Academic journal article Monthly Labor Review

The Labor Force and Unemployment: Three Generations of Change: The Influence of the Baby-Boom Generation on the U.S. Unemployment Rate Continues Unabated Today; the Subsequent, Smaller Generation X'ers and Echo Boomers Have Had Considerably Less of an Influence on the Rate

Academic journal article Monthly Labor Review

The Labor Force and Unemployment: Three Generations of Change: The Influence of the Baby-Boom Generation on the U.S. Unemployment Rate Continues Unabated Today; the Subsequent, Smaller Generation X'ers and Echo Boomers Have Had Considerably Less of an Influence on the Rate

Article excerpt

The post-World War II baby-boom generation--those born between 1946 and 1964--has had, and continues to have, a tremendous impact on the American labor market. The flow of these workers into the labor force also has affected long-term trends in the statistics used to gauge labor market conditions, particularly the unemployment rate. The groups following the baby boomers, popularly known as generation X (those born between 1965 and 1975) and the echo-boom generation (those born between 1976 and 2001), have not yet had the same kind of effect on labor market statistics.

This article examines the impact of all three of these generations on the unemployment rate. The first section starts things off by summarizing earlier work by Paul O. Flaim (1) on the influence of the original baby boom during the 1960s, 1970s, and 1980s. Then, employing Flaim's methodology, the next section assesses the influence of the baby boom, as well as the impact of the subsequent generations, during the 1990s. Finally, the article contrasts the demographic characteristics of the baby-boom generation with those of the rising young worker groups of today. The data presented throughout are annual averages from the monthly Current Population Survey (CPS). (2)

The baby boomers: three decades

Flaim explained the impact of the baby boomers on the Nation's unemployment rate by disaggregating the labor force into 22 different age-and-sex groupings (3) and then calculating the change in the unemployment rate due to three causal factors: (1) that due exclusively to changes in the incidence of unemployment among the various age-and-sex groupings that make up the labor force--in other words, changes in the unemployment rate due to the cyclical and structural changes that take place in the economy; (2) that due exclusively to changes in the age-and-sex composition of the labor force--in other words, changes in the unemployment rate due to changes in the relative weights of the age-and-sex groups; and (3) that due to the interaction between the preceding two components. (4) Flaim's analysis demonstrated the following points:

* By expanding the share of the labor force made up of young people (aged 16-24) in the 1960s and 1970s, the entry of the baby boomers into the job market exerted upward pressure on the Nation's overall unemployment rate. The reason is that younger workers tend to have higher unemployment rates than does the rest of the workforce.

* During the 1980s, when the youngest baby boomers had matured past age 24 and into groups with typically lower unemployment rates, increases in their share of the labor force (and the consequent shrinking of the youth population), in both absolute and relative terms, exerted downward pressure on the overall unemployment rate.

* No significant changes in the overall unemployment rate could be attributed to increased labor force participation among women between 1959 and 1989, because the unemployment rate for women aged 25 years and older generally is lower than the overall unemployment rate. In testing the hypothesis that the increasing labor force participation among women that began picking up speed during the mid- 1960s might have had an effect on the overall unemployment rate, Flaim concentrated on women aged 25 and older because their labor force participation rate increased significantly, from 36.2 percent in 1959 to 56.0 percent in 1989. (5)

Looking ahead to the 1990s, Flaim projected continuing downward pressure on the unemployment rate, due to the aging of the baby boomers and the decreasing proportion of younger workers in the labor force. In addition, he suggested that there might be a decrease in the youth unemployment rate, relative to the unemployment rate for older workers, in the 1990s, because of the reduced competition for jobs among the shrinking youth population. In a caveat to this suggestion, Flaim cautioned that any improvements in the youth jobless rate could be undercut by the labor market's continuing trend toward more racial and ethnic diversity. …

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