Author’s Note: I wrote this in 30 minutes one morning before work and decided I would lightly edit and amend my original thoughts. I figured this was the only way I’d contribute to the site again, so here goes.

Much has been made of the declining economic prospects for the US as a country, but especially the economic prospects or lack thereof for the younger generations. This despite a ‘labor shortage’ and generally aging populace. Thinking in strict supply-demand terms, shouldn’t the supply of labor going down increase worker pay and dilute the power of capital? The younger generations should be relatively rich, why isn’t this happening? Why are boomers seemingly uniquely positioned for success?

One would think that a labor shortage would greatly advantage those providing the labor. I think it can only be explained by government policy and some unique combination of factors. First I am going to postulate some givens:

1. Money just represents stuff, so, it’s a measure of how much stuff you can get.
2. The less stuff available, the more money it will take to get the stuff, all else equal. Or, if you drastically increase the amount of money, you have the same effect.
3. Government has created a lot of money, but it also gives it preferentially to the old (through various schemes, not just transfer payments), many of these older people also have some serious savings from inheritance from the silent generation (who were really good savers, by and large). There is probably, actually a double-sided benefit to the upcoming generation when an older generation is slightly thrifty. Prices stay low (helpful when young as there is a minimum level of expenses one needs to expend to survive) during your earning years, allowing you to live better and save money, then you also inherit that money later. While boomers did experience economic travails, overall, they lived through the greatest economic performance of this country during their prime working years.
4. This just means that olds who are done providing value* are now at an age where they only have a few years left, may as well spend it. My thinking is that all their retirement money plus government funny money is all chasing a smaller, or not rapidly growing pot. Ironically this means that inflation out paces wage gains for the people providing the services required.
5. ???
6. Profit

No really, I haven’t figured out how to profit off of this. Someone must be, but I don’t know who. Speaking with a PT friend who works in a hospital, she (and everyone working with her) just got a 10% raise, the second raise of the year. So, maybe you just want to be in the business of providing services directly to the old. There’s only going to be higher demand for it and no political will at all to reduce that expense. At least not yet.

This is an effect that always occurs, but the effect size is going to be larger today than it was in the past (due to government policy and demographics). Changes in for example productivity can offset this, however there isn’t much evidence for increased productivity ( https://www.axios.com/2023/11/03/productivity-growth-us-economy). And anyway, this dilution of purchasing power of those still working is a drag on what wages would have been with the higher productivity.

https://www.zippia.com/advice/working-age-population/#:~:text=The%20working%2Dage%20population%20in,population%20of%20approximately%20207.4%20million.
Working age population is the lowest it has been since 1970.
Additionally, labor Force participation is at the lowest in a long time (since the 1970’s)

How Far Is Labor Force Participation from Its Trend?

People are also generally less healthy than ever (mind, body, and soul), which may be contributing to the labor Force participation rates. I don’t know what did it in the 70’s. All I know is that the 70’s weren’t great. But they had demographics on their side to some extent, and eventually, better policy.

I don’t think we’re likely to get either. I do think unemployment will stay low long-term (because demand will stay high), but that it won’t result in higher real wages, but strangely, lower real wages.

And now for my spiciest take: the browning of America means lower economic output per person.

Generally the highest earners are:
1. Asians (including Indians)
2. Whites
3. Hispanic
4. Blacks

(https://www.pgpf.org/blog/2023/11/income-and-wealth-in-the-united-states-an-overview-of-recent-data)

1 and 3 are growing demographics while 2 and 4 are stagnant or declining. The two largest groups are 2 and 3, and 4 is close third, but stagnant. Without changes to this pay distribution (and it seems pretty durable throughout time, the largest change has been that Hispanics have gotten richer as low-skill immigrants now make up a smaller percentage of them) will mean continued economic under performance as higher paid people make up a smaller proportion of the populace.

Why doesn’t Asians growing offset this?

They’re just too small of a group and you can’t import significantly more without compromising the quality of the entrants and driving down the average wage anyway./spice

This ties back into my other interest- the national debt and how this effects economic output. This will be another headwind for economic performance. I don’t think this is the apocalypse, but we will see slower and slower real growth and perhaps even falling standards of living as fewer resources are available per person. To some extent the extreme affluence of the past decades has been a guaranteed short-term effect as we reaped the investments of years past (whether financial or in human capital- children) without adequately replacing those investments. With birth rates cratering in the US and around the world, this effect (reduction in workforce relative to population) will not be going away.

*Since savings is just a representation of past value provided I am unequivocally not saying that people who saved don’t deserve to spend that money later in life, I plan to be one of them, but it does have effects.