Generation Debt: The Broken Social Contract

This week, Money360 takes a look at , a book that proposes to show why today is a terrible time to be young, from a financial perspective, at least. Is there enough meat on this idea to make an interesting argument, or is this book just blowing in the wind? Let’s find out.

The middle section of this book relies heavily on the concept of the “social contract,” as described by . In so many words, the social contract assumes that all people live in non-ideal conditions, and in order to move away from these conditions people enter a “contract” with one another which allows them to live together in peace and unity, improving conditions for all.

The social contract is more than just a concept; it occurs again and again in modern society, both in tangible form (the New Deal, for example) and intangible form (people pitching in to help in the immediate 9/11 aftermath).

Kamenetz spends the middle section of the book arguing that the social contract built up in America during the twentieth century enabled previous generations (in particular the baby boomers) to achieve huge successes. However, she argues, that social contract has now been broken in a number of ways:

Steady labor is a thing of the past. In the past, employers and employees had a relationship of mutual respect in which workers could expect long periods of steady employment in exchange for their labors. Today, no one expects long-term steady employment.

Consumer prices for everything have risen, while real wages have fallen. It is much more expensive today for a minimum wage worker to buy a loaf of bread than it was thirty years ago. In other words, merely being employed does not make it easy to even keep food on the table, let alone provide housing. Wages simply aren’t growing to match other prices.

Marketers have unforeseen access to impressionable youths, convincing them of the value of materialism. Children today are inundated with extremely clever marketing the day they are born, marketing that repeatedly issues the mantra of consumerism: keep trying to keep up with the Joneses by buying more and more stuff you don’t need. This marketing is now tied to concepts completely unrelated to the product and instead related to an individual’s self worth, a challenge that previous generations never had to face in their formative years.

Social Security is insolvent. Even the government-mandated social support structures are ailing. Programs such as Social Security might survive long enough for the baby boomers, but by the time Generation X gets old, they’ll either be insolvent or else they will have required a significant influx of money during the prime earning years of the younger generation.

In short, Kamenetz believes that the old social supports are eroding away, stripped away by individual greed. What can be done about this? We’ll talk about that tomorrow.

Generation Debt is the fourteenth of fifty-two books in Money360’s series 52 Personal Finance Books in 52 Weeks.