We’ve been talking about the workforce “crisis” and the drian of senior talent as baby boomers retire in droves. I thought I’d present another viewpoint – this one from the Economist.
The crucial question is therefore what the effect of demographic decline is on the growth of GDP per person. The bad news is that this looks likely to slow because working-age populations will decline more rapidly than overall populations. Yet this need not happen. Productivity growth may keep up growth in GDP per person: as labour becomes scarcer, and pressure to introduce new technologies to boost workers’ efficiency increases, so the productivity of labour may rise faster.
The Economist, Januray 5, 2006. “Incredible shrinking countries.” Retrieved from the Economist.com on January 5, 2005.
This article does not really address the shortage of talent, but some other positive affects a decrease in workforce population might have – in this case technology increases that will be necessary to maintain productivity levels. I’m not sure this is necessarily true. First of all, if there is a shortage of talent, this should also apply to innovation industries that will need to create this technology. Second, there is some serious doubt whether technology can keep up with Moore’s Law, let alone increasing innovation to make up for decreases in workforce.
People love to worry—maybe it’s a symptom of ageing populations—but the gloom surrounding population declines misses the main point. The new demographics that are causing populations to age and to shrink are something to celebrate. Humanity was once caught in the trap of high fertility and high mortality. Now it has escaped into the freedom of low fertility and low mortality. Women’s control over the number of children they have is an unqualified good—as is the average person’s enjoyment, in rich countries, of ten more years of life than they had in 1960. Politicians may fear the decline of their nations’ economic prowess, but people should celebrate the new demographics as heralding a golden age.
ibid
I thought it rather interesting that the Economist would put out social commenteary like this. I’m not going to comment, but I wanted to at least point it out.
3 responses to “Shrinking Workforce is Good for Technology”
Though I agree with the article’s central point about the promise of technology, one thing it elides is that the declining population trend is not uniform across the EU/Russia/Japan and the US. While it has declined steadily, fertility here is still right around replacement level and immigration (legal and otherwise) is comparatively high.
The end result of this is that by 2050-ish, the EU will be under 300 million population, with a median age in the 50s, while the US will be third behind China and India with a population over 400 million and a median age not much higher than today’s (upper 30s). For those who see economic destiny in demographics, this is a pretty interesting data point.
You bring up, Kingsbury, the all important topic of immigration. So much has been talked about how immigration is undermining our economy. Of course, a very different position could be taking that it is helping fuel expansion.
The demographics tell us two very important things:
1. With employment a near full during the 90s and right now increasing after a slow down, immigration (both legal and illegal), has helped us avoid a very serious labor shortage in this country.
2. Without the offshoring of a significant number of jobs, there would not be enough of a labor pool to supply the job market.
Now the composition of the job market can be analyzed of course and it may very well show that Walmart-type jobs are replacing higher paid/higher skill jobs, but certainly productivity gains through technology has also picked up the slack of a more slowly expanding labor pool.
[…] Shrinking Workforce is Good for Technology […]