As the U.S. unemployment rate has dropped over the past year, a persistent refrain from many quarters has been that part of the drop can be chalked up to people removing themselves from the labor force. And conventional wisdom says that, as the economy continues to improve, many of those people will return to the job hunt, causing the unemployment rate to tick up again.
Well, maybe not, says Barclays Capital economist Dean Maki.
Maki, in a recent report titled “Dispelling the Urban Legend,” contends that the labor force is shrinking mostly because more baby boomers are retiring. His report predicts that demographic will keep the labor force rate down, along with unemployment figures, even as discouraged workers jump back into the labor market.
Even if Maki’s conclusions are solid and come true, they won’t be known for some time. But here’s something that is known: The growing number of retired baby boomers, coupled with a potentially smaller labor force, will put an even greater strain on Social Security and Medicare, two federal programs that are already in trouble.
Implicit is the need for long-term solutions, something Congress and the Obama administration have been unable to agree on.
As we’ve said numerous times, everything needs to be on the table in Washington when it comes to getting the government, and the economy, back on track, and reform of the tax code would be the best place to start. And lawmakers cannot continue to put off reforms of Social Security and Medicare. The growing number of baby boomer retirees highlighted in Maki’s report, and a demographic problem we’ve known about for years, should make speedy reform of those two programs a priority.
Loveland (Colo.) Daily Reporter-Herald (March 22)