Economic Trends
By Gene Koretz
Demographic Time Bombs
They may be off the radar screen for the moment, but global population trends pose increasing challenges for industrial economies, contends economist Martin H. Barnes of BCA Research, a Montreal-based investment advisory firm. In a recent report, he explores three developments he deems especially ominous.
The first is a projected accelerating decline in the working-age populations of Europe and Japan, due to extremely low fertility rates. According to the U.N., the ranks of 15- to 64-year-olds in Japan, Germany, Italy, and Russia will decline 10% to 20% by 2025, with even greater declines in later decades.
Fewer workers translate into lower potential gross domestic product. Barnes calculates that Europe's potential GDP growth rate will fall from an average 2.2% a year in the 1990s to 1.4% from 2000 to 2025. Japan's potential growth rate over the same period will average just 0.6%, he says.
The U.S. is another story. Its workforce will continue to grow (albeit at a slower pace) because of relatively high fertility and immigration. Thus, Barnes pegs its potential GDP growth rate at 2.4% over the next few decades.
A related trend is the sharp rise in the aged population. It's hardly news that the U.S. faces a huge fiscal burden for health care and pensions as baby boomers start retiring and the number of working-age people per older person falls (from 5.4 in 2000 to 3.5 in 2025). But Europe and Japan's worker-retiree ratios, notes Barnes, are already at levels that the U.S. won't see for at least another decade and will fall even more.
Meanwhile, the developing world's population is projected to climb by 58% by 2050, with some of the fastest growth in Islamic countries. Iran's population should surpass Germany's by 2025, and Yemen's is expected to overtake Italy's and Germany's by 2050.
A 2001 CIA analysis of demographic trends cites Iraq, Afghanistan, Pakistan, and Yemen (as well as Colombia) as examples of poor and politically unstable countries with large and growing youth populations. It warns that unemployed youth in such nations "provide exceptional fodder" for terrorist organizations.
The upshot is that demographic trends spell huge long-run economic problems for the developed world. On the domestic front, industrial nations will have to cope both with fiscal strains rising from aging populations and with the prospect of slackening demand for consumer goods and real estate as work forces shrink in Europe and Japan.
In the developing world, the rising number of jobless youth attracted by terrorism is the obvious danger. The challenge is to place nations with such groups on a path of stable economic growth -- turning would-be terrorists into producers and consumers whose demand for goods and services will help offset weakness in industrial nations.
As for the U.S., its population growth will continue to bolster domestic demand and add to the dynamism of its economy, lessening the potential burden of a rising tide of retirees. America's unique demographic profile among major industrial nations, says Barnes, suggests that its position as the world's main economic and political power will become even stronger.
Do Gays Have Higher Incomes?
A common perception, especially among marketing experts, is that gays are far more affluent than other groups. Not so, say many who favor laws banning workplace discrimination based on sexual orientation. Gays, they claim, are often discriminated against by employers.
One way to assess such claims is to look at data reflecting both earnings and sexual orientation. Based on six years of survey data from the 1990s, a recent study by economists Nathan Berg of the University of Texas at Dallas and Donald Lien of the University of Texas at San Antonio finds that gay men earn about 22% less than similarly qualified straight men, controlling for such variables as age, race, education, occupation, and area of residence. But it also finds that gay women earn approximately 30% more than similarly qualified heterosexual women.
This adds up to a puzzle. The lower earnings of gay men are consistent with discrimination. But what about gay women's incomes? The authors theorize that gay women may be more career-minded than married women, who are likelier to have kids. And gay men's lower incomes, they say, may partly reflect a tendency of gay male couples to work less than single straight men and married men with dependent wives.
Still, one thing seems clear: If discrimination does affect gay workers, it's men who appear to be most at risk.
Tech Wizards Take a Beating
America's highly skilled workers, the elite of the New Economy, continue to take a big hit in the jobless recovery. Jared Bernstein of the Economic Policy Institute reports that such workers are suffering scant wage growth and unusually high unemployment.
In the quarter ended in December, Bernstein found, the nominal wages of technical and professional workers were up only 1.7% on a year-over-year basis -- the smallest increase in the history of the series. After adjusting for inflation, that comes to an annual decline in real wages of 0.5%.
At the same time, Bernstein reports that the unemployment rate for mathematicians and computer scientists recently hit its highest level since the Labor Dept. started keeping tabs on these professionals in 1982. By the fourth quarter of last year, that group's jobless rate had climbed to 5% from a low of 1% in the late 1990s. Over the same period, overall unemployment increased only two percentage points, to 6%.
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Copyright 2003, Bloomberg L.P.
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