Sunday, February 12, 2012

Peak Workers, Not Peak Oil is the Real Problem of the Future

Demography is the most precise of the social sciences. It deals in high statistical accuracy and predicted trends play out over decades. To some extent the problems of debt and future liabilities for the United States are wholly predictable from demographic trends. Unfortunately, these problems are global, not limited to the United States. The percentage of the population that is able or willing to participate in the labor force is going to undergo huge shifts over the next two decades, with predictable consequences. (To get ahead of myself, this is why I believe we need to solve the illegal immigration problem quickly, so that we can establish the conditions to allow massive legal migration, while we still have that option.)

Doug Saunders, a reporter for Canada's Globe and Mail, highlights some interesting issues. He calls the problem, peak people, but I think the term peak workers is more accurate.
About 11 per cent of the world’s people are over 60 at the moment. In the next 25 years that will double, to almost a fifth, and one in six of those people will be over 80, according to a forthcoming book, Global Aging in the 21st Century, by sociologists Susan McDaniel of the University of Lethbridge and Zachary Zimmer of the University of California.
. . .
The cheapest labour will vanish. We’re already seeing this: Because China is aging very fast, its dwindling working-age population is turning down the lowest-paid jobs and pushing up the minimum wage sharply, as well as the once-minimal costs of social services: Stuff from China will stop being cheap, because the Chinese aren’t young.
. . .
Peak people will also be an age when countries will be competing for immigrants rather than trying to limit them. Immigration has spared Canada from the worst of aging, but immigrants adopt host-country family sizes very quickly, so they’re a temporary fix. And if their home countries are competing to keep them, then we'll have a harder time finding young people who want to come.

Saunders doesn't address the public pensions issue much in the article, but that will be a key area of dispute. As we have seen in Greece, people don't much like having their wages or entitlements cut. But Social Security has always been run on an implicit assumption that there would be sufficient workers replacing the one's leaving and receiving benefits. What if that is no longer true? Look at this population pyramid:

We can see the bulge in the 45-54 year old age category which will spell trouble since there are fewer workers behind that group. But look here is the Chinese problem.

Source of graphs is, which aggregates publicly available facts in an easy to use fashion.

We can see that their pension problem is farther in the future, but is much more significant. Further, as their population bulge enters its peak earnings years, it will drive up average wages.

The United States has had a higher fertility rate than other first world nations. I am not sure that will continue to hold up. We have always been a nation of immigrants, attracting the best and brightest from all over the world. We need to be thinking about this problem now, and attracting young skilled immigrants before the competition heats up. All that is really required is for government to get out of the way, by ending unnecessary limits on H-1B visas, and letting those with such visas have a path to citizenship.

1 comment:

  1. In naval arch. terms, China looks to be approaching a negative KG. Not good.