A coming job crisis AND a retirement crisis in the US?

Here's the crystal ball

It’s almost my favorite time of year…Halloween! And of course imagery of divination is everywhere: Ouija boards, Tarot cards, crystal balls. Let me add to that list population pyramids. With so much uncertainty in the practice of strategic foresight, demography saves the day by painting the clearest picture we have of the future. Here’s how.

Feel free to share any of these graphs on social media with your own takeaways. I already put attribution in there so you can copy and paste.

With lower fertility and longer life expectancy (hopefully we’ll regain lost ground soon), people are going to need to work longer almost everywhere to support existing social security systems. But it’s hard to stay productive when you’re unwell and the gap between healthy life expectancy and overall life expectancy is often wide: in most OECD countries it’s a decade and in the US it’s 12 years! We know from past newsletters that the US health picture has only been growing dimmer (even before COVID) so getting the average person to work past 66 years is a huge challenge. But, as we’ll see in the following section, longer working lives is a key adaptation to population aging. Good health has to be part of the strategy.

Credit: Catherine McQueen, Getty Images

Nearly every restaurant and store I enter has had “Help Wanted” signs up so long they’ve yellowed and worn. Statistical evidence bears out just how tight the labor market is. In July, there were nearly twice as many job openings as unemployed workers—11.2 million to 6 million. While reasons for this tight market are complex, population is a key contributor. America’s growing economy is abutting its new demographic reality.

I love population pyramids* because a single snapshot in time lets you see both the past and the future. I’ve always said they’re the best crystal ball we have. The US age structure in 2022 shows larger baby boomer cohorts nearing and just past retirement ages, with a smaller Gen X coming just after them—clearly thriving in middle age (says I)—and followed by the “echo boom” of Millennials. The bars get longer starting around age 50, showing that the domestic US labor market benefited from an annual increase in number of new entrants for about 20 years. But then the situation shifts. Future workers are already born, and their numbers are smaller.

The US population pyramid doesn’t just show the future of new entrants to the workforce, it also shows the future of exits. As time goes on, cohorts age out of the workforce and enter retirement. But when they enter retirement is dependent upon a host of regulations around entitlements eligibility and retirement, social norms, and physical ability. In 2018, the average working man and woman in the US stayed in the workforce past normal retirement age, which is age 66. Men worked an extra two years and women an extra half of a year. In 2020, both men and women in the US exited the workforce—“effectively” retired—about 1 year earlier than normal retirement age. As we see from the infographic on healthy life expectancy in the US, though, there’s a ceiling on how long people can work. That’s why we can’t think about retirement independently from morbidity. In 2018, the average Korean man worked an extra 4 years beyond his American counterpart. Japanese work longer, too, and healthy life expectancy in Japan is 74 years, while overall life expectancy in the US is just 78. That’s one reason Japan—the world’s demographically oldest country—is actually better positioned to weather aging than the relatively younger US.

What about immigration? Well, immigration to the US has been down since 2015, and while that’s a valve in large part controlled by policy makers, widespread population aging means that the potential supply of workers from abroad will also dwindle. Still, the US remains one of the most desirable places for immigrants so policy makers have the power to ramp up entries.

*More accurately called population trees these days since fewer and fewer countries have populations shaped like pyramids from high fertility

• The US is the world’s fourth largest Spanish speaking country—that’s native Spanish speakers.

• I love Austin Kleon’s newsletter because it reminds me of the privilege my career affords to be creative. But what he said recently about reading hit the spot like nothing else he’s written. Like him, I read work-related stuff in the pool (and on the screened porch, and curled up in the window with tea) but it feels naughty. According to him, and the writers he links to, with cooler temps ahead and the promise of crackling fires I need to get over it.

• I also have guilt-free reading, including new Robert Galbraith novel, which is 999 pages! But almost 300 pages in I’m enjoying it enough to see it through.

If you’re in DC please buy a ticket to Profs and Pints next week! I’ll be in town and am hoping for a lively conversation.