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  • They've been called a generation of dreams deferred.

  • One out of every seven people here in Europe between the ages of 15 and 24 who wants a job can't find one.

  • And many who do have found jobs are stuck in part-time or temporary positions.

  • And it's not just a phenomenon happening here in Europe.

  • Young people all around the world are feeling the pain from income inequality.

  • There are all kinds of inequality in the world like gender, wealth, or race.

  • We're going to look specifically at income inequality and the effect that it's having on younger generations.

  • Simply put, income inequality refers to the gap in income which is the money you earn from your job or investments between the rich and the poor.

  • It's not exactly a pretty picture right now.

  • Since 1980, the top 1% has taken a bigger slice of the world's income, while the bottom 50%'s share has stagnated.

  • That picture is even more dramatic in the world's biggest economy, the U.S.

  • And in many ways, it's even worse for young people.

  • Let's come back to Europe to help understand why.

  • After the financial crisis in 2007, incomes declined across the board as people lost their jobs.

  • Research from the International Monetary Fund found that as the European economy started to recover, the incomes of people aged 65 or older increased by 10%, in part because their pensions were protected.

  • Meanwhile, the incomes of young people recovered but didn't ever grow.

  • The research said that because young people didn't have as much professional experience, they were the first to be let go or they were less likely to find work.

  • Those who did find jobs often accepted lower wages than before.

  • Others took part-time work, which doesn't offer the same benefits or safety nets.

  • That helps explain why the youth unemployment rate across the 28 countries in the EU is so high at 14%.

  • That's more than double the EU's overall unemployment rate across all ages.

  • This younger generation also has more debt relative to their income than any other age group.

  • This leaves them much more exposed if the economy unexpectedly gets worse again and could get them into deeper trouble with their finances.

  • One glaring example is student debt.

  • As demand for higher education in the U.S. has increased over the years, so has the cost of college and student debt.

  • National student loan debt sits at $1.5 trillion, making it the second largest type of consumer debt after mortgages.

  • Student debt is increasingly becoming a concern in other countries too, like Canada, the United Kingdom, New Zealand, South Korea, and Japan.

  • You can see how inequality is playing out by looking at poverty rates.

  • Before the financial crisis, the risk of slipping into poverty was more evenly spread among age groups.

  • Now, one out of every four young people in Europe is at risk of poverty.

  • The problem is that many young people have gotten stuck in these low-wage, low-skill or part-time jobs.

  • They miss out on the opportunities to learn new skills required in jobs that make more money.

  • At the same time, the cost of living is going up.

  • Just look at this graph, which shows house prices increasing far faster than income over the past two decades.

  • This is one reason fewer millennials are part of the middle class than the generations before them.

  • Plus, as the global population ages, public debt is going up as governments finance social assistance programs for the elderly.

  • The burden of paying off that debt, well, it'll likely fall on young people.

  • All these costs and more have made young people skeptical of the government and institutions and helped fuel populist movements around the world.

  • So what can be done?

  • One popular idea is better education and more training.

  • In fact, half of young people surveyed here across Europe say the main priority of schools should be to prepare them for employment.

  • Take Germany's apprenticeship model.

  • Students split their time between training at companies and taking classes at public vocational schools.

  • So they get the work experience and the skills they need at the same time.

  • Data shows this type of training model works to reduce unemployment and inequality.

  • Another idea is taxation.

  • Some policymakers and politicians have floated wealth taxes that would target companies with a big income gap between their workers.

  • Others want unions to fight for higher wages.

  • More affordable housing could also help ensure young people aren't priced out of good jobs in cities.

  • While many of these proposals are wildly popular, they've proven to be a tough sell in the political arena.

  • But the economic reality is that addressing inequality among young people benefits all ages.

  • This is particularly the case in low-income and emerging market countries, where the IMF found more young people working means more equality for everyone.

  • Hey everyone, it's Elizabeth here. Thanks so much for watching.

  • What do you think the best fix is for income inequality?

  • Let us know in the comments section.

  • And leave us any other ideas there too. See you later!

They've been called a generation of dreams deferred.

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A2 US TOEIC young people inequality young income debt

Why is inequality worse for young people? | CNBC Explains

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    Mackenzie posted on 2019/12/31
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