Young America: Victims of irrational optimism

FORTUNE — To a Silicon Valley billionaire, a self-made entrepreneur and venture capitalist, the state of opportunity for young people in America has never been better.

“Just look at my son,” he says. The twentysomething is launching a new company and has millions of dollars in backing from some of the leading investors in technology. The boy did it, he says, by working hard.

From the billionaire’s vantage point, a technology boom has investors throwing suitcases of money at young people with the right projects. Indeed, the feeling across much of San Francisco is that the world is a wondrous, fast-growing place where social enterprises are revolutionizing business and everyone is moving up the economic ladder. Ideas become reality by the next morning jog, and the deepest financial crisis since the Great Depression is a forgotten moment in history.

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After all, Silicon Valley accounted for 35% of the entire state of California’s job growth last year. In fact, so many jobs haven’t been created in the region since the 2000 technology boom. It’s little wonder, since the Joint Venture Silicon Valley and Silicon Valley Community Foundation reports that angel investments jumped 90% in 2012.

The only things stopping someone from becoming a success today, this particular billionaire asserts over dinner, are passion and a big idea.

However, he and his Silicon Valley peers are living in a bubble.

The effects of the financial crisis are still weighing on millennials across the country and their ability to gain work experience, develop professional networks, and accumulate enough money to risk launching their own business.

The March 2013 unemployment rate for 20 to 24-year-olds was 13.3%. The year before, it was 13.1%. Not much has changed. For 25- to 29-year-olds, the jobs picture has improved a bit more: 8.3% compared to 9% in March 2012. The unemployment rate for the entire working-age population last month was 7.6%.

The number of young workers in part-time jobs for economic reasons — meaning they would like to work full-time but either have had their hours reduced or have been unable to find full-time jobs — has increased since last year. And that doesn’t even capture the whole story for recent high school and college graduates. Many have dropped out of the job hunt altogether, frustrated with a lack of results.

This is all happening as college debt soars to historical highs, which means a bunch of millennials owe thousands of dollars for a degree that is offering no or very low returns. (The billionaire’s son probably does not have to deal with this particular stress.)

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The hard-working billionaire excuses the statistics, saying many millennials are just lazy and entitled today.

But the data shows that the longer someone is out of a job, the more likely they will suffer from long-term joblessness, because potential employers are less interested in out-of-work candidates. This leads to lower wages years down the line, diminished appeal to employers, loss of confidence, and even a shorter life span.

So, go and create your own job, the billionaire argues. But many small businesses are finding it hard to get financing in today’s market. Banks are unwilling to lend without significant collateral. Data from the Federal Deposit Insurance Corporation shows that loans to businesses for $1 million or less has increased by less than half a percentage point in the last year.

On this front, and many others, the billionaire’s son has the advantage of, well, being a billionaire’s son.

Parental income is more directly correlated with children’s income in the U.S. than in any other leading economy, according to Richard Wilkinson, author of The Spirit Level: Why Equality Is Better for Everyone.

It is harder than ever for young people to climb the economic ladder if they weren’t born at a higher rung. The net worth of a typical household headed by an adult under the age of 35 is now 68% less than households headed by same-age counterparts in 1984, and a third of Americans raised in the middle class now fall out of it as adults, according to the Pew Research Center. Moreover, 37% of United States households led by someone under the age of 35 have a net worth of zero or less than zero.

Why can’t we surpass these hurdles? The answer is policy.

Policies implemented since the 1980s have systematically cut off opportunities for young adults to move up the economic ladder, including reduced subsidies for education, tax rates that favor homeowners and investors, and declining middle-income salaries. We are not focusing enough on growth and the future. Instead, we are spending significant time on paying for Baby Boomers’ retirement and protecting entrenched lobby groups. The financial crisis has made the impact of these policies — an inveterate divide between the very rich and everyone else – even harsher for millennials.

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Maybe a Silicon Valley billionaire cannot relate to all of this. After all, this particular tech titan is a Baby Boomer who has benefited from a healthier economy. His children are riding off of that success, as they should. But the longer the billionaire and big business ignore the plight of most millennials in the U.S., the longer millennials will weigh on the economy and slow down the potential growth afforded by new technologies. In the end, the technology boom can only be as successful as Generation Y.

Riva Froymovich is the author of End of The Good Life: How the Financial Crisis Threatens a Lost Generation — and What We Can Do About It.

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