A smaller working-age population could mean less growth
How much an economy can produce depends to a large extent on the number of persons who are old enough to work but not too old to work. One can try to make sure there are employment opportunities, but obviously you need workers. The graph shows two measures of the “working age” population for the United States, based on different age spans. The 15- to 64-year-old range covers everyone who could work up to the hypothetical retirement age of 65. The 25- to 54-year-old range excludes the youngest (likely still in some form of schooling) and the oldest (who may have already entered some form of retirement). As the overall population of the U.S. increases, these two measures ought to increase as well. But the second measure lately has not. Why?
It all boils down to the age composition of the U.S. population.
- The large cohort of the Baby Boomers is now almost all older than 54, so would not be included in the 25- to 54-year-old age range.
- Fertility has decreased, so there are fewer younger people replacing those who are retiring from the workforce.
- Immigration can compensate for lower fertility, as immigrants are typically of working age, but immigration doesn’t appear to be strong enough to make up the difference.
With about a 10-year delay, the number of 15- to 64-year-olds should also flatten out, with far-reaching economic implications: The U.S. economy is unlikely to be able to sustain the growth of past decades without the usual growth in its working-age population.
How this graph was created: Search for “working age population age” and the two series should be visible. If not, use the side bar options to narrow down your choices. Check the two series and click “Add to Graph.”
Suggested by Christian Zimmermann.
View on FRED, series used in this post: