Baby Boomers are retiring faster than the population of 16-to-64-year-olds is increasing, an analysis of Bureau of Labor Statistics data shows, with 3.2 million more 65-years-old-or-older Americans leaving the civilian labor force since Jan. 2020.
Comparatively, the population of 16-to-64-year-olds has only increased by 1.5 million since Jan. 2020 to its current level of 207.2 million.
As a result, the size of the U.S. labor force has actually shrunk since Covid began, from 164.4 million to its current level of about 163.9 million.
Not much more is needed to explain the current labor shortage situation in the U.S., with job openings increasing in the U.S. by almost 3.6 million since Jan. 2020, from 7.1 million to the current 10.7 million.
And while job openings are definitely sinking in the current volatile economic climate as the U.S. economy falls into recession, long term this trend is hard to ignore, for it seems to indicate that as Baby Boomers continue retiring en masse, jobs that were once performed simply will no longer be.
The implication is that means businesses will reach the outer edges of productivity, have a need to expand by hiring new recruits, but overall being unable to do so and therefore be unable to meet demand. That’s how the labor shortage have quickly and readily become a production shortfall and then a supply crisis that does not appear to be abating.
In short, the economy wants to grow — but it can’t. At least, not at the rate that it would otherwise grow were the labor shortages not a problem.
And now, U.S. Rep. Paul Gosar (R-Ariz.) is proposing twin pieces of legislation that would simultaneously, according to Gosar, mean “no taxation for Social Security benefits” and would also allow Americans nearing retirement age to keep working without being penalized over their benefits with punitive tax rates.
In an interview with Americans for Limited Government President Rick Manning on Aug. 21, Gosar laid out his plan, stating, “Why not allow people to have extra income? Now, currently there is this rule that if you’re below retirement age, for every dollar you make over the allowed amount, they take one out every two dollars with tax, a 50 percent tax. If you’re retirement age, they’ll take one out of three.”
Gosar added, “So, why should that be? Because you’re trying to help out yourself by having a second job, why does it hurt? You’ve put away these benefits, they should be there for you…”
Gosar has got a point. Double taxing Social Security benefits is a powerful disincentive from continuing to work, a policy that was designed to get people to leave the U.S. labor force. But now, with a massive retirement wave more than fully underway, life-extending medical care and declining fertility, it is leaving the U.S. labor force short-handed.
This can be addressed by allowing those seniors who want to continue to work to do so without any further penalty. Similar policies have been used in Japan, where demographic decline is even more steep and further ahead than in the U.S. and Europe, to incentivize seniors who are able to keep working, staving off deflation and a shrinking economy.
Ultimately, additional fertility and marriage incentives will likely be needed just to maintain population stability, or certainly to stave off population collapses along the lines that billionaire Elon Musk has been warning about. Short-term, fixing Social Security so that seniors are no longer taxed for their earnings and for trying to work longer, can help fill gaps in the labor force while the next generation is growing up.
Robert Romano is the Vice President of Public Policy at Americans for Limited Government.
