Leave it to a macroeconomics conference to forge unexpected connections and tangents. This time, panels at the annual National Association of Business Economics (NABE) conference, held earlier this week in Washington, dredged up an episode kept for some 20 years in the zip files of my brain.
3rd Rock from the Sun is a sitcom that aired in the late ’90s and was based around the premise that four members of the extraterrestrial military elite have shed their nonbodies of purple goo for human life-forms and attempt to navigate Earth culture in a northwestern Ohio college town. Wacky hijinks ensue.
Sally (portrayed by Kristen Johnston), a decorated combat officer in the form of a 20-something woman, finds herself stranded in the foursome’s attic apartment during a blizzard with one of the human students of Dick (John Lithgow), her high commander–turned–physics professor. Sally believes the massive snowfall portends the end of time and informs her somewhat awkward companion that the two of them must “preserve humanity.”
I’ll spoil the kicker: The show went on for another five and a half seasons, after which the crazy crew of cutups rocketed back off into the ether. As for the real Earth, however, is the boom economy going to have such staying power? According to some economists, better get the Netflix queued up: Present demographics portend at least some flurries.
Birth rates across the Group of 20 have been tapering off, whereas the working-age population keeps getting older. Two key ingredients to long-term economic expansion are productivity and — as Sally might have understood on some level — population growth. The size of the workforce in the U.S. isn’t dwindling as fast as it has for some of its G-20 peers. In fact, U.S. workforce is on track to expand somewhat, albeit at a slower pace because of baby boomers’ collective retirement.
Nonetheless, the U.S. economy has been sauntering along as of late: It clocked in at a tepid 1 percent annualized rate, as of the fourth quarter 2015. Although preferable to a recession, the slow growth has analysts searching for any way to speed things up a bit. With monetary policy looking likely to stay soft for, at the very least, a few months, the spotlight is turning toward fiscal policy as the possible tonic.
Talking stimulus, taxes and the like at the NABE conference were Peter Orszag, former director of the U.S. Office of Management and Budget, and Kevin Hassett, director of economic policy studies at the American Enterprise Institute. The topic of this given moment: tax implementation vis-à-vis helping to bolster jobs growth. The earlier that workers are in their career, the more valuable is each hour worked, Hassett noted. “A lot of people who are aged 30 to 40 are at their peak capital-earning point in the cycle,” he said.
The line of thinking is this: Beyond the wages, the worker gains more experience, thus theoretically upping one’s earning power down the line, helping to further productivity. In recent years, older Millennials and Gen Xers saw an uptick in employment, however slight: Between December 2012, the last month before the marginal tax rate took effect, and October 2015, labor force participation decreased less than 0.5 percent for those 35 to 44, compared with slightly more than 0.5 percent for those aged 45 to 54 and more than 2 percent for those 55 and older.
Ostensibly, more hours worked should mean more productivity, checking off another box in the formula for economic growth. Yet “productivity remains low,” said Keith Hall, director of the Congressional Budget Office, during a previous panel. Pointing out that productivity has slowed down since August, he continued, “That’s something that I find hard to understand and, therefore, hard to forecast.”
There’s also the fact that down from the ivory tower and back on Earth, many in the 30- to 40-year-old age group have other priorities besides working their tails off. Some 50 years ago, many households headed by youngish adults were ensconced in a home, with children often school age by the time one’s parents hit that age range. Somewhere in the intervening decades, however, student loans crept into the picture. That, combined with the wallop of the 2008–’09 recession during those peak earning years that Hassett mentioned, has put a crimp in the general expected life cycle for that now 30-something crowd.
Also sapping productivity — for multiple generations — is retirement. Certainly, presumptive baby boomer retirees took a hit during the 2008–’09 recession, many having lost value in their nest eggs and earning power during the peak salaried years of their careers. Yet their youngish adult children, who might just be regaining their sea legs after shaky unemployment, are staring down not just starting their own home lives but also having to handle care for their parents. A July 2015 AARP report estimated the costs of lost productivity from providing eldercare at about $25 billion, with women shouldering a bigger brunt of lost wages and benefits as a result.
Blasting off into space is starting to look like an attractive retirement option.
Follow Anne Szustek on Twitter at @the59thStBridge.
