(June 2008) The aging of baby boomers and the fact that women’s labor force participation has already peaked are expected to slow U.S. labor force growth in the near future. Globalization is also changing the size and composition of the U.S. workforce. Foreign-born workers have contributed 40 percent of the labor force growth between 1990 and 2000, and global corporate restructuring is shifting production from high-wage countries to low-wage countries.
During a PRB Discuss Online, Marlene A. Lee, senior research associate and editor of the Population Bulletin at PRB, and Mark Mather, associate vice president of Domestic Programs at PRB, answered participants’ questions about how demographic, institutional, and economic changes will affect the composition of the U.S. labor force.
June 26, 2008 1 PM EST
Transcript of Questions and Answers
Ben Knecht: American medical schools are increasing their enrollment because of population gain in the older, longer surviving cohorts of people. Also because of generational life style changes [less work, more play]. Is the generational changes noted in the U.S. similar in other countries?
Marlene Lee: Many other countries are experiencing population aging, but at different rates and from a different base than the United States. For example, for some African countries population aging means that their working age population is increasing because these countries’ youth populations were such a large proportion of the total population. European countries such as Germany and Italy are experiencing more rapid growth in their older population than the U.S. as are some Asian countries like Japan. Because these changes affect the economy, e.g. supply of labor, and family structure, there is pressure for social change in other countries, but what kind of changes take place depends on the specific dynamics in the country. The National Institute on Aging (NIA) put out a nice short overview of some of the global issues a couple of years ago (http://www.nia.nih.gov/NR/rdonlyres/9E91407E-CFE8-4903-9875-D5AA75BD1D50/0/WPAM.pdf), also PRB’s publication on global aging provides some perspective (https://www.prb.org/wp-content/uploads/2008/07/60.1GlobalAging.pdf). A longer resource is available from the Census Bureau is An Aging World (http://www.census.gov/prod/2001pubs/p95-01-1.pdf).
Richard Cincotta: Because low-wage, non-technical jobs are shifting overseas, the jobs that immigrants occupy can be expected to show little growth or decline for the next generation. The sons and daughters of immigrants have typically trained and educated their way into higher-paying occupations. How does the current “immigrant 2nd generation”, who will face extraordinary pressures to adjust to overseas competition for low- and mid-wage jobs, stack up to the past? Do you perceive problems; is the US investing enough in them?
Marlene Lee: This is a very complicated question because not only is there a lot of diversity in the immigrant population at any one point in time, but over time the characteristics of groups entering the country vary. Koreans immigrating to the U.S. in the 1970s had different socioeconomic characteristics than those entering in 1980s. How the 2nd generation stacks up relative to the past will depend on which ethnic group you look at and which past you compare them to. Outcomes for the children of immigrants depend both on the ability of their families to invest in them and also on public policy and investment in health care and education. Analytic studies of educational attainment and labor market success among the children of immigrants actually suggest that they do quite well relative to their parent’s status, largely because of family investments. (See Fuligni and Mirowski 2004.) Of course, other studies show the children (under 18) of immigrants today are less well off than their native-born counterparts. (For example, see Lichter, Qian, and Crowley 2005) With regard to how overseas competition may affect the current “immigrant 2nd generation,” this group will face the same challenges that the children of many native-born Americans face — demand for higher level skills from all workers and decreasing leverage with employers. Some will have disadvantages because they may live and go to school in areas with underachieving schools and under-performing economies, so their opportunities become limited by the type of education they can get and the types of jobs that will be available. However, some 2nd generation immigrants might also have some tangible advantages in the “soft skills” that employers seek, particularly in a global market. They may know a foreign language and be more at ease dealing with individuals from diverse backgrounds.
Robert Prentiss: Given the lack of wage growth among most U.S. workers since NAFTA, which haven’t kept up with inflation, and the increasing cost of goods workers purchase, has NAFTA lived up to its promise?
Marlene Lee: To judge how well NAFTA has lived up to its promise, we really need to consider what wages and the costs of goods might have been like without NAFTA. Would goods have cost even more without NAFTA? There have been a lot of cost-benefit analyses of different aspects of NAFTA. I wouldn’t know enough about these to give you a yes or no answer.
John Migliaccio: There has been much speculation and conjecture about whether the boomers will work “longer.” (than they planned? than projected? than they want to?) What’s the most likely scenario for boomer work trends?
Marlene Lee: I think the most likely scenario is that boomers will work longer. I say this because analysis from the Health and Retirement Study shows that boomers say they expect to work longer. Also, some employers are looking at shifting demographics or potential loss of knowledge from within their organizations and trying to figure out how to meet their labor needs. And people are living longer which means that they will have expenses to meet. Home equity as a “savings account” does not look as attractive as it once did. Advances in medical technology mean that even with greater likelihood of chronic diseases, health conditions are not likely to prevent boomers from working in their old age. Some employers are considering how to make jobs attractive to older workers—providing transportation, changing the health benefits offered. That said, working longer does not mean that boomers will continue to work in the jobs they have held all their lives. We will probably see more blurring of the lines between working and not working. And it will become increasingly difficult to tell if someone is retired because they might choose to work part-time in a less demanding job, to be self-employed, or to work in short intervals when they need the money or when employers might have greater demand for temporary employees. We might see a greater share of older workers in the contingent workforce. Whether we do a good job of capturing this in statistics remains to be seen.
earl Grandstaff: I am 60 years old. What will really be the conition of Social Security 10 years from now ??
Marlene Lee: Projecting the financial health of Social Security and Medicare is pretty complicated, but the Social Security trustees have been giving the same answer for a number of years. The essence of their answer is that the condition will be “problematic”. Social Security reserves will start declining in the next few years but won’t be exhausted in 10 years—the administration will still take in more Social Security taxes than it is spending on programs. However, Medicare’s reserves are forecasted to be exhausted in 11 years. Here is an excerpt from the trustee’s public message in 2008:”The financial condition of the Social Security and Medicare programs remains problematic. Projected long run program costs are not sustainable under current financing arrangements. Social Security’s current annual surpluses of tax income over expenditures will begin to decline in 2011 and then turn into rapidly growing deficits as the baby boom generation retires. Medicare’s financial status is even worse. This year Medicare’s Hospital Insurance (HI) Trust Fund is expected to pay out more in hospital benefits and other expenditures than it receives in taxes and other dedicated revenues. The difference will be made up from general revenues which pay for interest credits to the Trust Fund. Growing annual deficits are projected to exhaust HI reserves in 2019 and Social Security reserves in 2041…. We are increasingly concerned about inaction on the financial challenges facing the Social Security and Medicare programs. The longer action is delayed, the greater will be the required adjustments, the larger the burden on future generations, and the more severe the detrimental economic impact on our nation… Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 14 percent in payroll tax revenues (from 12.4 percent to 14.1 percent) or an immediate reduction in benefits of 12 percent or some combination of the two….” http://www.ssa.gov/OACT/TRSUM/index.html. Changes in retirement behavior could affect this scenario, but these changes would have to be on a pretty large scale.
Shannon Sweeney: Will there be a skilled labor shortage? Many companies seem concerned, but this past weekend, the New York Times cited Laurence Kotlikoff saying that technological advance and offshoring might forestall it. What do you think?
Marlene Lee: It depends on who you ask. My assessment of the debate is that in general, there will be no skill shortage in the short to medium term—particularly if you take the global perspective that Kotlikoff is taking. The world capacity for producing scientific advances and and its high skill labor supply seems to be growing. It is, however, more widely distributed than in the past. This means that the person with the most advanced knowledge of mapping techniques might be found in Australia or China today and that’s were Google or Microsoft might look to hire. However, employers might also be looking for specific skill sets as technology changes or as different economic and social problems rise in prominence. Hal Salzman of Urban Institute uses the example of JAVA as a job skill requirement. There might be great demand for individuals with ten or more years of JAVA experience, but the technology is new enough—released c. 1995—that there are not many people with this number of years of experience, so there is a perceived shortage. Of course, just because there is not a global or national shortage does not mean that local areas and smaller firms will have easy access to people with the skill sets they want.
marivir r. montebon: Is there a public forum where we can listen to the studies conducted by Mather and Lee? If so, when and where
Mark Mather: The best way to learn about PRB’s work on this issue is to visit our home page (www.prb.org) where you will find a link to our new report on the U.S. labor force.
Nancy McGuckin: I work in trasnportation policy, and we track workforce trends. I’m curious about your statement that women’s workforce participation has ‘peaked’. Could you elaborate?
Marlene Lee: If you look at the percent of women ages 25 to 54 working in the labor force, that percent has gone up each year from the mid-1970s to end of 1990s, but the increase has not been as great in the 1990s as it was in the 1970s and 1980s. The expectation is that the percent of women in the labor force will not grow the way it did in the 1970s and 1980s. You can read more on this in the Social Security Trustees report or our PRB Bulletin.
Pradip Menon: I have recently been hearing more and more about a phenomenon called reverse globalization, where U.S. jobs (mostly manufacturing) that were once outsourced to developing countries are finding their ways back. Is this a trend that will have any staying power, and could it be possible that this means that there is a limit to how economically developed a nation can be before it tapers off, sort of like economic Malthusian Scissors?
Mark Mather: It’s true that high energy prices have increased the cost of importing goods from abroad, making manufacturing more favorable here at home, at least in the short term. But globalization involves much more than the international exchange of manufactured goods: With recent advances in computers and communication technology, we have seen an explosion in the transfer of knowledge across countries (e.g., the U.S. offshoring of IT jobs to India and China), and this is only expected to increase over time.
Dr. Anima Sharma: I am an academician and like to keep myself updated with the recent trends going on globally. I will make mention of one such phenomena. Earlier, the developing countries were worried about the ‘Brain Drain”. They gradually developed their technical resources to retain their Brains within their country and slowly they are reaching the stage when they are attracting their migrated countrymen back in their homeland. My question is that is this process affecting the work and workforce composition in Developed Countries in any way? What could be its futuristic economic implications?
Mark Mather: Many developing countries fear that they are losing their best talent to the United States and other developed countries. But this movement of highly-skilled workers is also an efficient way to transfer knowledge between countries, and many scientists and engineers do return to their home countries to apply their new skills. Return rates vary widely by country. Historically, few high-tech workers have returned to India, compared to China or Korea, for example. In India this trend may be reversing with the increasing availability of high tech jobs—many of which are owned by foreign companies. Brain drain is still a big issue in many countries, especially in Africa and the Caribbean. In parts of the Caribbean, 70 percent of the highly-educated workforce has left to work in OECD countries. These sending countries benefit from remittances from those who left, but they lose some of their most industrious workers.
Ken Stewart: Work has been recognized in modern social sciences as a key anchor or social identity. How is this changing in the U.S. and elsewhere in the world? Is identity becoming more or less anchored in the work we do? What are the implications? Your take?
Marlene Lee: In the U.S., news reports on the job seeking patterns of 20-somethings indicate that younger workers seem more willing to change jobs, in search of work that matches their sense of identity. Also, leisure time is increasing despite fairly constant average number of hours spent at work (http://www.bos.frb.org/economic/wp/wp2006/wp0602.pdf). To me, this suggests that other aspects of people’s lives are competing with work as a key anchor. But it is likely that the extent to which work is a key anchor of identity varies with the investment (years of education, cost of training) that that the individual has to put in before securing particular kinds of work. It probably also varies with how much other aspects of one’s life is dependent on one’s work. For example, the identity of a foreign service officer in a host country probably is more closely anchored to his/her job than is the identity of a teenager working for the summer. Given patterns that suggest people will change employers more often and will need to re-tool for new jobs as technology changes, it might just make sense to have one’s identity less anchored in work or at least less anchored in a specific job.
Michael F.: How would you define and quantify the obviously visible and growing gap between rich and poor in the U.S. and what can be done about it structuraly, politically or any other way?
Marlene Lee: [corrected text] There are a number of statistical methods for doing this and the Census Bureau provides an explanation of these (www.census.gov—check under household income). Another way would be to look at measures of relative poverty—what percent of people have income less than 1/3 of the median income and what percent have income greater that 10 times the median income. Rebecca Blank recently published a paper discussing how the perspective on poverty in the U.S. would change if we looked at relative poverty the way European countries do. New York City is also looking at using a relative poverty measure. The Luxembourg Income Study provides relative poverty measures for countries included in the study.
John Migliaccio: Given the scenario that boomers will work longer, is there any projection about how much longer than current retirees did. Are we looking at theem working months longer or years? Full time or part time?
Marlene Lee: I am not aware of specific projections of how much longer than current retirees boomers will work. But I will certainly be on the look out for anything like this.
Carolyn Bird: What is the likelihood that the government will promote private savings accounts in lieu of traditional Social Security? We have seen that 40l(k) and similar accounts expose the retiree to market conditions and sometimes necessitate delayed retirement or a return to work after a brief period of retirement.
Marlene Lee: If government follows where the market leads, then 401k plans or some kind of defined contribution plans, at least as an option, have some likelihood of being offered. Whether this replaces Social Security is more of a question for a political scientist, I think. Some state universities already offer such plans in place of pensions or social security. Work by Poterba, Venti, and Wise published in the Proceedings of the National Academy of Science in 2007 studies this shift to defined contribution pension plans for U.S. employees. Retirees in 2040 will have had access to such plans for most of their working lives, so would have had the potential of contributing much more.
Michael F.:I heard so much about the BRIC countries (Brazil, Russia, India, China) about 7-8 years ago, then for the last 4-5 only India & China. Now I hear Brazil and Russia are back. What does this mean for U.S. workers?
Marlene Lee: A 2008 article in the Economist online distinguishes between the emerging markets of India & China vs. Brazil and Russia, indicating that Brazil and Russia’s economies are more commodity driven which is why you see them coming back. India and China have economies more driven by the availability of low cost labor. So, it seems India and China offer more competition to U.S. workers.
Mark Mather: Not sure but Goldman Sachs has done a lot of work in this area, so you might look at their work.
For More Information:
Marlene A. Lee and Mark Mather, “U.S. Labor Force Trends,” Population Bulletin 63, no. 2 (2008), available online at www.prb.org/pdf08/63.2uslabor.pdf