Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
DOUBLE YOUR DONATION!
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. A generous donor is matching all donations of $100 or more! So please donate now to double your punch!
FacebookTwitterGoogle+RedditEmail

Why an Aging Population Won’t Make America Poor

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.

More articles by:

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

Weekend Edition
October 19, 2018
Friday - Sunday
Jason Hirthler
The Pieties of the Liberal Class
Jeffrey St. Clair
A Day in My Life at CounterPunch
Paul Street
“Male Energy,” Authoritarian Whiteness and Creeping Fascism in the Age of Trump
Nick Pemberton
Reflections on Chomsky’s Voting Strategy: Why The Democratic Party Can’t Be Saved
John Davis
The Last History of the United States
Yigal Bronner
The Road to Khan al-Akhmar
Robert Hunziker
The Negan Syndrome
Andrew Levine
Democrats Ahead: Progressives Beware
Rannie Amiri
There is No “Proxy War” in Yemen
David Rosen
America’s Lost Souls: the 21st Century Lumpen-Proletariat?
Joseph Natoli
The Age of Misrepresentations
Ron Jacobs
History Is Not Kind
John Laforge
White House Radiation: Weakened Regulations Would Save Industry Billions
Ramzy Baroud
The UN ‘Sheriff’: Nikki Haley Elevated Israel, Damaged US Standing
Robert Fantina
Trump, Human Rights and the Middle East
Anthony Pahnke – Jim Goodman
NAFTA 2.0 Will Help Corporations More Than Farmers
Jill Richardson
Identity Crisis: Elizabeth Warren’s Claims Cherokee Heritage
Sam Husseini
The Most Strategic Midterm Race: Elder Challenges Hoyer
Maria Foscarinis – John Tharp
The Criminalization of Homelessness
Robert Fisk
The Story of the Armenian Legion: a Dark Tale of Anger and Revenge
Jacques R. Pauwels
Dinner With Marx in the House of the Swan
Dave Lindorff
US ‘Outrage’ over Slaying of US Residents Depends on the Nation Responsible
Ricardo Vaz
How Many Yemenis is a DC Pundit Worth?
Elliot Sperber
Build More Gardens, Phase out Cars
Chris Gilbert
In the Wake of Nepal’s Incomplete Revolution: Dispatch by a Far-Flung Bolivarian 
Muhammad Othman
Let Us Bray
Gerry Brown
Are Chinese Municipal $6 Trillion (40 Trillion Yuan) Hidden Debts Posing Titanic Risks?
Rev. William Alberts
Judge Kavanaugh’s Defenders Doth Protest Too Much
Ralph Nader
Unmasking Phony Values Campaigns by the Corporatists
Victor Grossman
A Big Rally and a Bavarian Vote
James Bovard
Groped at the Airport: Congress Must End TSA’s Sexual Assaults on Women
Jeff Roby
Florida After Hurricane Michael: the Sad State of the Unheeded Planner
Wim Laven
Intentional or Incompetence—Voter Suppression Where We Live
Bradley Kaye
The Policy of Policing
Wim Laven
The Catholic Church Fails Sexual Abuse Victims
Kevin Cashman
One Year After Hurricane Maria: Employment in Puerto Rico is Down by 26,000
Dr. Hakim Young
Nonviolent Afghans Bring a Breath of Fresh Air
Karl Grossman
Irving Like vs. Big Nuke
Dan Corjescu
The New Politics of Climate Change
John Carter
The Plight of the Pyrenees: the Abandoned Guard Dogs of the West
Ted Rall
Brett Kavanaugh and the Politics of Emotion-Shaming
Graham Peebles
Sharing is Key to a New Economic and Democratic Order
Ed Rampell
The Advocates
Louis Proyect
The Education Business
David Yearsley
Shock-and-Awe Inside Oracle Arena
FacebookTwitterGoogle+RedditEmail