FacebookTwitterGoogle+RedditEmail

Why an Aging Population Won’t Make America Poor

by DEAN BAKER

Virtually the entire economics profession failed to recognize the housing bubble and the devastating impact that its collapse would have on the economy. Hundreds of millions of people across the globe are suffering as a result of this failure. The economics profession has responded with a limited dose of soul searching and a promise to do better.

Six years later there is little evidence that it is meeting this commitment. Most obviously, the fact that the economies of all the wealthy countries are still operating well below potential GDP is compelling evidence of continuing failure of economists to produce an agreed upon solution to the crisis.

This is not the only area where economics has failed in a very fundamental way. In recent years, we have been given numerous warnings about a future in which robots and the computerization of tasks once done by people will displace tens of millions of workers creating a world of mass unemployment. At the same time, we have a whole industry of deficit fear mongers who warn the public that we lack the means to support an aging population. Their argument is that a rising ratio of retirees to workers will impose an impossible burden on the dwindling pool of young people still in the labor force.

In case it is not immediately apparent, these are directly opposed concerns. The robot story is one of too few jobs. In this scenario technology is rapidly displacing workers, leaving little need for human labor. This is a world of abundance; we can have all the goods and services we may possibly want, while working less than ever. There can be an issue of distribution if we manage our economy poorly, but there is no basis for concern about scarcity or inadequate resources.

Even environmental problems will not be a concern. The robots will be able to produce and install solar panels everywhere at very low cost. And, we can save an enormous amount of energy that is currently wasted commuting, since few of us will have to go to work.

By contrast, the demographic story is one where we experience hardship because we don’t have enough workers to meet essential needs. Our aging population will be trying to get workers to provide health care and cook their meals at the same time their children need workers to educate and care for their kids. This leads to an inevitable conflict where one group or the other must suffer. The robots are nowhere in sight.

The incredible part of this story is that we have prominent economists who argue each position. Of course it’s not a bad thing to have a diversity of views in any discipline, but if economics cannot tell us whether we will have incredible abundance two or three decades from now or be suffering from extraordinary scarcity, then we have a serious problem. This would be like biologists not being able to tell us whether carbon was an essential component of most life on Earth or a deadly poison.

In this case the reality almost certainly lies somewhere in the middle, a point that is quickly clarified when we remember that the item at issue is productivity growth. Under any remotely plausible scenario, productivity growth will proceed at a pace that is fast enough to ensure that both seniors and young people have higher standards of livings. The aging of the population is not new; we have been seeing it for more than a century. However, productivity growth swamps the impact of demography.

Even if productivity growth fell back to the 1.5% annual rate of the slowdown years (1973-1995), output per worker hour would be almost 60% higher in three decades than it is today. And, productivity would keep rising in subsequent decades, whereas the demographics would change little for the rest of the century.

The moral of the story is that we could have a situation where inequality within generations is a drag on living standards, but changing demographics will not make us poor.

Those claiming that technology will lead to mass unemployment need to provide a productivity number. We saw productivity growth of almost 3% annually from 1947 to 1973. This was a period of high employment and rapidly rising wages. In their technology story, is productivity growth even more rapid? And if so, why shouldn’t that lead to even more rapid improvements in living standards?

These contradictory stories of future dystopias seriously confuse current economic policy. We badly need to focus on policies that will bring us back to full employment now. If we can sustain full employment, we will have little reason to fear either demographic or technological change.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. 

This article originally appeared on CNN Money.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

January 19, 2017
Melvin Goodman
America’s Russian Problem
Dave Lindorff
Right a Terrible Wrong: Why Obama Should Reverse Himself and Pardon Leonard Peltier
Laura Carlsen
Bringing Mexico to Its Knees Will Not “Make America Great Again”
John W. Whitehead
Nothing is Real: When Reality TV Programming Masquerades as Politics
Yoav Litvin
Time to Diss Obey: the Failure of Identity Politics and Protest
Mike Whitney
The Trump Speech That No One Heard 
Conn Hallinan
Is Europe Heading for a “Lexit”?
Stephen Cooper
Truth or Twitter? Why Donald Trump Is No John Steinbeck
Binoy Kampmark
Scoundrels of Patriotism: The Freeing of Chelsea Manning
Ramzy Baroud
The Balancing Act is Over: What Elor Azaria Taught Us about Israel
Josh Hoxie
Why Health Care Repeal is a Stealth Tax Break for Millionaires
Kim C. Domenico
It’s High Time for a Politics of Desire
Shamus Cooke
Inauguration Day and Beyond
Clark T. Scott
More and More Lousy
David Swanson
Samantha Power Can See Russia from Her Padded Cell
Kevin Carson
Right to Work and the Apartheid State
Malaika H. Kambon
Resisting the Lynching of Haitian Liberty!
January 18, 2017
Gary Leupp
The Extraordinary Array of Those Questioning Trump’s Legitimacy (and Their Various Reasons)
Charles Pierson
Drone Proliferation Ramps Up
Ajamu Baraka
Celebrating Dr. King with the Departure of Barack Obama
David Underhill
Trumpology With a Twist
Chris Floyd
Infinite Jest: Liberals Laughing All the Way to Hell
Stansfield Smith
Obama’s Hidden Role in Worsening Climate Change
Ron Leighton
Trump is Not Hitler: How the Misuse of History Distorts the Present as Well as the Past
Ralph Nader
An Open Letter to President-Elect Donald Trump
Binoy Kampmark
NATO and Obsolescence: Donald Trump and the History of an Alliance
Zarefah Baroud
‘The Power to Create a New World’: Trump and the Environmental Challenge Ahead
Julian Vigo
Obama Must Pardon the Black Panthers in Prison or in Exile
Alfredo Lopez
The Whattsapp Scandal
Clancy Sigal
Russian Hacking and the Smell Test
Terry Simons
The Truth About Ethics and Condoms
January 17, 2017
John Pilger
The Issue is Not Trump, It is Us
John K. White
Is Equality Overrated, Too?
Michael J. Sainato
The DNC Hands the Democratic Party Over to David Brock and Billionaire Donors
John Davis
Landscapes of Shame: America’s National Parks
Andrew Smolski
Third Coast Pillory: Politicians and Rhetorical Tricks
Chris Busby
The Scientific Hero of Chernobyl: Alexey V. Yablokov, the Man Who Dared to Speak the Truth
David Macaray
Four Reasons Trump Will Quit
Chet Richards
The Vicissitudes of the Rural South
Clancy Sigal
“You Don’t Care About Jobs”: Why the Democrats Lost
Robert Dodge
Martin Luther King and U.S. Politics: Time for a U.S. Truth and Reconciliation Commission
Jack Sadat Lee
I Dream of Justice for All the Animal Kingdom
James McEnteer
Mourning Again in America
January 16, 2017
Paul Street
How Pure is Your Hate?
Jeffrey St. Clair - Alexander Cockburn
Did the Elites Have Martin Luther King Jr. Killed?
FacebookTwitterGoogle+RedditEmail