The Friday Front

  An item this week that caught my attention, and might catch yours . . . 

     I saw two articles this week that seem to offer dueling views on the economy, and what it means for Baby Boomers and our children.

     In "The Baby Bump" from the New York Times, two former members of the Obama administration, Kenneth S. Baer and Jeffrey B. Liebman, argue that there's really no good reason to worry about the federal budget deficit and the nation's high unemployment rate.

     The reason the government is spending so much money, they point out, is not because Congress has gone on an out-of-control spending spree, as some have charged. It's because of a demographic shift.

The unemployment rate has started to go back down

     We're spending more on Social Security, Medicare and Medicaid, because Baby Boomers are getting older, so there are a lot more retired people with a lot more medical problems. But aside from this demographic shift, the government has actually been fiscally responsible in recent years. Spending on discretionary items, such as defense, agriculture and education, has gone down, at least as a percentage of our gross domestic product (GDP).

     The authors also say the high unemployment rate is a temporary problem that will correct itself over time. The economy is currently generating about 150,000 jobs a month. According to critics that's not enough to employ all the new high school and college graduates entering the workforce. The critics point to the falling labor participation rate, and say the only reason the unemployment rate is going down is because so many people are discouraged and have given up looking for work.

     But the authors claim that 200,000 Baby Boomers are retiring every month -- and it's all those retirees, not discouraged workers, who account for the falling labor participation rate. They figure that 200,000 replacement jobs, plus 150,000 new jobs, offer plenty of opportunities for newcomers to the employment rolls.

But the labor participation rate has not improved

     The authors don't say where they get a figure of 200,000 Baby Boomers retiring every month. Honestly, I don't believe it. Maybe it's possible that 200,000 Baby Boomers are leaving the workforce (although that figure still seems inflated), but no doubt a lot of them are getting laid off or packaged out.

     Regardless, just try to tell any of this to young people, says Robert Samuelson in his Washington Post article "Is the Economy Creating a Lost Generation?" His analysis shows that for young people jobs are scarce, and those that are available pay low wages with few benefits. The result is some 20% of young workers are underemployed -- either officially unemployed, working part time, or so discouraged they've stopped looking for a job.

     Furthermore, the stagnant job market blocks the traditional path to better jobs and higher pay. Historically, young people moved up the economic ladder by changing jobs, learning new skills, developing their business network. But today, with  jobs so scarce, those who are employed are clinging to their old jobs. They're too scared to jump at new opportunities, the time-honored way to increase pay and responsibility.

     As a result, fewer young people are getting married, buying houses and starting families. In 2011, the birth rate dropped to its lowest level since numbers started being reliably recorded in 1920. The expected fertility rate (the number of children born to a woman in her lifetime) has now fallen for four years in a row, down to 1.9 (the replacement rate is 2.1).

And young people are left behind

     Samuelson does not hold out a lot of economic hope for our children, at least for the immediate future. He points out in another article, "Job Creation's Glum Arithmetic," that even if you take the official unemployment rate at face value (ignoring all the underemployed), given current job-creation rates, it will take until  2018 to get the unemployment rate back down to a barely acceptable 6.5%. Even if we start generating 250,000 jobs a month, it will be the end of 2014 before we reach that rather modest goal.

     And that's assuming we fix the fiscal cliff, reform the tax code, avoid future energy shocks, and do not suffer another recession.

     I don't know whether to believe Baer and Liebman from the Times, or Samuelson from the Post. But all this is somewhat disconcerting to me. I'm no longer looking for a job myself. But as someone who was forced out of the labor pool prematurely, as someone who is officially counted as retired but is really just underemployed, what I really wonder is:  If those young people don't start making more money, who's going to pay my Medicare and Social Security?