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Beyond STEM and startups — how to build an economy for real people

Imagine the average young person, and a few characteristics come to mind: tech-obsessed, college graduate, employed at a Silicon Valley startup.

Yet, only around thirty percent of this generation are likely to receive four-year undergraduate degrees. And few of the "jobs of the future" are to be found in sectors glamorized by television like tech or artisanal brewing. The Bureau of Labor Statistics projects that between 2012 and 2022, the fastest-growing occupations are now and will continue to be dominated by health care jobs. Meanwhile, the top ten jobs with the greatest numerical growth are mostly jobs with lower wages and few skill requirements. Six of the ten occupations with the most job growth-personal care aides, retail salespersons, home health aides, food preparation workers, janitors and cleaners, and construction laborers-require less than a high school education.

The typical Millennials, then, will be neither tech geeks nor startup entrepreneurs.    They  will be  Americans with high school educations or less working in service sector occupations at  jobs that pay relatively low wages and provide few or no benefits.

If they even have jobs. After all, no generation has suffered more from the Great Recession and its lingering aftermath than this one. According to the Bureau of Labor Statistics, in August 2014 the unemployment rate was below 5 percent for workers above the age of 34-but remained 6.9 percent for those aged 25-34. The bad economy has led many young people to put off household formation in favor of renting or sometimes returning to live with parents.

If most members of the next generation are not to be worse off than their parents and grandparents, they will need to benefit from a new social contract-a new system of wages, benefits and public services that will allow most Americans to join the middle class and not fall out of it.

A new middle-class social contract is unlikely to resemble the one enjoyed by unionized workers in the U.S. manufacturing sector in the mid-twentieth century. Back then, organized labor had the clout to demand high wages and generous employer benefit packages including health insurance and employer-provided pensions. But unlike the 1950s and 1960s, today's employers, especially industrial corporations face intense foreign competition and pressures to hold down compensation and benefits. And many domestic service sector firms-nursing homes, for example-lack the profits that would allow them to create generous benefits for their workers. In the face of employer hostility and conservative political resistance, there is little chance of raising private sector unionization above its present low level of less than 7 percent of the private sector workforce.

In light of these trends, the most promising approach to a new social contract, one which finds assent from many reform conservatives as well as progressives, would be to sever the link between benefits and particular employers. The Affordable Care Act already provides two systems-expanded Medicaid and the exchanges-that allow individuals without employer coverage to obtain health insurance. Fewer Americans receiving healthcare from their employers over time could accelerate the transition to a universal, individual-based system.

A social contract that moves away from employer-provided benefits might also mark progress for retirement security. For the luckiest workers a generation or two ago, employer pensions provided a third tier of retirement security in old age, on top of Social Security and private savings accounts. In the last generation, more and more employers have stopped providing guaranteed pensions, replacing them with employer-sponsored individual savings accounts like 401(k)s, which shift financial risk from the company to the individual. The result increasingly is a system with fewer layers of support.

That gets at another big question raised by re-imagining a social contract: How will working-age Millennials-including the plurality or majority who will be employed in relatively low-paying service sector jobs-earn the income they need to build savings - other critical layers of support- in the first place?  More education is seldom the answer; a janitor with a Ph.D. will still be paid a janitor's wages. Nor is entrepreneurship the panacea that many believe it to be. Self-employment as a home health aide may be a worse option than working for a hospital or firm. At the bottom of the income ladder, a higher minimum wage might be part of a new social contract, with benefits to millions of workers that outweigh the loss of a few poverty-wage jobs. Some on both sides of the political spectrum have also suggested expanding the earned income tax credit (EITC) by raising the income of workers eligible to receive this income supplement from the federal government.

Most of these proposed elements of a new American social contract have one thing in common:  they transfer responsibility for key elements of what used to be thought of as a "good job"-health insurance, retirement savings, even part of a working-age person's income stream-from the employer to the government, the individual, or a partnership of both. With benefits no longer provided by employers, the "good job" will be succeeded by the "good system," in which the employer does little beyond paying a decent wage.This generation may continue to suffer not only from the Great Recession but also from the slow transition from our crumbling employer-based social contract. But for most American workers the new system is likely to be better than the old-and this generation will get a chance to build it.

Michael Lind is Policy Director of the Economic Growth Program at the New America Foundation

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