Our undersupply of labor is the very reason why we have had lack of economic growth since 2009.
Economic researchers have been talking about this as early as 2002-2004. Flat out saying growth will slow.
Your link is to a paper written in 2008, but setting that aside... your paper says this:
"The future growth of the U.S. economy depends on the contribution of labor input, that is,
the growth rate of labor input multiplied by the labor share of output. However, future growth
also depends on the rate of growth of total factor productivity and the contribution of capital
input. In the neo-classical theory of growth embodied in IGEM, the contribution of capital input,
the growth rate of capital input multiplied by the capital share, is endogenous. To a reasonable
approximation growth rates of output and capital input must converge in the long run. The only
component of the sources of growth not yet accounted for is productivity growth."
The take-aways from this paper:
- the paper assumes neo-classical economic theory (aka supply-side economics)
- the paper assumes strong annual productivity growth (3% annually)
- the paper assumes that people continue to retire at similar ages as they did in the past.
- the paper anticipates 1.6% annual growth
Even though they arrived at the (so far) accurate prediction of GDP growth, they arrived at it using faulty assumptions. Specifically, they assumed that productivity would continue to rise (it's declining). If they arrived at the right conclusion about GDP growth without anticipating the decline in productivity, another factor must be in play, pushing GDP growth up even as productivity declines.
Taken to its logical conclusion, using neo-classical theory, this should tell you that labor input has not declined at the anticipated rate (since this paper assumes GDP growth = labor input x labor share of output).
Every mainstream economist out there was pushing there was no threat of recession. Even MMT people got it wrong and got other things wrong as well. MMT's cult leader (I know, that's mean) Warren Mosler almost lost his shirt over Russia currency crisis in the mid 1990s with him betting they would never default.
I'll admit I was not following economics very closely in 2008, so I can't comment much on this.
Nonetheless, a past failure to forecast an event doesn't make all of their future and past analyses invalid.
US has growing by 14m in the 9 months of 2016 so far? What are you smoking? US population growth rate is at .77% per year. That's roughly 2.5m population growth per year.
Mistype, my bad. I meant 2010.
Not a demand issue, you can't increase demand without supply. So we've never had a problem with demand when the next generation went on to retire because we also had an ample supply of labor to fill the role of worker and consumer. We just don't have supply of consumers over the age of 18. We have another 2-4 years (depending on how future 18 year olds spend). This is just a fact. We hit our peak largest year in consumers when current 30/31 years old turned 18.
We have plenty of supply. When a business needs a highly-experienced worker to fill a role, and no Americans are applying, businesses just secure an H1B visa and hire somebody from another country. And as I previously stated (and you have not refuted), we have a labor supply glut for many entry level jobs.
A transitioning economy has very little to do with oversupply. We create millions of entry level jobs ever year. You can't create consumers, those are based on birth rates. US has a declining birth rate. 59 per birth per 1,000 women.
Our issue is supply. We are talking about missing 1% or more growth because of our population issue.
[/QUOTE]
Yes, birth rate is declining, but nobody being born today is entering the labor force. The labor force only extends back to the year 2000 (birth rates were higher then).
A transitioning economy has meant increased automation, which means less labor demand for jobs that are being replaced by automation. Thus, we have a growing supply of entry levels relative to demand (not because supply is increasing significantly, but because automation is eliminating demand).
