The upside of getting older

One Cent's Worth
By ZACK ANCHORS  |  January 16, 2014

It's become conventional wisdom that the biggest economic challenge Maine faces in the coming years is a “demographic crisis.” The accepted narrative is that Maine, the oldest state in the nation, has too many old people, not enough young people, and stagnant population growth. When University of Southern Maine economics professor Charlie Colgan delivered his annual economic forecast for Maine last week, his optimistic projections for 2014 were overshadowed by warnings about the dire long-term threat posed by the “basic demographic facts of life in Maine.”

Why is Maine’s aging population such a problem? The answer, according to Colgan and other economists, is that when there are fewer people of working age, businesses have to pay workers more and have difficulty filling jobs. Let me rephrase that: The main problem with Maine’s demographic situation is that it will lead to rising wages and abundant jobs. Sounds pretty dystopian, right?

As you imagine that future, keep in mind our current economic climate: Maine has essentially lost a decade’s-worth of economic output due to the recession triggered by the financial crisis. Meanwhile, unemployment remains high and wages for middle- and low-income workers in the United States have remained virtually stagnant for more than a decade, while incomes for the highest paid Americans have soared.

The real crisis isn’t about demographics — it’s about jobs and income inequality.

That said, there are plenty of reasons to be concerned about our growing elderly population. Overall health care costs are bound to rise, and the social fabric of many rural communities will continue to unravel or at least radically change as young people become increasingly scarce.

But a major reason young people leave Maine is that there are few jobs that pay decent wages. The state’s so-called demographic crisis may remedy that problem rather than making it worse. As baby boomers retire, lots of desirable jobs will become available and employers will raise wages to recruit from a shrinking labor pool. What’s more, housing is likely to remain much more affordable than it would if our population kept pace with the rest of the nation.

In fact, the story of Maine’s demographic crisis has gained such traction in large part because it will pose major challenges for corporations and others with significant capital. Colgan delivered his economic forecast last week to a room full of businesspeople, and that’s why he emphasized that “the real threat is we will have to pay workers more and find ways to have them be more productive.” But he also mentioned, in an aside that was ignored in the abundant media coverage of his speech, that this scenario could provide a chance for workers to make considerable gains that have eluded them for years.

The hype surrounding Maine’s population is connected to a similarly-flawed national narrative about demographics. The conventional wisdom on this front is that the aging of the baby boomers will inevitably break Social Security and in turn bankrupt the nation. Some warn that there won’t be enough young workers fueling economic growth to offset the financial burdens posed on society by an expanding population of retirees. This is the justification that politicians cite in support drastic cuts to government spending and that businesses often use to explain low wages.

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