The coefficient of correlation between youth unemployment and government debts in each country in the 'EU15 + 2' is not particularly high at 0.47, but it is high enough to be interesting. But does one cause the other, or are they correlated with something else yet again?
The Baby Boomers would probably look at it this way round, and claim that today's lazy young people refuse to get off their backsides and find themselves a job, so instead of paying tax they are claiming welfare:
I think that the other way round is far closer to the mark. Those government debts have been racked up over decades (no fault of today's youth) and the large leap in recent years was due to the so-called financial crisis, which resulted in additional government spending to bail out older, wealthier people. When austerity measures kick in, it is usually young people who take the brunt (hiring freezes, increased tuition fees etc):
Sources:
Youth unemployment stat's from Eurostat.
Government debts from Eurostat.
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17 comments:
It is plausible to say that governments which favour high borrowing to fund excessive spending are socialist ones, and that such governments are more likely to enact legislation on behalf of unions to protect their member's interests, e.g. Minimum wage legislation, strict labour laws protecting incumbents, etc.
Just a thought.
Rob, I'm sure there are a hundred reasons, and that must be one of them.
Increased borrowing increases money velocity, it can be used to mask the harm to comparative advantage caused by taxes on work (VAT, Corp, NI, Income, Employer NI etc).
Socialists HAVE to increase debt (and that's why banks love them).
AC1
What about plotting yoof unemployment against total taxation rates?
AC1, I'm not sure I believe in this 'velocity of money' guff any more than I believe in 'the multiplier effect'.
L, nice idea, but which tax rate? Is the main rate of UK income tax 20%, or do we use the average overall rate of about 50%? It would take me ages to find a fair comparison for all EU countries.
Steve Keen got a much higher correlation when he graphed changes-in-total debt against unemployment for the USA and for Australia. Perhaps all you need to do is add the UK's private debt to its government debt and retry the correlation.
Yes, I think it is private debt that is the real indicator and influencer. Government debt tends to follow since most governments don't know what it really going on and end up being reactive rather than proactive.
MW - Use the average overall rate. And comapre low tax countries as well as high tax and see what pops out of the elctronic testube.
I seem to recall to have seen this done somewhere else (Adam Smith Institute perhaps). It showed that high average tax rate countries had much higher yoof unemployment than low tax countries.
D, QP, that's a good idea. Do you know a source of total private sector debt to GDP ratios for the EU 17? But SK is far cleverer and talks about changes in debts and changes in unemployment, not just as a snapshot in absolute terms.
L, yes, using total taxes to GDP (or total govt spending to GDP) seems like a place to start, when I have time.
Try the CIA World Factbook.
AC, that's country-by-country and it doesn't show private sector debt anyway. Eurostat's figures may not be 100% accurate, but at least they are on a consistent basis for all countries.
I know that SK has had trouble himself trying to find decent figures for the UK. Whereas US and Australian stats are readily available in an easy to understand format, the UK stats have apparently been put together by a crack team of Sir Humphrey Appleby's finest. Hence the reason he didn't analyse the UK.
Unfortunately I don't know where you might get better figures.
D, I could track down UK figures quite easily, but I hate doing country by country as they're never on a consistent basis. That's why I prefer broad brush like OECD or Eurostat, who make things comparable.
There's nothing controversial about money velocity.
AC1
"Do you know a source of total private sector debt to GDP ratios for the EU 17?"
In a word, no. There are lots of versions of the following sort of graph kicking around:
http://www.zerohedge.com/news/psssst-france-here-why-you-may-want-cool-it-britain-bashing-uks-950-debt-gdp
But I'm not sure were the raw data comes from. SK claimed he got UK data out of the ONS but didn't give details. I find the SK analysis fairly intuitive; the claim that unemployment drops as total credit accelerates (banks more confident in dishing out money) and unemployment rises as total credit decelerates (banks less confident about dishing out money = recession). It's a sort of alternative business cycle model.
Not exactly what you want in GDP terms, but the debt to income ratios for the EU are here.
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Key_ratios_of_sector_accounts,_households,_2010_%281%29.png&filetimestamp=20120110102734
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/National_accounts_%E2%80%93_GDP
AC1, it's a load of bunk, see next post.
QP, I'd found that, not enough countries.
Rich, ta, I was considering using that as a proxy, but it's a bit out of date.
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