These graphics are wonderful!
Shaped sort of like a triangle because the elderly population is so small, this population pyramid for Egypt illustrates a youth bulge of men and women who are 15 to 29. The “bulge” represents 28% of the population–maybe 23 million people. For Jordan, Algeria, Iran, Yemen, Saudi Arabia and Bahrain the demographic picture is similar.
But the U.S. is different. Our graph has a baby boomer bulge. As you might expect, population pyramids for other developed nations resemble the U.S. graph. (You can open “Demographic Indicators” at this OECD site to compare.)
The Economic Lesson
What does a youth bulge imply? It takes us to jobs. The Washington Post reminds us that when freedom is limited, unemployment among so many young people fuels instability.
By contrast, for the U.S. and other nations with an aging population, entitlement support for the elderly is the challenge.
An Economic Question: We know that population matters…but how? How might the size of a country’s population and the relative size of its different age groups affect GDP growth (the value of a country’s production of goods and services during one year)?
Baseball’s MVPs are typically younger than 30 and rarely over 35. Office workers and salespeople tend to be most productive in their early to mid-40s. Most Nobel prize winners in physics and chemistry did their innovative work before they were 50. Academic studies even imply that businesses with younger workers have a higher return on their assets.
In an excellent course on “Modern Economic Issues” from the Teaching Company, when Dr. Robert Whaples discusses aging in Lecture 13, he suggests that we have more to worry about than soaring health care spending and Social Security programs. An aging population could diminish productivity and innovation.
By 2050, close to 27% of the U.S. population will probably be older than 65 and the median age will be 41. Older than we are, Europe and Japan will have a median age that is close to 50 in 2050.
Should we be concerned? One researcher suggests that we might “coax more output from the workers we already have, through more physical capital, improved technology, or better resource management.”
The Economic Lesson
All of this returns us to economic growth. To sustain and better our standard of living, we need economic growth. Our yardstick for measuring economic growth is the Gross Domestic Product (GDP). The GDP is equal to the value of the goods and services that we produce in the U.S. each year. Its four components are 1) gross investment (primarily business spending), 2) consumer spending, 3) government spending, 4) exports minus imports.
How old are you? Between 35 and 69? Then you are more likely to be a saver. As a saver, you might place your money in a bank, or buy a government security, or invest directy or indirectly in a stock or bond. From there your savings could move to a business nearby or somewhere around the world.
Focusing on age, we can observe how money might move among nations. Those with more savers will have a surplus and send it to other countries. Researchers at Goldman Sachs predict that, because of demographics, emerging economies will be the source of more of a future surplus than the developed world.
The Economic Lesson
Economists predict that countries with more savers are more likely to have more money to send to other countries. The result is called a current account surplus. In a 2005 speech, Fed Chair Ben Bernanke provides a clear explanation of what a current account means. He says it can be defined from two perspectives. you can look at imports, exports, and investing and see whether more money is leaving or entering a country. Alternatively, but closely related, you can compare saving and investing see whether the result is negative, which means foreign money was necessary to fund domestic projects.