My Must-read, Realistic Story About the Future of Our Kids

A realistic look at job creation here and around the world and its effect on the future of our kids. It’s 3:00 a.m. and I can’t sleep. A couple of days ago, I read a story on the high unemployment in Europe and how the young find it so difficult to find a job (“Europe’s Lost Generation: No Jobs or Hope for The Young,” The Globe and Mail, 11/07/11). Because of the lack of job creation here in North America, I can’t get the idea of our kids having no future out of my head.

My mind is racing from India, to Europe, to North America, to my own children, to the lack of job creation. Having been in Europe twice this summer, I saw firsthand the plight of young, educated people who simply can’t find a job, despite how desperately they look, because there are no jobs to be had. There is no job creation in Europe.

According to the International Labor Organization, the youth (under 25) unemployment rate is 29% in Italy, 44% in Greece, and 48% in Spain. The “iPod Generation,” as they are often referred to, is in serious trouble, as industrialized countries fail at job creation.

Having returned from our office in India just a couple of weeks ago, I can see exactly what the problem with job creation in Europe and North America is about. Sure, the “Occupy Wall Street” movement could spread right across the U.S. and Canada, and they can protest all they want, but they are barking up the wrong tree. Wall Street is not the problem. Lack of job creation is the problem.

The fundamental problem with job creation in Europe and North America is the increasing role India and China are having in the global economy. All the major European countries, the U.S., and Canada had job booms after World War II. Cities were rebuilt in Europe, the manufacturing machine in North America was in high gear, and factories were busy making everything from widgets, to fridges, to cars. Job creation was in full gear.

Today, most manufacturing is done in the Far East. The manufacturing base in North America and Europe has evaporated. But it’s not the big Wall Street companies that are to blame for opening subsidiaries in foreign countries with cheap labor; it’s the cost of living in North America and Europe that puts the cost of labor in these countries beyond the affordability of companies.

Look at our small company. In India, we employee top computer engineers at one-tenth the cost these engineers would run us in the U.S. per year. Our operation simply wouldn’t be profitable in the U.S., because the labor cost is too high. In India, it works for us, because we can hire smart, young people at a fraction of what it would cost us at home.

As a company, is it our fault, or Wall Street’s fault, that labor is so cheap in India? As a company, are we not helping society by at least delivering some form of job creation instead of creating no jobs?

Millions of jobs in North America and Europe have been lost to India and China. Companies like ours, which cannot have profitable operations in the U.S. because the labor costs are too high, are making job creation happen in the East.

Driving through an IT park in India is like driving through Silicon Valley in California. All the major technology companies, from International Business Machines Corporation (NYSE/IBM) to Google Inc. (NASDAQ/GOOG), to any other major American-based IT company you can think of, have major offices in India employing masses of people at less than 10% of what that labor costs in Europe or North America.

For many companies like ours, it would not be profitable to have an IT office in North America, so we simply wouldn’t have one. If we didn’t have our own operation in India, we’d subcontract to a company in India.

And this brings me to our kids. Because of so many smart, young people in India and China today, the competition in schools there is getting intense. In India, a student needs an average of about 95% in high school to get into university. Those who get grades in the 80s or low 90s in high school can’t get into a good university in India, but they are accepted, often even granted scholarships, at North American Universities.

Strong students in India study 14 hours a day, outside of class. How is my kid, who is used to the luxuries and distractions of North America, to compete against these hungry Indian kids?

You buy a textbook in the U.S. for $50.00 and give it to your kid to study; no big deal. How can North American kids compete against education-hungry Indian and Chinese kids who go to sleep with their textbooks, because it is one of their family’s biggest expenses of the month?

Unfortunately, for North America, I see we are following the same path as Europe. Job creation is almost nonexistent for our young (aside from retail and services), as the cost of labor and the cost to live in North America have gotten too high for many companies in need of large labor pools to make it profitably in North America.

Despite politician after politician promising to help create jobs for the young (again those under 25 years of age); once they get in office, other issues become priorities over job creation for the young. It’s a crisis when so many North American parents today hope their kids will grow up to get jobs within the government or government-related agencies because they are the best, most secure jobs they can get.

Sad to say, there is no future for the great majority of our young people. And, unlike the parents and grandparents of many Americans and Canadians who left Europe in search of better opportunities in North America, our kids have nowhere to travel to achieve the Great American Dream. Regretfully, it will elude them.

Where the Market Stands; Where it’s Headed:

We are in a bear market rally in stocks that started in March of 2009. If it were not for the troubles in Europe, the stock market would be trading much higher than it trades at today. I’m waiting for stocks to give us the final blow-off to the top before the market enters Phase III of its bear cycle.

What He Said:

“When property prices start coming down in North America, it won’t be a pretty sight, because consumers are too leveraged. When consumers have over-borrowed so much that they have no more room in their credit lines to borrow more, when institutions start to get tight on lending, demand for housing will decline and so will prices. It’s only a matter of logic, reality and time.” Michael Lombardi in PROFIT CONFIDENTIAL, June 23, 2005. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.