If the Retirement Age Reaches 70, How Much Does Youth Unemployment Rise?

When they mentioned halfheartedly about raising the retirement age to 70, I have asked myself  ‘why not 75.56, or 72.11 for men and 79.07 for women?’ If the retirement age matches the life expectancy, the politicians have absolutely no responsibility anymore; moreover, the GDP per capita would be higher.

To capture the phenomenon, the pay-as-you-go system is based on the contribution of active employees; it makes up pensions, and the political class is responsible for it. Of course, if everybody save for themselves, not for those at the top of the pyramid, the retirement age wouldn’t have to rise so that politicians then try to become responsible for less people.

The problem is that constantly postponing retirement results in higher youth unemployment. But this is not a big issue for politicians, because they do not have obligations toward young people, which can thus be sacrificed.

In Romania, for instance, the overall unemployment is way below the European average, while the youth unemployment is fourfold the rate and also above the Community average. We do not have the rates twice as high as the EU average, like Greece, Spain and Italy, but they are high enough for the emigration to start as early as school age. But even if they graduate from a university abroad and intend to work in their profession, Romanians and other East Europeans still don’t find many jobs, so they generate start-ups.

All in all, on a national and regional level there’s also the issue of minimum wages, which compel the employers to pay youths amounts not related with their skills and productivity. So they better do not hire them. This situation is an advantage for all those who are already inside the system, to the expense of the newcomers.

This does not make things normal for Romania. On one hand, the aging process accelerates. On the other, youths hardly manage to replace the elderly. For a manager, it’s cheaper to replace unskilled labor resulting from poor training or lack of experience with the skilled work of present employees, whom they can pay better while demanding higher productivity.

Obviously, knowledge from schools is not useful for young graduates. The proof is that in the European Union, known for generous minimum wages, more than a third of youths are hired as sales assistants, waiters or hotel workers. There are, however, Eastern states like Poland, where youth unemployment has dropped from 40% to 12%. It’s also true that there’s a long way to 6%-9%, the rates of Germany, The Netherlands or Austria. Czechia and Slovenia are also in this tier, proving that the depth of economy restructuring also matters. Indeed, Romania had to rely on youth, as it faced massive emigration, although those hired were probably not mathematicians or physicists, in a country were the biggest employer is a retailer. But what has to be said is that overall, youth unemployment is high in Europe, twofold compared to the United States.

To solve the problems of those to whom they have obligations, the European politicians have sacrificed the future; I have to mention that, although they are shortsighted, usually across one term only, they still can face hard times. Pay-as-you-go doesn’t work during crises, because it needs a constant number of employees on higher and higher wages. Wars are out of question, because then the Ponzi scheme simply collapses. That’s why everybody should contribute for themselves!

Well, Adam Smith postulated that the prime requisite for the prosperity of a nation is a growing population.  Population and economy can grow on natural change, but also artificially, with help from immigration. That’s why the EU has integrated in 1973 Ireland, a country with a fertility rate (average number of children born to a woman over her lifetime) twofold the average of the then 11 members of the Union, i.e. 3.9. And in 1981 and 1986, when this rate dropped to 1.5, it was the turn of Greece, Spain and Portugal to join – countries where women were having two children each.

Of course, the expansion waves offered a sufficient remission for Western leaders to formulate a demographic strategy and to shift from extensive to intensive development, but they preferred to keep boosting the Union’s bureaucracy and hyper-taxation. Instead of the single market envisioned by Winston Churchill, the outcome was merely a customs union. With the mention that subsidized livelihood pushed the Greeks and Spanish from the top to the bottom of the fertility ranking. Moreover, the future potential of these countries and of Italy has been dented for selfish reasons, not just by the huge youth unemployment in parallel with older retirement ages, but also by over-indebtedness.

I have said many times that the Brexit meant to suggest to the European politicians that it’s time to restore the capitalist benchmarks – the markets and the respect for private property And I have added that it aims at anchoring the Europeans’ characters and at eliminating the discretionary decisions.

But now that I mentioned Churchill, it’s all the more worth stressing that the Brexit is a reaction to the corruption on the continent, and we can compare it to the Dunkirk evacuation.

It’s equally important to remind Russia’s influence in Europe, as it has spread its ways to a large part of the continent. I once wrote that, unlike Swedish, Dutch, Danish, British or Swiss Socialism, the Southern one resonates with Russia’s. The same goes for Germany, who uses the economic conditions to subjugate other nations, and this is why their Socialism is of Leninist type.

And I explained that Russian Socialism, who tries to dominate the EU, is very similar to feudalism. Some castes – the oligarchs – grab the power and set themselves up outside the markets. Privileges are inherited, like in the Dark Ages, in a corporate world shaped by regulations and state interventionism. The reallocation of resources is called redistribution and is made through the state budget, not through the market. And, as it always happen when the division of labor and the peaceful cooperation suffer, coercion activates within the society the cult of violence.

The Economist noted that the EU is suffocated by political proxies: “Power does not always lie where you might expect in Europe. Back-seat drivers are steering Poland, Romania and the Czech Republic the wrong way.”

And it doesn’t overlook another fact: “Europeans got used to dealing with back-seat drivers when Vladimir Putin ran Russia as prime minister in 2008-12, while his factotum, Dmitry Medvedev, kept the presidential throne warm.”

Long story short, Russia has spread its own model throughout the European Union, instead of vice versa. And this upsets the Brits, who justify their decision of leaving the Community by their refusal to discuss with proxies.

The United Kingdom is not unhappy about Socialism itself, as much as about the type of Socialism practiced in Mediterranean and Eastern countries, and in Germany. Here, I have to mention again Vilfredo Pareto, to note the differences in views. In capitalist societies, there is “social mobility”, a circulation of elites. At the top of the social ladder, people are rich and politically important, but these individuals in these positions – the elites – are constantly replaced. Contrariwise, in feudalism the aristocrats owned great wealth for centuries, irrespective of their qualities, talent, character or morality.

Just like in feudalism, in the aforementioned area servitude is cultivated. The difference between the EU and Russia resides merely in the former being led by seniors who take advantage of presidential republics, while the latter has seigneurs authoritatively controlled by a czar. Russians’ presidential republic might be an even better model, to the extent the “emperor” assumes the responsibility.

Anyhow, Romania might be just an experiment to allow Russia to see the difference between a parliamentary republic and a presidential one.

I will end reminding you what I once said, half jokingly: Nicolae Ceausescu – a promoter of Russian-inspired Socialism – would have liked the EU, because it’s impossible not to remember the slogans of his times when we read a couple of European ones. This is a reason for our superiority complex towards uneducated Irish or Dutch, who are just learning what Socialism is.

Of course, the opposite is also true. Ceausescu said that capitalism will return in Romania when hell freezes over. Applause! Cheering! But look at youth unemployment, which betrays feudalism.