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Home Publications Blogs Beat the Press Dependency Ratios Poised to Plummet In Next Two Decades

Dependency Ratios Poised to Plummet In Next Two Decades

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Monday, 14 June 2010 16:30

There is something incredibly otherworldly about current economic policy debates. We are sitting here with almost 10 percent of our workforce unemployed. Let's repeat that so even a policy wonk can understand it: almost 10 percent of the workforce is unemployed. That means people with the skills and desire to work cannot find jobs. The problem is too few jobs, too much supply  of labor, got it?

Nonetheless, there is now a national fixation on the problems of an aging population. The story is that we will have too few workers to support too many retirees. That's a problem of too little labor.

At a time when we have the greatest oversupply of labor since the Great Depression, we are now supposed to be terrified that in a few very short years we will not have enough labor. Is that possible?

Not if we know arithmetic. The NYT gave us a little glimpse of this horror story in its Economix blog today. It showed that the ratio of dependents (defined as people over 64 or under 20) to working age people (those between the ages of 20 and 64) is supposed to rise from 0.67 today to 0.74 in 2020, and 0.83 in 2030; pretty scary, right?

Well suppose we defined a slightly different dependency ratio. This will be the ratio of people who are not working to the people who are. The idea being that people who are working must support the people who are not, regardless of their age.

In 2010, this ratio stands at 1.22. We have 139.4 million people working and 170.1 million not working. However, if we assume that we get back to near full employment and the labor force grows as the Congressional Budget Office projects and population grows as the Census Department projects, this dependency ratio will have fallen to 1.05 in 2020 and then rise to 1.07 by 2030. So, are we scared yet?

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Comments (5)Add Comment
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written by izzatzo, June 14, 2010 9:12
At a time when we have the greatest oversupply of labor since the Great Depression, we are now supposed to be terrified that in a few very short years we will not have enough labor. Is that possible?


This is the new deficit hawk economic theory known as Dark Labor Gravity Waves, which explains how the supply of labor expands and contracts at the same time. While seeming to expand like the universe, labor no longer expands at a decreasing rate and like Social Security, has entered the Black Hole of No Return to contract at an increasing rate.

This explains how sophisticated chants by Teabaggers can hold seeming conflicts when addressing complex subjects like a jobless recovery, such as, "Don't Just Do Something, Stand There."
You bet I'm scared!
written by Sandwichman, June 14, 2010 9:38
It's always more comforting to be frightened about some unprecedented future scenario that to think about the lack of integrity of the folks who tell us what we should be afraid of. Even scarier to think that if there ever was such a labor shortage, wages would go up (not to mention increases in productivity likely to occur between now and 2030).

Speaking of productivity... why is it that "in view of the virtual unanimity of opinion among economists as to the general shape of the relationship between hours and output, that the effect of hours shortening has received so little attention in published projections"?

http://www.angrybearblog.com/2010/06/five-million-jobs.html
Some dependents are more equal than others
written by Tom, June 15, 2010 12:12
Dean, your numerical analysis ignores the key social factor. Unemployed dependents are good because they increase the supply of labor, lowering wages and helping the social position of the dominant class. Retired dependents are bad because they decrease the supply of labor, increasing wages and decreasing the social position of the dominant class.
Your graph is inadequate
written by Erik L, June 15, 2010 9:10
There is not enough information in your graph to tell. First it uses the common but misleading practice of showing only a portion of the Y axis. The lowest number you show is .95; the highest is 1.25. Second, you only show 3 years and the first is chosen with extremely high unemployment.

It would help your readers to see the full y axis and also ratios for many more years.
Same old, same old
written by FoonTheElder, June 21, 2010 1:16
For business and their media puppets, there has supposedly been a shortage of labor for over 30 years. I can't tell you how tired I am of hearing it.

There's just never enough highly skilled people who are willing to work for below market wages. So, business has to import cheap laborers or outsouce them in their race to the bottom of the wage scale. The shortage is of people willing to be jerked over by employers.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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