There is no question that younger people are working at a lower rate now than they were in 2000.
What is not fully understood is why.
Why, since July 2000, has the population of those aged 20-34 increased by almost 7.4 million, yet only 1.3 million of those — just 17.67 percent — have found jobs?
As a result the employment-population ratio — that is, the percentage of young Americans who have jobs — has dropped, from 78.2 percent to 71.36 percent, according to data compiled by the Bureau of Labor Statistics.
The answer may be demographic, for there is another segment of the population that is increasingly working.
Older Americans are living longer, and working longer than ever. And, as a result, there appear to be fewer jobs available in the labor pool for those who are entering the labor force, creating a backlog of entrants.
Since July 2000, the population of those 55 and older has increased 27 million. Of those, 14.25 million found or kept their jobs, or 52.7 percent.
As a result the employment-population ratio for older Americans has risen dramatically, from 31.5 percent to 38.3 percent.
If these employment-population ratios had remained what they were in July 2000, 4.4 million more younger Americans would have found jobs, and 5.7 million more older Americans would have retired. But they didn’t.
Yes, Baby Boomers are retiring, just not fast enough to create room for those entering the work force. Or at least, the economy is not growing fast enough to accommodate older Americans working longer and the entry of those younger who are supposed to be in their prime working years yet cannot find a job.
That is not to say that Boomers are working in entry level jobs. Quite the contrary. But their forestalled retirements would in turn be preventing promotions, which would lead to a drop in workforce entry by those just getting their start.
So why are Boomers working longer? A great part of it is that they can because they are living longer — some of them prefer to keep working. Others may be stuck in a catch-22. Their kids still can’t find work, and so many parents are afraid to stop working because they’re still providing monetary support.
But another aspect, perhaps the most important, is that many Boomers simply cannot afford to retire. Why is that?
Too much debt. Since 1975, household debt to household median income ratio has risen from 88.36 percent to a peak of 235.3 percent in 2007, according to data from the Federal Reserve and the U.S. Census Bureau. While those numbers have settled down some since the financial crisis, to 207.8 percent in 2012, they are still really high.
Making matters worse, according to the National Institute on Retirement Security, a third of workers aged 55 to 64 have no retirement savings. That is not good. And it represents 8 million people.
How did we get here?
Prior to 1971, credit outstanding measured by the Federal Reserve — that is, all debts public and private — grew at 6.25 percent a year. But, when Richard Nixon took the U.S. off of the gold standard, leaving the Federal Reserve in command of a fiat currency, that all changed. Afterward, it grew at 8.81 percent.
By severing the dollar from a unit of value, such as gold, the ability to expand the unprecedented credit bubble that followed became possible. Household debt skyrocketed to pay for the burgeoning housing boom that nearly wrecked the global economy in 2007 and 2008 when it went to bust.
And, in the process, it wiped out the savings of Boomers, who now cannot afford to retire, and whose children now cannot find work. We may be living with this folly for generations to come.
Robert Romano is the senior editor of Americans for Limited Government.
