The Labor Cliff
The labor market is one of if not the key dimensions of economics. After all,
"The end goal of economic output is to generate the means and necessities to sustain life, and ideally comfort."
The nature of the labor market today and in the 80s is completely apples to oranges. In the 80s, the last of the baby boomer generation was finishing post-secondary education or already in the workforce. Labor was relatively abundant, and the subsequent much smaller generation (Generation X) were still largely dependents.
Extrapolating upon this, one could say that throughout much of the 80s, the US was in the beginning of its demographic dividend. This is a time in a jurisdiction's development where there is an unusually large number of working-age adults relative to the rest of the population.
The ratio of working-age adults to "dependents" - youths and those of retirement age - is known as the age dependency ratio (ADR or ADP).
The elderly and youth require services such as healthcare and education respectively, and generally participate in the workforce to a lesser degree. We can think about the working age population as generating supply, and dependents as sources of demand. When the ADP of a jurisdiction is low, that means there are a lot of excess productive potential workers to go around. This makes the overall workforce more elastic.
Jurisdictions with an ADP of under 50 have a considerable tailwind when it comes to developing manufacturing, higher order economic activities, and faster levels of economic growth in general. This is in part because there are less dependents the state has to provide services for such as education, healthcare, and so on. State resources that otherwise would have been spent on essentials can be redeployed into easing the cost of doing business, such as the construction of infrastructure and reducing taxes. At the same time, energy and focus spent away from careers taking care of the elderly and children can be dedicated to innovation and increasing output.
America today has a higher and rising ADP than it did in the past 48 years. This is a huge component as to why unemployment as we know it is dead in the absence of an outright depression; a reality that will only become more true over time.
The ADP metric's definition of what qualifies as "youth" is the cohort of the population ages 0-15. Fertility as well as the number of births per annum fell off after 2007 in the United States and among OECD countries more generally. High school seniors in the class of 2024 were born in 2005-2006, with their underclassmen peers the first of the post-2007 baby bust generation. Those jobs previously being filled by high school part-timers and summer jobs are beginning to get squeezed as the beginning of the post-baby bust are now turning 16.
By the time the beginning of this age cohort enters the workforce around 2026 to 2030 (when this age cohort will graduate from secondary and post-secondary respectively), the quantity of new entrants to the labor force will drop precipitously. Compounded with the fact that last of the baby boomers turn 65 in 2029 with the end of the "silver tsunami" retirement bomb, and by the end of the decade conditions will be such that there will be nearly the complete impossibility for unemployment, and with it, demographic quicksand is climbing up the age ladder.
The labor market is one of if not the key dimensions of economics. After all,
"The end goal of economic output is to generate the means and necessities to sustain life, and ideally comfort."
The nature of the labor market today and in the 80s is completely apples to oranges. In the 80s, the last of the baby boomer generation was finishing post-secondary education or already in the workforce. Labor was relatively abundant, and the subsequent much smaller generation (Generation X) were still largely dependents.
Extrapolating upon this, one could say that throughout much of the 80s, the US was in the beginning of its demographic dividend. This is a time in a jurisdiction's development where there is an unusually large number of working-age adults relative to the rest of the population.
The ratio of working-age adults to "dependents" - youths and those of retirement age - is known as the age dependency ratio (ADR or ADP).
The elderly and youth require services such as healthcare and education respectively, and generally participate in the workforce to a lesser degree. We can think about the working age population as generating supply, and dependents as sources of demand. When the ADP of a jurisdiction is low, that means there are a lot of excess productive potential workers to go around. This makes the overall workforce more elastic.
Jurisdictions with an ADP of under 50 have a considerable tailwind when it comes to developing manufacturing, higher order economic activities, and faster levels of economic growth in general. This is in part because there are less dependents the state has to provide services for such as education, healthcare, and so on. State resources that otherwise would have been spent on essentials can be redeployed into easing the cost of doing business, such as the construction of infrastructure and reducing taxes. At the same time, energy and focus spent away from careers taking care of the elderly and children can be dedicated to innovation and increasing output.
America today has a higher and rising ADP than it did in the past 48 years. This is a huge component as to why unemployment as we know it is dead in the absence of an outright depression; a reality that will only become more true over time.
The ADP metric's definition of what qualifies as "youth" is the cohort of the population ages 0-15. Fertility as well as the number of births per annum fell off after 2007 in the United States and among OECD countries more generally. High school seniors in the class of 2024 were born in 2005-2006, with their underclassmen peers the first of the post-2007 baby bust generation. Those jobs previously being filled by high school part-timers and summer jobs are beginning to get squeezed as the beginning of the post-baby bust are now turning 16.
By the time the beginning of this age cohort enters the workforce around 2026 to 2030 (when this age cohort will graduate from secondary and post-secondary respectively), the quantity of new entrants to the labor force will drop precipitously. Compounded with the fact that last of the baby boomers turn 65 in 2029 with the end of the "silver tsunami" retirement bomb, and by the end of the decade conditions will be such that there will be nearly the complete impossibility for unemployment, and with it, demographic quicksand is climbing up the age ladder.