Friday, July 4, 2014

Changing Demographics

I talk a lot in this blog, and in class, about how changing demographics are the big reason for our declining labor force participation. Here’s an animated GIF that shows you the distributions I have in mind:


What should you get out of this?

First off, no one in the first 3 bars on the left, or in the 7 bars on the right (or spaces for bars) is involved in the labor market in a way serious enough to change the numbers much.

Secondly, most people don’t start consistently counting in the labor force until they hit the 6th bar from the left (25 to 29), and they start leaving it in the 9th bar from the right (55 to 59).

In short, you need to focus your attention from just to the left of the URL to about half way through it. Then watch a few times until you can count off the dates in rhythm like your counting for a music teacher.

Now note the big wave that starts to hit around 1980, and that levels out by 2010. That’s why labor force participation is down: imagine you’re at the beach, you just body surfed a wave up onto the beach, and now you’re laying in the sand wondering why you’re not moving any more forward any more. 

There is another wave coming though. But it’s not nearly as big, and it won’t hit until 2020 or 2025.

What’s the takeaway? Reagan and Clinton were luckier than their supporters would have you believe. Obama is unluckier than his detractors would have you believe. But Obama and the Democrats are probably pretty dumb if they 1) weren’t aware of this, and 2) didn’t start coaching the public that reality wasn’t going to match up with the nonsense they spouted on the campaign trails.

Bill McBride at Calculated Risk created this image. Via Carpe Diem.

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