Tuesday, April 5, 2011

Canary in the Coal Mine: Adult Males Living with Parents

The chart shows the risk price of Credit Default Swaps on a country's loans as set against the number of adult men (by %) who live at home.  From the top right sliding down the scale you get:  Greece, Ireland, Portugal, Italy and Spain.  Buried at the bottom are Finland, Neatherlands, France, and Belgium.  Austria sits in the middle.  The education gap likely runs somewhat the same way, but the progression would not be as smooth.  What is really surprising is how large the differential is:  Over 50% to under 10%.

ht economist website:

Which leads to the question of whether its is a push or pull effect.  Are they at home because they want to be or because they have not good options?  I would suspect that both factors come into play. 

Some young men have not good options.  Within there economic circumstances there are no viable alternatives.  People who have no work and no family support often are starting down the slope towards perpetual homelessness.  Of course there are lesser versions of this problem.  Youngster has earned an MBA degree, but all he can find is work as temp secretarial help.  Does he spend his time working as a temp (thus benchmarking himself at a very low income rate), or does he spend all his time looking.

Of course, where the parents are willing and have the means, I am sure there are young men who just don't want to work.  A discussion related to this trend was had at the National Review Online between Matthew Schaffer and Tyler Cohen:

SHAFFER: David Brooks seems to borrow an idea from you, that some of our economic slowdown is attributable to people feeling economically secure (a good thing), and consequently pursuing careers for aesthetic, moral, cultural, intellectual, and leisure benefits, rather than purely for financial compensation. Paul Krugman doubts that. What’s your response?
COWEN: I agree with Brooks. Sometimes I call these people threshold earners. You’re calling me from New York. There was a very good article in the New York Times about how many young men, especially in the New York area, are delaying growing up, they have extended adolescence, they move back in with their parents, they’re not that ambitious. And that’s precisely because they can have so much free or almost-free fun through the Internet, and our lives are so good in terms of comforts.
We’re seeing society grow more rapidly along the happiness or utility dimension than we had expected, and seeing it grow more slowly across the jobs-and-revenue dimension than we had expected. And that’s a disconnect. It doesn’t have to be a fatal problem. The problem is when you don’t plan for that and don’t understand that that is happening.

A major issue is that we have a lot of debt commitments — some privately, but mostly in the public sector — that were premised on robust growth in revenue and jobs. But we’re taking a lot of our social dividend out in the form of happiness or utility — which, by the way, is harder to tax.

But that does mean that our fiscal crisis is going to come more quickly and be a lot worse than many people expect, even fiscal conservatives. They still think it’s only a matter of time before we revert to 1968 levels of growth for the typical families. And I don’t see us as being there.
We’re going to have slow growth and persistent, fairly high unemployment. The Great Stagnation view is what I’ve been predicting for a long time — that high unemployment will persist. And that seems to be happening. Other views don’t predict that.


Degringolade said...

Just thought that I would thank you for keeping me posted. I read your stuff every day.

russell1200 said...

Thanks D. !

I am working off mostly saved for futures stuff at them moment because I am working on another combatant type one. They take a lot longer.

Having grown up with WW2 type stories, the non-military character of them makes for a certain strangeness to them, and they play out much more differently then the western gunfight sagas that were truthfully more like todays urban gangbanger brawls dressed up for public consumption.