Declining Working Age Population
Mar 27, 2017
Elmer Zimmerman adds a complicating factor to my comments about the slowing growth of the US population:
"An add-on to your population article: another key factor is that working-population (age 25-60), which supports an economy, is declining faster than overall population. This percentage change -- working population to non-working population -- dramatically affects economic growth."
Thanks for the input, Elmer. To begin with, let's make sure we're clear on what I was trying to say. The US population is still growing, but the rate of growth is declining. That's what the two charts I used showed. Think of it as a car decelerating, but not going in reverse.
The problem you accurately pointed out is the working age population, and here's where it gets tricky. The Fed, which tracks these numbers looks at ages 15 to 64. That chart looks like this. But many analyses look at prime working age 25-54. That chart looks more troubling, as it has flattened out. But there's even more unsettling news. This research from Pew released this month shows the effect on our working age population with and without immigration – of all types.
All these numbers matter because of Japan. Japan is a wealthy country whose economy has stagnated largely because "working age" also means "spending age", and their working age demographic is shrinking. Japan has avoided – barely – recession by exporting to make up for absent domestic demand.
Bottom line for the US: slow-growing or declining working age population presents real hurdles for economic expansion. Combined with trade policies that hamper US exports, this could spell real trouble real soon.