Because most philosophies that frown on reproduction don't survive.

Friday, October 07, 2016

Millennials: Weakness in Numbers?

I was recently at a conference where a demographer gave a talk dealing with how demographic trends could affect business. I'm still deciding what I think about the overall approach (other than that it looks fun to be a pop demographer) but one element which struck me as interesting was his discussion of how population dynamics have made things harder for the Millennial generation. In this post I'll take you briefly through his argument, and I'd be curious as to your reactions.

If you graph out the number of births in the United States every year, one of the things which jumps out is that the 1970s (when many Gen X people were born) had the lowest numbers of births in the last sixty years.

United States Births by Year

Throughout this entire period, the total US population was growing, but this was a period when the birth rate (the number of babies born divided by the number of thousands of population) had just fallen significantly from ~25 in the 1950s to ~15 in the 1970s. The rate has been moderately stable since then, but it took a while after the initial drop in birth rate for the growth in the population to catch up and start producing numbers of births per year equal to what was normal before.

The number of births per year translates pretty directly into the number of 18-30 year olds you that you have entering the workplace, because everyone who is 18-30 has to have been born. This means that in the 1990s and early 2000s there was a significant dip in the number of 18-30 year olds.

From 1989 to 2001 the number of 18-30 year olds dropped 14% while the total US population increased by 15%. Then, the number stared climbing again, so that from 2001 to 2016 the number of 18-30 year olds increased 17% while the US population increased only 14%.

The demographer's argument was that the smaller Gen X generation benefited from being a scarce resource. With fewer young people coming into the workforce they had higher employment rates and higher pay -- the 1990s boom -- but that by 2005-2010 you had more young people coming into the workforce each year with an economy going into recession that had already adjusted to get by with fewer entry level workers and less affordable entry level housing. The Millennials were a more plentiful resource than the Gen X-ers and so the economy payed less for them.

There are interesting elements to this, and others that I want to think through more. I hadn't realized that the number of 18-30 year old was growing faster than population at the same time the recession was hitting, and I can certainly see how that would tie in with youth unemployment, skyrocketing higher education costs, etc. We'd now hit the end of that rise and will see a basically flat number of 18-30 year olds for the next ten years while the overall US population continues to increase. That may ease some strain for the next cohort of young adults coming along.

Of course, the trick is that an economy does not have just a set number of jobs for people at a given stage of life. People create innovation, growth, etc. and so in general a healthy economy is one with a growing population. It would be a mistake to see a growing number of young people as a necessarily bad thing for an economy or a culture. And yet, change is messy and systems are slow to adjust. I could certainly see how after twenty years during which the absolute number of young adults shrank or was flat, to have it start growing (and doing so faster than the population as a whole) would throw off a lot of things until people adjusted.


Jenny said...

To me, this feels more like an attempt to retroactively pin reality on demographics rather than actually explain reality.

For instance, in the early 90s when my oldest cousins--the oldest Gen Xers--were entering the job market, there was a recession and precious few entry-level openings. This was explained away by demographers by saying that Gen X was such a small generation, the baby bust, that the workforce didn't want to waste resources to train so few workers. It didn't scale so it wasn't worth starting new projects. I remember reading articles about how the economic lives of the baby busters would be compromised because the economy did not have to expand to accommodate us, unlike the Boomers.

Later in the 90s during the tech boom, you could write your own ticket. During college, I knew people who had multiple offers before graduation. I also knew people who graduated a year or two later who couldn't buy a job offer. The demographics of young workers didn't drastically change in two years, but the economy sure did.

I've known lots of struggling Gen Xers (myself included). It seems that those who hit the job market in those few magic years of prosperity have struggled much less than those a year or two out on either side. If you graduated in the early 90s, you struggled. If you graduated in the late 90s, you were set. If you graduated in the early 2000s, you were struggled. If you graduated into the housing bubble, you were set. If you graduated into the popping bubble, you were screwed.

And now the Millenials are coming online to an economy that is rapidly shifting to gig work. They are reaping the rewards of being fed a lifetime of flying unicorns and an economy that is not currently hiring flying unicorns.

I think the truth is less that business adapted to having fewer younger workers and now has to ramp up again and more that business stopped accommodating entry positions 30 years ago and the Millenials are the first set of workers large enough for the wider country to notice. Meanwhile, the Boomers will work forever.

All that to say I am skeptical. Heh.

Darwin said...

I'm kind of waffling on whether I find the argument persuasive or not, for basically the reasons you outline.

foxfier said...

It could heavily depend on the job.

There's some jobs where just being younger (thus stronger, more energy, etc) and less likely to be married is a big advantage.