Economic growth in the United States has been disappointing for more than a decade now. Some of the reasons are complex and hotly debated, and will be the subject of a series of posts here starting next week. But one of the reasons is not mysterious at all. It simply reflects demographic changes.
The share of Americans who are working age — old enough to be out of school but young enough not to be retired — is no longer growing. Only about 53 percent of the population was between the ages of 25 and 64 last year, unchanged from 2007 and up only slightly from 52 percent in 1997. Between 1967 and 1997, by contrast, the share grew 8 percentage points, to 52 percent from 44 percent. As more baby boomers retire, the share will begin to fall.
Fewer people of working age means, obviously enough, fewer workers. It also means fewer potential entrepreneurs creating new businesses that hire people. READ MORE.
Swedish telecom giant Ericsson released a Traffic and Market Reportin which it predicts that 85% of the world’s population will be covered by high-speed internet as early as 2017. It estimates that the total number of mobile broadband subscriptions will quintuple from 1.1 billion today to 5 billion in 2017. In the same period, smartphone subscriptions will rise from 700 million to 3 billion. READ MORE.
Few investors are more bullish these days than public pension funds.
While Americans are typically earning less than 1 percent interest on their savings accounts and watching their 401(k) balances yo-yo along with the stock market, most public pension funds are still betting they will earn annual returns of 7 to 8 percent over the long haul, a practice that Mayor Michael R. Bloomberg recently called “indefensible.”
Now public pension funds across the country are facing a painful reckoning. Their projections look increasingly out of touch in today’s low-interest environment, and pressure is mounting to be more realistic. But lowering their investment assumptions, even slightly, means turning for more cash to local taxpayers — who pay part of the cost of public pensions through property and other taxes. READ MORE.
The young alone lack the demographic firepower to mobilize an effective protest movement.
With the return of warm weather, the ‘Occupy Wall Street’ movement is staging a series of protests in the hope of making a comeback after last fall’s dismal showing. Whether it succeeds in turning itself into an enduring force for change or whether it fizzles out as it did in November will depend in some measure on its ability to overcome some demographic odds which are stacked against it. Because the percentage of young people in this country is now relatively low (compared to the 1960s and 1970s), the movement will likely gain more traction only if it succeeds in drawing into its ranks greater numbers of Americans aged 30 or more.
The hypothesis is that the young population (under 30) must be of a certain critical size as a percentage of the total population in order for a small protest to gel into something bigger. And in America today, the young lack sufficient numbers to reach that level. It would take a stronger demographic, equivalent to 20 to 30 million additional Americans aged 16 to 30, in order for a certain number of them to bring about significant change through street demonstrations. This hypothesis is borne out by the demographic dynamics of the 1960s protests in America and of protests in the Arab world in the past 15 months.
The adjoining chart shows the annual number of Americans who reached the age of sixteen, as a percent of the total population, between 1930 and 2010. Note how it rises for nearly two decades from a low of 1.49% in 1955 to a high of 2.03% in 1973. With the Vietnam War and the charged climate of the civil rights movement, there was plenty in the 1960s for young people to want to change. And they clearly had the numbers to push for change.
But the picture today is quite different. In America today, the percentage of people becoming young adults every year is only 1.3% and it is trending down towards the all-time low of 1.2% reached in 1992. This decline is explained by the fall in the birth rate (the numerator) and by the aging of baby boomers (the denominator). The deviation from the past may appear small but the 0.7% differential between the 1973 and 2010 figures is in fact equivalent to 2.2 million fewer young people per year, or 11 million over five years (the 16 to 20 bracket) or 22 million over ten years (the 16 to 25 bracket), than there would be in the US had the ratio remained at the 1973 level.
Consider for comparison the corresponding numbers in the Arab world. The number of teenagers turning 16 every year, as % of the population, is 1.9% in Egypt, 1.8% in Libya, 1.7% in Tunisia, 2.2% in Syria and 2.3% in Yemen. If there is a ‘tipping point’ in youth demographics beyond which a revolt can sustain itself, it can perhaps be derived from these ratios. A tipping point is likely to be at 1.7% or higher.
A rise in a country’s median age is another noteworthy measure. The median age in America is 37 years but it is 24 in Egypt, 25 in Libya, 30 in Tunisia, 22 in Syria and 18 in Yemen.
This time around, ‘Occupy Wall Street’ may grow to become more significant, but only if it can attract older demographic segments in much larger numbers than it did in the fall.