Population aging is expected to drag on U.S. growth, and the hit could be substantial.
The retirement of baby-boomers in the decade between 2010 and 2020 will lower GDP growth per capita by 1.2 percentage point a year from what would have been the case if the nation's demographics had held steady, according to a National Bureau of Economic Research study out this week. The bright side is that the dent is only half as deep between 2020 and 2030 as the pace of aging slows.
The study is based on a simple idea: population aging is already long underway and has been playing out with varying degrees of intensity across different regions of the country. By looking at variations in state population aging, authors Nicole Maestas at Harvard Medical School, and Kathleen Mullen and David Powell at policy research group RAND Corporation, are able to estimate how a graying workforce affects output, participation rates and productivity.
What's surprising is the composition of the slowdown. Just one-third is driven by slowing workforce expansion and the rest by a drop in productivity gains. The productivity slump isn't reserved to older workers: it takes place across age groups, the researchers find.
The authors suggest a few theories about why that's the case. It could simply be that younger and older workers complement one another. Or the most productive older workers might be leaving the workforce, while less-productive old timers stay on the job.
"How much of it is that relatively productive workers are the ones who are choosing to retire? It's very hard to say," Maestas said in an interview.
Regardless of what's behind it, the discovery that the aging workforce could be weighing on productivity comes in contrast to other guesses and is important.