Blog on the Run: Reloaded

Friday, June 18, 2010 8:13 pm

But … but … all the OLD peoples …

One of the seemingly endless arguments in favor of cutting Social Security to help get deficits under control is that the population is aging and there will be fewer wage-earning workes supporting more Social Security recipients in coming years. It makes intuitive sense, what with the pig-in-the-python Baby Boomers heading into SocSec territory and all, so even I thought this argument, at least, was probably true. But was it?

Well, Rule 5 of investigative journalism is — say it with me, kids — do the math.

Economist Dean Baker does the math:

At a time when we have the greatest oversupply of labor since the Great Depression, we are now supposed to be terrified that in a few very short years we will not have enough labor. Is that possible?

Not if we know arithmetic. The NYT gave us a little glimpse of this horror story in its Economix blog today. It showed that the ratio of dependents (defined as people over 64 or under 20) to working age people (those between the ages of 20 and 64) is supposed to rise from 0.67 today to 0.74 in 2020, and 0.83 in 2030; pretty scary, right?

Well suppose we defined a slightly different dependency ratio. This will be the ratio of people who are not working to the people who are. The idea being that people who are working must support the people who are not, regardless of their age.

In 2010, this ratio stands at 1.22. We have 139.4 million people working and 170.1 million not working. However, if we assume that we get back to near full employment and the labor force grows as the Congressional Budget Office projects and population grows as the Census Department projects, this dependency ratio will have fallen to 1.05 in 2020 and then rise to 1.07 by 2030. So, are we scared yet?

So if I understand him correctly, that means the biggest problem isn’t the aging population, it’s the lack of jobs.

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