While President Joe Biden has often pointed to the persistently low unemployment rate to prove the viability of his economic policies, the rosy employment numbers may actually be an indicator of future economic turmoil as workers age out of the labor force, according to the Wall Street Journal.
Changing demographics following the aging of the baby boomer generation are pushing the labor force participation rate down as an increasingly large portion of the population is retiring, leading to a labor force shortage that could boil into a crisis as fewer workers support a greater number of people, according to the WSJ. The unemployment rate has stayed consistently below 4% since February 2022 after coming down from a spike of 14.7% in April 2020, according to the Federal Reserve Bank of St. Louis (FRED). (RELATED: Gov’t Jobs Are Booming In Biden’s Economy, Data Shows)
“A carpenter now is making 20% to 25% more than they did 24 months ago, and that is not sustainable,” John Fish, chairman and CEO of construction contractor Suffolk, told the WSJ. Fish pointed out that an aging workforce with a lack of young people entering is a dangerous combination due to the deficit of workers it creates.
The demographic shifts fueling the crisis are coming from people leaving the workforce, which was accelerated by those who left during the COVID-19 pandemic and never returned, according to the WSJ. The baby boomers, currently ranging in age from 58 to 77 years, are increasingly aging out of the workforce, causing trouble due to the fact that this time period saw the largest number of births in U.S. history.
Since more workers are leaving the workforce than entering due to changing demographics, employers are struggling to fill positions, leaving unfilled jobs that would normally contribute to economic growth and productivity, according to the WSJ. The lack of workers may create a bottleneck that economic growth will be hindered by, driving wages and costs up as workers demand more from the greater bargaining power afforded in a tight labor market.
The labor force participation rate peaked at 67.3 in a series of months during 2000 but has since declined to 62.8, not recovering from before the COVID-19 pandemic, which was 63.3% in February 2020, according to FRED. That rate is expected to drop to 60.4% by 2032 following more baby boomer retirements, according to the WSJ.
The Biden administration has continually cited the low unemployment rate as proof of the success of his economic policy, dubbed “Bidenomics.” The focal points of Biden’s economic policies have consisted of high-expenditure programs like the Inflation Reduction Act, which approved $750 billion in new spending.
The total number of people employed will grow by about 0.3% per year until 2023, which is far slower than the annual rate of 1.2% that was seen during the 2012-2022 period, according to a projection from the Bureau of Labor Statistics. A slower rate of growth for employment will restrict the rate at which the economy can grow, reflected through Gross Domestic Product, as the labor force will fail to keep up with job demands.
The shortage of workers has already emboldened unions, who have seized on the growing demand for workers to request higher wages and better benefits, strangling productivity as workers demand more for less, according to the WSJ.
So far, 2023 has seen several major strikes, with some calling it the “summer of strikes,” following union activity from the Writers Guild of America, who reached a tentative deal on Sunday night after striking since May, and SAG-AFTRA, an actors union with 160,000 workers who joined them in July. The United Auto Workers have been on a partial strike since contracts expired on Sept. 14, with workers at 41 plants striking, avoiding an all-out strike of all 146,000 union workers.
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