In Europe, Job Protections for Older Generation Are Barriers for Younger Workers

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By Ilan Brat,

from The Wall Street Journal,

Earnings Gap Looms for Younger Generation.

By the time the parents of Serena Violano were in their early 30s, they had solid jobs, their own home and two small daughters.

Today, Serena, a 31-year-old law graduate, is still sharing her teenage bedroom with her older sister in their family home in the small town of Mercogliano, near Naples.

Ms. Violano spends her days studying for the exam to qualify as a notary in the hopes of scoring a stable job. The tension over her situation sometimes spills over in arguments with her sister over housework or their shared space. And with her 34-year-old boyfriend subsisting on short-term contracts, Ms. Violano doesn’t even dare dream of building the sort of life her parents took for granted.

“For our parents, everything was much easier,” she says. “They had the opportunity to start their own life. Instead, we don’t have any guarantees for our own future.”

Ms. Violano’s stunted adulthood and dashed expectations mark a generational divide between younger and older Europeans that is challenging the Continent’s dream of broad-based prosperity.

In Europe’s weaker economies, people in their 20s and 30s often have little hope of achieving the careers, wealth and economic security enjoyed by their parents. In places like Spain and Italy, the employment rate has tumbled for people under 40 since 2008, even as it has stayed relatively steady or grown for their parents’ generation.

Their predicament is exposing a painful truth: The towering cost of labor protections that have provided a comfortable life for Europe’s baby boomers is now keeping their children from breaking in.

The older generation benefited from decades of rock-solid job protection, union-guaranteed salary increases and the promise of a comfortable retirement. All this has allowed them to weather Europe’s longest postwar crisis reasonably well.

By contrast, many younger Europeans can hope for little more than poorly paid, short-term contracts that often open a lifelong earnings gap they may never close. Employers in many countries are reluctant to hire on permanent contracts because of rigid labor rules and sky-high payroll taxes that go to funding the huge pension bill of their parents.

The breach is widening: Median income for people over 60 rose between 2008 and 2012 in nearly every European Union country, according to Eurostat; it declined for people under 25 in almost half the EU countries, including in Spain, Portugal, the U.K. and Holland.

This has left young people increasingly dependent on the older generation. In turn, parents are frustrated that children in their 30s and even 40s can’t cut the cord.

A recent study by EU social research agency Eurofound showed that the number of people aged 18-29 living with their parents rose to 48% from 44% between 2007 and 2011, while youth poverty has risen almost everywhere in Europe.

The rift will weigh on future growth in Europe, now experiencing a fragile recovery, since lengthy spells of joblessness for young people can penalize earnings for years and drag on growth.

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