Question: The monthly job reports are usually accompanied by a statement that we need lots of new jobs just to keep up with population growth. Since large numbers of baby boomers are now retiring, however, wouldn’t this have a complete offsetting effect for the next 15 years or so? Submitted by JohnnyOh
Answer: There are basically three variables that will determine the growth of the labor force: The fertility rate, the participation rate (how many people of working age want to work), and the rate of immigration. You are right that the aging of the baby-boom generation, coupled with declining fertility rates, has had a significant affect on the growth rate of the labor force. A report from the Labor Department last year predicted that the growth of the labor force will slow by 7% between the years 2010 and 2020 compared to the previous decade.
That being said, we still have a growing population and a growing workforce. The third factor — immigration — has remained fairly steady, while the fertility rate — though declining — remains strong compared to other developed nations. That’s why we need somewhere between 80,000 and 120,000 jobs per month just to keep up with population growth, and that will probably continue to be the case for the next ten years.
But this is a good thing! When you hear that we need X number of jobs per month to keep up with population growth, it might give the impression that population growth is a burden to the economy — that if we could only slow the growth of the labor force we could solve our unemployment problems. But in fact the opposite is true: Steady population growth is a good thing for the economy. New entrants to the workforce don’t just supply labor, they also demand it. All these new young people and immigrants who are now joining the labor force need things like clothes to wear, cars to commute to work, and homes to live in. And this demand creates jobs. Furthermore, a growing population allows us to support our ever-growing elderly population.
In other words, it’s not the size of the labor force that’s the problem, but the lack of jobs.
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