Economic recovery calls for lifestyle changes

Economies around the globe are still suffering from the recession, despite signs of improvement on the horizon. And while many countries share the same issues, certain problems are unique based on demographics and consumer lifestyles.

According to Michael Carew, an economics professor at Baruch, one must study the demographics of an economy to truly understand the economic issues at hand.

According to Carew, the United States, whose economy is driven by personal consumption expenditures, is having a difficult time recovering because consumers aren't spending.

Carew called attention to two key issues affecting the American economy: the "Baby Boomer" generation and the unemployment rate.

In the near future, the United States must consider the Baby Boomer generation, which is the result of an increase in births post World War II from the years 1946-1964.

The issue concerning this generation is that as they approach the retirement age of 65, "they finish paying off the kids' student loans, marrying [off] their daughters, and so they are reducing their spending drastically," said Carew.

The next issue that needs to be analyzed is the United States unemployment numbers. According to the August 6th Bureau of Labor Statistics report, the amount of people who are currently seeking unemployment relief is 9.5 percent.

According to Carew, there are three types of workers in the United States: college educated, skilled workers, and unskilled workers.

The college educated portion of the work force is considered professional and managerial; skilled workers are those who generally require a license to do their work; and unskilled workers are those who have no specific skill or training set.

"The proportion of the labor force in those three categories, if you go back to 1980 for the New York Metro area, 14 percent of the force was college educated. Another 18 percent were skilled workers," said Carew, and the remainder were unskilled workers.

Carew stated that in the latest report, from 2005, of the New York Metro area's work force, 41 percent are college-educated workers and 40 percent are now skilled workers.

"What that says is that your college educated, professional and managerial, and your skilled workers have gone from about 35 percent of the labor force to about 80 percent of the labor force," said Carew, "And that means that your unskilled has gone from over 60 percent to barely 20 percent in 25 years,."

"The unemployment rate for college educated two years ago was 1.9 percent," Carew continued. "It has peaked at just over 4 percent and now it is about 3.8 percent, so if you then run the numbers, you can see that the unemployment problem we have is for the unskilled."

Americans can see the end of the recession, but don't have the power to reach it. Conversely, said Carew "Europe is in a long-term decline."

Three factors contributing to the economic issues in Europe, namely in countries such as Greece and Italy, are the average hours worked a year, the decline in fertility rates and the ‘guest worker,' suggests Carew.

According to Carew, the average American puts in about 2,070 hours of work a year. The average German puts in about 1900 hours of work a year, followed by the French, who work around 1200 hours yearly and Greek and Italian workers, who average about 1100 hours of work a year.

When analyzing these numbers, a correlation between a countries number of hours worked and the status of its economy can be made.

Greeks, whose declining economy has been the focus of the financial troubles of Europe, work the least amount of hours per year. On the other hand, the Germans, who have suffered the least among the nations listed, has one of the higher numbers of hours.

Another issue the Europeans have to deal with is their declining fertility rate. This is a major issue because as the older generations pass on with no one to take their place, the overall population is declining.

It begs the question: Who will there be to pay taxes which in return will pay for all the social benefits Europeans are accustomed to receiving?

The "guest worker problem," is a major socio-economic difference between the United States and Europe, according to Carew.

"It's less obvious elsewhere," said Carew. "But in terms of the social structure in Germany, Italy and France, your immigrant population are accorded citizenship, but does that provide them the opportunity which they have in the United States of getting on the social economic ladder? Absolutely not. So you have these class divisions which are traditional in Europe but not in America."

The class divisions mentioned by Carew only allow the increasing guest worker population to contribute to the economy to a certain extent, while here in America legal immigrants are granted all of the opportunities of a natural born citizen.