Millennials who get raises need to thank retired baby boomers
After decades in which employers have generally gained the upper hand, something is different in the US job market. Wages are increasing at all income levels. Workers are resigning in large numbers. McDonald’s franchisees provide hourly workers with child care and tuition fees.
The COVID-19 pandemic and unprecedented government assistance in response is clearly a part of it, but it may also be relevant that the working-age population stopped growing a few years ago.
Definitions of “working age” vary. In Bureau of Labor Statistics jargon, this means everyone is 16 and over, while international statisticians such as the Organization for Economic Co-operation and Development and the World Bank tend to define it between 15 and 64. years. I think the metric I chose – ages 20 to 64 – better reflects who is actually available to work in the United States, given that it includes all age groups with a market participation rate of work greater than 50% and excludes all those for which it is less.
Changes in the Census Bureau’s population estimates are responsible for most of the volatility. A sharp decline in the early 1950s can be explained by the sharp increase during the Korean War in the number of uniformed servicemen, who were removed from the population count for the purposes of labor statistics (as were detainees and other institutionalized persons). The Vietnam War also appears to have slowed growth in the 1960s, although by the time the famous baby boomers turned 20 in 1966, they had passed its effects.
The oldest baby boomer is 75 this year and the youngest 57, so their entry into the 65 and over ranks has been holding back population growth from 20 to 64 for a decade now. The latest Census Bureau population projections, made in 2017, predicted a slight rebound in the growth rate after the baby boomers ceased to age, but still much slower growth than that seen in the 1950s through the mid-1980s. 2010.
As we can see, the reality has already exceeded the projections. This would appear to be primarily due to a slowdown in legal immigration during the Trump administration that turned to a virtual halt in the first few months of the pandemic. Growth will likely continue to be below projections over the next decades – barring a surge in immigration – as birth rates have fallen faster than expected. The 3.6 million babies born in the United States in 2020 was the lowest total since 1979, and given that the rate of decline has increased as last year progressed, births this year will be probably even fewer.
That America’s population growth has slowed is not exactly news. The shrinking 20- to 64-year-old population since late 2018 has attracted less attention, which is not surprising given that hardly anyone keeps track of the 20- to 64-year-old population (I had to subtract those 65 and over from the BLS population estimate from its estimate of 20 and over to get the numbers). The most watched ‘working age’ population of 25 to 54 began to decline in 2008, a few years after baby boomers turned 55, resumed growth in the mid-2010s, as the most populous part of the millennial generation has turned 25 and seems destined to fluctuate in a narrow band over the next few years.
Analyzes of these trends, however you choose to measure them, tend to focus on the negative implications for economic growth, US geopolitical clout, the funding of the pension system, and other macroeconomic issues. These are valid concerns, but focusing on them to the exclusion of everything else can be misleading, as four researchers from Canada and the UK described in a recent article published in the American Political Science Review.
Based on a new dataset of US news content, we find that the tone of economic news strongly and disproportionately follows the fortunes of the wealthiest households, with little sensitivity to changes in income among the non-wealthy. . Further, we present evidence that this pro-rich bias emerges not from pro-rich journalistic preferences but rather from the interaction of media emphasis on economic aggregates with structural features of the growth relationship. economic and distribution.
In other words, growth in gross domestic product, asset prices, and other aggregate measures of economic performance provide “a portrait of the economy that strongly and disproportionately follows the well-being of the very rich”, and does not not necessarily represent everyone’s experience.
So let’s try an economic metric that doesn’t explicitly track the welfare of the very rich: the real hourly earnings of production workers and non-supervisory workers. I measured and smoothed it in the same way as for the growth of the working-age population (i.e. by calculating the annual percentage growth over a rolling three-year period).
OK, so it’s not exactly a locking relationship. But it’s a relationship – with a correlation coefficient approaching -0.6 (over a range where one and negative one means perfect correlation and zero none) if you compare population growth to wage growth four or three. five years later. Which doesn’t prove anything, of course, but it’s worth noting that a similar exercise with real GDP growth results in roughly zero correlation coefficient no matter how you shift the data over time.
This is of course also what the basic economics of supply and demand would predict. All other things being equal, a scarcer labor force should mean higher prices for that labor force, which in turn should spur efforts to improve the productivity of that labor force. through investment and innovation. Not everything else is equal and, again, I don’t think all the concerns about the negative effects of a shrinking working-age population are out of place. However, barely positive growth over the long term is probably acceptable, and over the short to medium term, employment may increase among working-age Americans, even if this is not the case for the working-age population.
It’s not just that the current employment-to-population ratio of 72.3% of the 20-64 age group is well below past highs. Even the peak in the employment rate of the early 2000s should not be seen as the upper limit, say JW Mason, Mike Konczal and Lauren Melodia in a new paper from the Roosevelt Institute, given that large differences in rates employment by race, sex, education and age persist. even then. Mason, professor of economics at the John Jay College of Criminal Justice at the City University of New York, recently argued repeatedly that “there is much more room for demand-driven growth in the economy. American than conventional estimates. suggest, ”and that the Biden administration’s ambitious spending plans could deliver significant labor and productivity gains. If this is true, blocking the growth of the working-age population will primarily be a boon for workers.
Justin Fox is a Bloomberg Opinion columnist covering business.
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