Companies are having a hard time recruiting and retaining young talent, and as a result are accommodating what would have once been considered extreme demands. “The scales have tipped in favor of knowledge workers, creating a seller’s market for the next 5 to 10 years,” writes to Stan Smith, National Director of Next Generation Initiatives at Deloitte.

Here are some reasons why so many younger workers have gained the advantage when it comes to negotiating the terms of a new job.

The workforce is shrinking.

The Department of Labor reports that from 2000 to 2010 there will be a 30 percent decrease of workers in their 30s and 40s. In addition, many Generation X parents are choosing to leave the workforce or cut back on hours in order to be home with their children. This trend is so pronounced that it’s creating a shortage of managers already.

Many young people want their own businesses.

The barriers to starting an Internet business are low. Viral marketing via a personal e-mail list and a few key mentions on prominent blogs can potentially catapult a good idea into a successful business. Since young people can effectively fund their own companies this way, many do not want to pay their dues by working for someone else and learning the ropes. The flexibility of owning a company is not only appealing, but also a way to avoid menial labor at the bottom of the corporate ladder. In fact, many young people are choosing the excitement of entrepreneurship over the stability of a good salary.

If entrepreneurship is the first choice, a corporate job is a backup plan. Matt Humphrey, 20, and three friends just founded SlapVid, a company that cuts the cost of providing video content online. Humphrey thinks of the MBA program he is now in as sort of a backup plan in case SlapVid does not take off at the end of the summer. And in the event that he does not have another idea for a company before he graduates, getting a job at someone else’s company is a second-level backup plan.

Parents are a safety net.

More than 50 percent of college graduates will move back home with their parents this summer. And most parents will like it. It used to be that returning home after college was seen as a sign of failure. Today, however, economists and sociologists see such homecomings as a smart response to exorbitant housing prices in big cities, and entry-level wages that do not cover living expenses.

Three out of four of the founders of SlapVid are getting financial help from their parents. And Humphrey’s parents are typical in their enthusiasm for their child’s adventure, and the tight relationship they share. “They know they might have to support me for longer than they planned for,” Humphrey said. “They’re definitely up for that. If I want to do something really, really cool, they’ll support me all the way. They call me every day to see how I’m doing.”

With such parental support, there is no need for a company to play the parenting role, which is what happened when baby boomers entered the workforce. And if there is no paternalism in corporate life, it becomes a scramble to figure out what businesses can leverage to scoop up young employees.

The intimidation factor is diminished.

“People going to college today are working harder than I ever did in school,” says Bill MacGowan, chief human resources officer of Sun Microsystems. “These kids will find work easier than I did.” In return for their effort, they expect to be well compensated by employers. As consummate consumers, they use technology to customize the way they view information, and they expect the same kind of customization when it comes to selecting jobs. They negotiate for vacation time, mentoring and training, flexible schedules, and even tricked-out laptops.

And when it comes to negotiating, young people assume the adults at the office are on their side. Generation Y has been raised by parents who often acted more like friends and mentors. In fact, often a wide community was involved in helping a Generation Y child succeed — including teachers, coaches, and private tutors. As a result, young people bring unprecedented confidence to the negotiating table. Some even have their parents in the room for added help, and many respected companies are willing to engage parents in the hiring process if that’s what the candidate wants.

Indeed, the scales have tipped and young people are in charge. For people who have been in the workforce for a long time and expected to be in charge, the new reality is difficult to accept. But it’s possible all employees will benefit from some of the changes. After all, demands such as more flexible schedules, are appealing to all employees, regardless of age.