Category Archives: Demographics

An Aging Economy Is a Sluggish Economy

Source:

Source: “The Effect of Population Aging on Economic Growth, the Labor Force and Productivity.” (Click for more legible image.)

by James A. Bacon

Why is U.S. economic growth slowing? Perhaps for the same reason economic growth is slowing in Europe, Japan and other advanced economies — our populations are getting older. That was a major theme of my book “Boomergeddon,” written in 2010, when I accurately predicted that U.S. economic growth would fall short of the optimistic expectations in U.S. eonomic and budget forecasts. I don’t pretend I got everything right — I failed to foresee the fracking boom that ignited the U.S. energy boom, and I did not anticipate how quantitative easing would goose goosing the economy by inflating asset values. But I was pretty certain about one thing — the U.S. population was getting older, and an older population would dampen economic growth.

That’s not a controversial view among the handful of economists who study the impact of aging. It just isn’t appreciated by the broader economic profession, the geniuses who have consistently overshot economic growth forecasts over the past decade, or a political class that has shown no willingness to put entitlements and debt accumulation on an economically sustainable basis.

Now comes a study, “The Effect of Population Aging on Economic Growth, the Labor Force and Productivity,” by Nicole Maestas, Kathleen J. Mullen, and David Powell, and published by the National Bureau of Economic Research. Their disturbing conclusion: “We find that a 10% increase in the fraction of the population ages 60+ decreases the rate of GDP per capita by 5.5%. … Our results imply annual GDP growth will slow by 1.2 percentage points this decade and 0.6 percentage points next decade due to population aging.”

Extrapolating from differential rates of aging and economic growth in the 50 states, the authors see a number of forces at work. Slower growth in the workforce accounts for about one-third of the effect. The rest comes from slower productivity growth from an aging workforce, with possible spillover affects among younger workers.

The fraction of the United States population 60 or older will increase by 21% between 2010 and 2020, and by 39% between 2010 and 2050. This dramatic shift in the age structure of the U.S. population — itself the effect of historical declines in fertility and mortality — has the potential to negatively impact the performance of the economy as well as the sustainability of government entitlement programs.

We can argue over the impact of taxes, regulation, quantitative easing, fiscal policy, and most will retreat into our respective ideological corners, agreeing upon nothing. But the aging of the population is an undeniable phenomenon that transcends partisan analysis. And there is consensus in the economic profession that once a tipping point is reached — as it has in many countries — the economic impact is negative. The U.S. and other aging countries which once had the demographic wind at their back now are leaning into a gale. None are likely to return to the economic growth rates of the early post-World War II era.

Virginia impact. Sadly, the paper did not provide a state-by-state breakdown for aging. However, two maps in the appendix (including the one above) show that Virginia’s population aged more rapidly than that of most other states between 1990 and 2000, and again between 2000 and 2010. One could conjecture that the aging effect has dampened economic growth here somewhat more than the national average. There may be more to blame for Virginia’s economic sluggishness than federal sequestration or flawed public policy.

No one can foresee the future, but if there is one aspect of the future that is predictable with some reliability, it is a nation’s (or state’s) demographic profile. And if there’s one thing we can say with some certainty, it is that economic growth will be slower. Our elected leaders should bear in mind as they discuss expanding entitlements and taking on more debt. No miraculous resurgence of economic growth will make it easier to pay our bills.

When the political class ignores this advice, don’t say I didn’t warn you.

Virginia Welfare Trends

I came across some interesting data on the Virginia Department of Social Services website showing the number of Virginians receiving social welfare benefits. I offer the data without commentary. — JAB

Temporary Assistance for Needy Families (TANF)

Temporary Assistance for Needy Families (TANF)

Supplemental Nutrition Assistance PrograM (SNAP), formerly known as food stamps.

Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.

medicaid_enrollment

Medicaid

Children's Health Insurance Program (CHIP)

Children’s Health Insurance Program (CHIP)

Energy Assistance -- heating and cooling

Energy Assistance — heating and cooling

Energy Assistance -- crisis

Energy Assistance — crisis

Hospitalization claims

Hospitalization claims

General relief

General relief

Virginia Needs More Vikings and Mormons

What we're missing in Virginia

What we’re lackng in Virginia

by James A. Bacon

One of the most intriguing disciplines of social scientific study in the 21st  century explores the social and economic dimensions of happiness. Academics routinely rank the nations of the world and, less consistently, the fifty states. Our friends at WalletHub have taken a crack at devising their own state-by-state breakdown. But instead of polling people on how happy they are, the financial services website looks at a basket of 28 metrics measuring emotional and physical well being, the work environment and the community & environment. (To view the methodology click here.)

As the 21st happiest state, the glorious commonwealth of Virginia fares better than average, but it’s hardly a Shangri-la. The Old Dominion scores best (10th) in the “community & environment” cluster of metrics, which includes such measures as the volunteerism rate, leisure time, the divorce rate and safety. But it runs in the middle of the pack for emotional & physical well-being (22nd) and work environment (23rd).

We can take some comfort in being the happiest of the Southern states, but that’s setting a low bar.. We lag New England, the West Coast, and a vast bloc of states stretching in the northern plains and Inter-Mountain states. The happiest states are Utah (loaded with Mormons) and Minnesota and North Dakota (chock full of Scandinavian-Americans).

Is it coincidence that the happiest countries in the world — Denmark (#1), Norway (#4), Finland (#5) and Sweden (#8) — are Scandinavian while two of the three happiest states are inhabited mainly by Americans of Scandinavian descent?

I think not. My light, night-time reading at the moment, “Debunking Utopia,” takes a close-up look at the Scandinavian welfare states. One of several fascinating arguments advanced by the author (an Iranian immigrant to Sweden, incidentally) is that the Scandinavian countries are homogeneous societies marked by high degrees of social cohesion, shared values, personal responsibility and trust. As it happens, those traits are associated to a large degree with happiness. Thus, it should come as no surprise that the descendants of Scandinavians, who shared those ancestral traits, are among the happiest of all Americans.

(Both Scandinavians and Scandinavian Americans also are taciturn, as lamented in another book I’ve been reading, “Lab Girl,” but luckily for them gregariousness is not a big predictor of happiness.)

Likewise, Mormons are notable for their social cohesion, shared values, personal responsibility and trust, so it should come as no surprise that Utah and neighboring states with large Mormon populations also score high in the WalletHub rankings.

One of Virginia’s misfortunes, it appears, is to suffer a paucity of Mormons and Scandinavians. If we want to increase our share of  happiness, we need to import more Mormons and Scandinavians. There may be more to it than that, but that’s my story right now, and I’m sticking to it.

Move to the City, Young Man, Move to the City

Image credit: StatChat

Image credit: StatChat

Virginians are most likely to move to another jurisdiction when they reach age 18 and head to college and again as they establish themselves in the job market. As they grow older and sink personal and professional roots in a community, their proclivity for moving steadily declines. Only when Virginians hit retirement age does the trend line level off. The pattern is shown clearly in the chart above, taken from Hamilton Lombard’s latest blog post on the StatChat blog.

Equally interesting is Lombard’s map showing where young people (15 to 24 years old) are moving from, and where they’re moving to. No surprise here: They’re moving from rural and suburban counties to college towns and urban-core jurisdictions.

migration_map

Image credit: StatChat. Click for larger image.

What does that mean for public policy in Virginia? Writes Lombard:

The rise in college attendance rates and the common need to move to large urban centers for graduates to find jobs are both likely helping drive the increasing flow of young adults into Virginia’s urban areas and communities with universities. The inflow of young adults into Virginia’s cities has boosted their workforce noticeably and helped support the revival in growth that many cities in Virginia are experiencing. But as an increasing share of young adults have remained in cities after starting families, it has also forced many urban localities, such as Arlington and Falls Church, to reevaluate their long-term planning as demand for housing and school spaces have surged.

Conversely, he writes, “A smaller working age population has typically also meant fewer families with children in rural counties, often slowing population growth and in many cases causing population decline.”

If there is a consolation for rural counties, the outflow of young people is offset to some degree by an influx of retirement-age Virginians. As Lombard speculates: “Many the older people that rural counties are attracting are likely the same ones that moved away for college or work decades ago.”

— JAB

Map of the Day: Decline in Teen Birth Rate

Source: StatChat blog

Source: StatChat blog

The fertility rate for U.S. women reached an all-time low in 2015. All told, there have been 3.4 million fewer births since 2007 than would have occurred had fertility rates not declined, writes Hamilton Lombard in the StatChat blog.

There are reasons to be concerned. Fewer births means fewer Americans entering the workforce, fewer workers paying into Medicare and Social Security, and fewer taxpayers to support the swelling national debt, which now stands at $19 trillion and counting.

But Lombard finds a silver lining. A big one. The decline in births is concentrated among teens. That decline, he argues, is tied to the increase in the high school graduation rates and college attendance as teens put off starting families until they have earned a high school and/or college degree.

Teenage pregnancy was once fairly common and even socially acceptable, particularly after World War II, when there were plenty of well-paying jobs available that did not require a high school diploma, much less a college degree. As these low-skill jobs began to disappear, the teenage birth rate started to fall. By the mid-2000s the U.S. teen birth rate had declined by 50 percent since 1960.

Insofar as inter-generational poverty in America is demographic in nature — poor teens giving birth to children and raising them in poverty before acquiring skills needed to rise out of poverty — declining fertility is a very good thing.

The national trends do not play out evenly. As can be seen in Lombard’s map above, the change was dramatic in some Virginia jurisdictions between 20007 and 2014 and far less noticeable in others.

In the City of Richmond, the birth of children to teens fell from 470 to 149 over that period — an astonishing decline. The overwhelming number of those 331 never-born children would have been raised in poverty and at high risk of never rising out of it. By contrast, the decline was far more modest in rural localities of Southwest Virginia.

Here is the decline in teen births between 2007 and 2011 in Virginia broken down by race, according to Centers for Disease Control data:

All races — 28% decline
Non-Hispanic whites — 20%
Non-Hispanic blacks — 29%
Hispanics — 50%

And here is the 2011 birth rate per 1,000 teenagers aged 15-19:

All Races — 24.5 births
Non-Hispanic whites — 19.4
Non-Hispanic blacks — 37.4
Hispanics — 36.9

— JAB

Map of the Day: Hopewell Turns Minority-Majority

Map credit: Wall Street Journal

Map credit: Wall Street Journal

Note the presence of the city of Hopewell, Va., on this map. According to the Wall Street Journal, Hopewell was one of seven counties where racial minorities came to comprise a majority in 2015. Of the nation’s 3,142 counties, 12% are minority-majorities now.

— JAB

The Metropolitanization of Virginia

1990 commuting patterns. The darker the color, the longer the average commute.

1990 commuting patterns. The darker the color, the longer the average commute. Source: StatChat

by James A. Bacon

A couple of weeks ago, three guys came rolling through my neighborhood in a heavy pickup truck and pitched me on cutting down some dead limbs and trees in my back yard. They lived in Rappahannock County, they said; they’d spent three hours driving to Richmond looking for work and when they finished with us would spend three hours driving home. Their routine, they said, was to hit the sack, get some sleep, and then get up early in the morning and repeat the ordeal.

The story is testimony to many things, including the lengths to which some people will go to earning a living. But it is also an example of how the workforce in lightly populated “rural” counties, where inhabitants once farmed or worked in light manufacturing, is getting sucked into the orbit of Virginia’s larger metropolitan regions.

2014 commuting patterns.

2014 commuting patterns.

Many commentators on urban affairs, myself included, have tended to view the steady geographic expansion of Metropolitan Statistical Areas (MSAs) as a consequence of so-called “suburban sprawl,” the pattern of low-density, hop-scotch development — urban areas pushing outward. And that remains the dominant explanation for the ever-expanding size of our MSAs. But Hamilton Lombard, writing in the StatChat blog, notes that there’s more to the story:

Workers in “rural” counties are commuting to metropolitan areas in search of work: “Agricultural employment declined in nearly every rural U.S. county, while manufacturing jobs in most small towns also began to disappear by the 1980s. The result of these two trends has been that residents in most rural counties have grown more dependent on nearby cities for jobs. …  In many rural counties … the proportion of workers commuting to a nearby city has risen above a quarter of all workers, causing counties to become part of another city’s metropolitan area.

In Virginia, the portion of commuters who traveled over an hour each way to work rose from 6.5 percent in 1990 to 10 percent in 2014. But in rural areas that are within commuting distance of city centers, the percent of residents who drove over 60 minutes to get to work often doubled or tripled in the same period. In some counties on the edges of large metro areas, such as Warren County, Virginia, located 70 miles west of Washington DC, it is common for between a quarter and a third of residents to commute more than an hour to get to work.

As an example, Lombard points to Floyd County, which was incorporated into the Blacksburg MSA in 2013. The 20th century saw the transformation of Floyd’s economic base from agriculture to manufacturing, and then the hollowing out of manufacturing. But the growth of Virginia Tech and Radford Universities created jobs for Floyd residents willing to make the commute. As a bedroom community, Floyd’s population has rebounded to levels last seen in 1900, .

Given this analysis, the hollowing out of Virginia’s “rural” economy is even worse than it appears from traditional unemployment figures. An increasing number of Virginians outside the metropolitan areas stay employed by commuting long distances to wherever they can find jobs.