America's maturing 'baby boom' -- good economic news for the '80s?
The "baby boom" generation of the 1950s will be a boon to American society in the 1980s. Beyond today's seemingly intractable problems of high unemployment, inflation , crime, and low productivity is a demographic trend that will exert a powerful correcting influence on those problems in the coming decade.
Demographers and economicsts are careful to note that public policy and world events will be potent forces in shaping the US experience over the next 10 years. But they see mostly positive benefits from the explosion of children born in the 1950s and early 1960s, who now either are adults or are entering young adulthood.
"The baby-boom generation is on the verge of entering the most productive phase of life," demographer Leon F. Bouvier noted in a recent report published by the Population Reference Bureau Inc., a nonprofit research group in Washington.
Mr. Bouvier pointed out that between 1955 and 1964 and 42 million babies were born in the United States -- the most ever for a 10-year period in this country. The population bulge was significant because it was preceded and followed by substantially lower numbers of births.
While society has spent the past 20 to 30 years struggling to accommodate the unprecedented number of new members -- rearing, educating, and employing them -- it will soon begin reaping benefits.
Economist William Serow of the University of Virginia predicts, on balance, favorable consequences for the American economy from the maturing of the baby-boom population.
Within three years Mr. Serow says the United States will have for the most part accomplished the task of employing this flood of new workers. The US labor force was expanding by about 2 million people on average each year from 1968 to 1978. The rapid growth brought high unemployment among teenagers and young adults, who tend to have a tougher time finding work due to inexperience and who typically switch jobs more frequently.
But in the 1980s the growth in the labor force is expected to slow and have a positive influence on unemployment rates. Economist Michael Wachter of the University of Pennsylvania has forecast that the level of core unemployment -- the number of workers who are considered practically unemployable -- will drop a full percentage point by 1988 from its 5.5 percent level in 1976.
Fewer teen-agers could also lower the US crime rate because the incidence of crime is particularly high in that age bracket.
Children born during the baby boom are now in their late teens and early 20s, which economists also say bodes well for the nation's sagging productivity.
The American work force is not making the gains in efficiency, measured by production per man-hour worked, that it did from 1950 to 1965. This has tended to exacerbate inflation and erode the world competitiveness of certain major industries, like steel.
There are numerous causes cited for the slowdown, but one common explanation is all the new, inexperienced, and unskilled workers that have been absorbed into the labor force.A maturing, better trained work force, as will develop during the 1980s, will rectify one cause of slumping productivity, economists say.
Thomas Espenshade, a demographer with the nonprofit Urban Institute, sees productivity improving this decade for other reasons as well. With the baby-boom population entering young adulthood, he expects the savings rate among Americans to improve as these people earn more and build families. This would create more capital in the US economy for business investment and better equipment and technology to improve productivity.
Also, Mr. Espenshade says he thinks with a smaller labor pool of teen-agers, the business community will find it makes more sense to upgrade their plants and equipment. "There will be more incentive to invest in better technology when cheap labor is more scarce," he declared.
Another potential impact of the aging of the baby-boom generation is a shortage of young unskilled workers within the next 15 years. The impact on US immigration policy could be great. Former commissioner of the Immigration and Naturalization Service Leonel Castillo ventures that by 1990 the United States may be actively recruiting Mexican labor, in contrast to current policy to trying to limit the migration of workers from that country.
As those American born in the 1950s and early 1960s establish households they are expected to trigger a boom in the housing industry. The demand for new homes will be at an all-time record this decade, predicts the National Association of Home Builders (NAHB), and this is apt to spur greater consumer sales of furniture and appliances.
While this housing demand bodes well for the economy in general, NAHB economist William Young notes, "it's going to be a seller's market." That means home prices will continue to rise rapidly, as they did through the 1970s.
Coming demographic changes in the US population will greatly affect the tax burden on workers. As the baby-boom generation has grown up, school enrollments have been falling, which has lessened the need for greater local tax revenues.
However, funding the social security system could become tremendously more expensive for wage earners as the baby boom generation retires. The tax burden will ultimately depend upon how many children are born in the next decades to support that segment of the population when it retires, but it is clear that the number of persons over 65 will more than double by 2030.
Still, Mr. Bouvier points out that if the current low birthrate persists into the future, the total "dependency ratio" of elderly and school-age children on the working population could be unchanged 30 years from now. Whether tax dollars can be redirected from supporting public schools to propping up the social security system is a matter of changing public policy, not demographics, he noted.