Category: Degrowth

Economic growth will continue secular stagnation through 2050 after its recovery from the financial crisis of 2008-2009

Degrowth: Labor Force

Decline in Labor Force & Increase in Dependency Ratio

The slowing of population growth in the OECD nations will alter the age pyramid as Baby Boomers retire. Disturbingly, labor force participation rates have declined from about 66% in 2008 to 63% in Q1 2019: See the BLS trends. Fewer workers will be asked to support the overall population, a rising dependency ratio after a sharp decline from 1960 to 2015: see World Bank trend data. An older population distribution and a rising dependency rate will inhibit economic growth, as reported by the St. Louis Fed.

The partial replacement by new entrants to the labor force will, however, increase employment opportunity for younger workers, provided that their education and skill level matches the demand for well-paying jobs. Meanwhile, the declining immigration of potential workforce from the global south will create spot shortages in regions and industries.

Thus, a labor shortage may emerge: Wages will rise with competition. Despite rising interest rates, investment might follow the increase in wages. Productivity could increase, marginally improving income and dampening the expected wage inflation.

I find that the discussion around this topic focuses on technological displacement of labor. David S. Gordon, a seminal authority, disagrees with automation replacing workers, but does not see productivity improvements.

More on this as my project unfolds, but recognize that future unemployment may not be as severe as some suggest, that wages may rise (eating into profit), thus demand would also rise, and that more investment could raise worker productivity — all benign prospects.

Degrowth #2: Population

Population trends

This post derives from the introduction to Degrowth.

A seminal source for this blog site, Fernand Braudel on civilization and capitalism, begins its long journey with population. So do we.

Population growth in the high-consumption nations and world-regions will approach ZPG, Zero Population Growth — or may even decline. Such a  fertility trend would greatly reduce the pressure on Earth’s carrying capacity for 2050. Among the rest of the world, growth rates will sharply decline, but Africa remains of great concern and must be specifically addressed.  (See U.N. forecast.

Population projections will likely approach the low end of the anticipated range. My expectation that the impacts of climate change of agricultural and industrial productivity will slow the stress on the carrying capacity of the Earth, already in Overshoot (Catton). Consider these basic trends:

Demographers are among the most careful and deliberate folks on the planet, but their established methods of projection, based on (past) data, may not adjust for a new paradigm that brings us to 2050. The major difference could be effects of the Earth’s changing climate.

Population and economic trends interconnect

As population slows down, so does economic growth, but not necessarily growth in per capital income. If an economy’s GDP increases by, say 3%, but its population increases by, say 3%, the net effect on per capita income is zero . If inflation proceeds at 3%, the real growth per capita declines 3%. Thus, stagnation.

However, consider a high-consumption country, the USA. The U.S. Congressional Budget Office forecasts that U.S. real (inflation adjusted) GDP growth will slow to 2%. But if the U.S. population grows by 1% per year, the rate of per capital growth is 1%, negligible. So, what if all the gains go to the very top 1% (or 0.1%) and expectations are disappointed? Read today’s news to find out: The USA is essentially there: stagnation. Capitalism does not work well under conditions of stagnation, especially if the population is aging. See Japan for two decades or so.

The next topic, economic growth, will pick up this theme.