September 05, 2011
Just after I say something nice about the WAPO’s reporting, the paper does its best to make up for its good deed. We find the Post trying to blame the slow recovery on demographics. See, the big problem is that because of the retirement of the baby boomers the labor market isn’t growing as fast as it had in prior recoveries.
Okay, let’s get this one straight. We have more than 25 million people unemployed, underemployed, or out of the workforce altogether because they have given up looking for a job. And, the problem is that the labor force isn’t growing fast enough?
How does that work? Suppose the labor force had grown by another 1 percentage point in each of the last four years. Why wouldn’t that just mean that we have another 6 million people looking for jobs?
There is an argument that slower labor force growth will lead to slower GDP growth over the long-run. This is almost certainly true, but it still could mean more rapid per capita GDP growth, in which case it is difficult to see the problem. But, this is a long-run story where we assume that resources, most importantly labor, is fully utilized. This argument makes zero sense in an economy with large amounts of unemployment and idle resources like the one we have now.
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