Millennials getting raises have retiring Boomers to thank

After decades during which employers usually held the upper hand, something feels different in the U.S. labor market. Wages are rising across the income spectrum. Workers are quitting in huge numbers. McDonald’s franchisees are offering hourly workers child care and college tuition.

The COVID-19 pandemic and the unprecedented government aid in response to it are clearly part of the explanation for this, but it may also be relevant that the working-age population stopped growing a couple of years ago.

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Definitions of “working-age” vary. In Bureau of Labor Statistics lingo it means everybody 16 and older, while international statistics-keepers such as the Organization for Economic Cooperation and Development and World Bank tend to define it as ages 15 through 64. I think the metric I’ve chosen — ages 20 through 64 — better reflects who’s actually available to work in the U.S., given that it includes every age group with a labor-force participation rate above 50% and excludes all those for which it is lower.

The oldest of the boomers are turning 75 this year and the youngest 57, so their entrance into the 65-and-older ranks has been depressing the growth of the 20-64 population for a decade now. The Census Bureau’s latest population projections, made in 2017, foresaw a modest rebound in the growth rate after the boomers finished aging out, but still much slower growth than seen in the 1950s through mid-2010s.

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Drawing on a large new dataset of US news content, we demonstrate that the tone of the economic news strongly and disproportionately tracks the fortunes of the richest households, with little sensitivity to income changes among the non-rich. Further, we present evidence that this pro-rich bias emerges not from pro-rich journalistic preferences but, rather, from the interaction of the media’s focus on economic aggregates with structural features of the relationship between economic growth and distribution. That is, gross domestic product growth, asset prices and other aggregate measures of economic performance offer “a portrait of the economy that strongly and disproportionately tracks the welfare of the very rich,” and doesn’t necessarily represent the experience of everybody else.

So let’s try an economic metric that explicitly doesn’t track the welfare of the very rich: real hourly earnings of production and nonsupervisory employees. All else being equal, scarcer labor should mean higher prices for that
labor, which in turn should spur efforts to improve the productivity of that labor through investment and innovation. All else isn’t equal, and again I don’t think all the worries about the negative effects of a shrinking working-age population are misplaced. Barely positive growth over the long haul is probably fine, though, and over the short-to-medium-term there’s room for employment to grow among working-age Americans even if the working-age population doesn’t.

It’s not just that the current 72.3% employment-population ratio of the 20-through-64 age group is well short of past highs. Even the employment-rate peak of early 2000 should not be seen as the upper bound, J.W. Mason, Mike Konczal and Lauren Melodia argue in a new Roosevelt Institute paper, given that big gaps in employment rates by race, gender, education and age persisted even then. Mason, an economics professor at the John Jay College of Criminal Justice of the City University of New York, has been making a spirited case in multiple venues recently that “there is much more space for demand-led growth in the U.S. economy than conventional estimates suggest,” and that the Biden administration’s ambitious spending plans could bring big labor-force and productivity gains. If that turns out to be right, the stalling of working-age population growth will mainly just be a boon for workers.