How the aged crowd out the young, and how it’s inefficient

This paper is pretty interesting. The last generation has seen the triumph of the baby boomers in attracting resources to themselves, at the cost of other generations, most obviously illustrated in throwing off the shackles of university fees (so other generations and the uneducated could pay for their university education) and then returning to ramp up fees on the oncoming generations. Ditto for the pension – which they’ll enjoy but get later generations to self-fund. Ditto all the tax breaks for self-funded boomers and on it goes though quite possibly the effect of house prices may be as or more important than all that.

Meanwhile think how those who rise to a certain position in the workforce tend to stay there, regardless of merit. This is not so true at the very top of large companies any more that seem to turn over their CEOs pretty quickly and ruthlessly (thought the terms of separation show a great deal of ruth). So economists tend to think of firms as making efficient decisions to survive competition, but they’re full of humangoes, and humangoes, just like mangoes have soft squishy bits that tend to do pretty much what they’re going to do whatever the state of competition is.

Demographics and Entrepreneurship

: by James Liang, Hui Wang, Edward P. Lazear – #20506 (IO LS)

Abstract: Entrepreneurship requires creativity and business acumen. Creativity may decline with age, but business skills increase with experience in high level positions. Having too many older workers in society slows entrepreneurship. Not only are older workers less innovative, but more significant is that when older workers occupy key positions they block younger workers from acquiring business skills. A formal theoretical structure is presented and tested using the Global Entrepreneurship Monitor data. The results imply that a one-standard deviation decrease in the median age of a country increases the rate of new business formation by 2.5 percentage points, which is about forty percent of the mean rate. Furthermore, older societies have lower rates of entrepreneurship at every age.

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Anne Magarey
Anne Magarey
7 years ago

Generational blaming, whatever the generation, is just plain wrong, for all sorts of reasons, and alienating. Because of the introduction to the article, I am unable to read the article itself, and it is probably a good one, well worth reading. Having read the introduction, and been blamed for all that is wrong for post boomers, I shall go and hide somewhere and try to regain some semblance of self worth, having fought all my life for justice and equity for everyone. Sigh.

Anne Magarey
Anne Magarey
7 years ago
Reply to  Nicholas Gruen

I shall remember that!

RobR
7 years ago

I second that comment above (or below or wherever it turns out to be): generational blame is a nonsense. But worse, what’s “how the aged crowd out the young and it’s inefficient” got to do with the linked document? Nothing? Almost nothing? Very little? Pick one!

The linked working paper (that’s all it is by the way, not a peer reviewed research paper or even close) has some nice regressions in it to tease out of a limited data set (just 14 years of GEM individual “survey” data, only the last 4 of which is of the ‘most complete’ data) some arguably interesting conclusions about a correlation that appears to link together an aging demographic and lower rates of entrepreneurship. There’s nothing here about “crowding out” or “inefficient” that I can see, certainly nothing substantial or demonstrated. In its favour it posits some possible alternative views, too.

Did I mention it’s based on just 14 years of survey data?

In any case what do we do about it, this parasitic older-worker logjam? Increase younger-aged immigration, boost fertility rates and/or cull out older workers at a younger age, perhaps? Just because “the young” show (supposedly) more creative oomph in business? Sounds flimsy and even risky to me.

Your blog post itself seems to miss the whole point of that and rants on at a tangent with an unrelated proposition about one generation “robbing” the next. As if 2 closely-consecutive world wars hadn’t had a huge impact culturally and demographically to our society. Things were more settled and it got shaken up – some would say in a good way, especially in terms of social justice and equity. Much of that a dividend earned by, umm, baby boomers. Or do you simply prefer another time in history?

And whilst historically it was pre-pre-war babies Curtin and then Menzies who kickstarted the Commonwealth scholarships scheme (and the ‘culture of entitlement’, groan) it’s worth noting that (again, pre-war baby) Whitlam only gave the latest-born of the post-war baby boomers a free tertiary education from about 1974 and as it happened only for the next 10 years or so, give or take. So how exactly did the “baby boomers” themselves manage to attract this favour? Why blame them for another generation wishing to raise intakes on the tertiary level? Indeed many of the remaining post-1945 baby boomers actually paid their way. And tertiary participation rates throughout that period weren’t very high anyway, especially for university study. So the whole generational “blame game” falls apart. It wasn’t them.

Not every so-called baby boomer attracted an undue share of resources or consumed a similarly unfair amount of resources either. They just lived their lives in the environment they lived in, as we all do. We are all individuals, not handy demographics ripe for blame.

And generations also blur together – there are few truly distinct markers for significant demographies but the post-’45 group happens to be one. Where it ends is hard to be sure about – some say 1955, others 1960. Some in between or even later. Point is that it’s a population spike, that’s all. It’s not really a coherent or discrete group that you should – or would want to – target for whatever popular blame attachment you desire. Unless you see a coherent group among the mix of classical, jazz, rock, mod, punk and new wavers that make up this cohort. Some went to war, others protested against it. Some worked in suits, others were hippies. And so on. Individuals making choices. It’s just more babies, post-war, and an older generation wanted the best for them. That generation worked to foster the next.

And as far as I can see that’s what each succeeding generation attempts to do. Some may do better than others – although how we determine that is beyond me – but what of it?

Anyway, I’ll stop before this keyboard runs out of ink. Hope some of that makes a little sense!

john Walker
john Walker(@johnrwalker)
7 years ago
Reply to  Nicholas Gruen

‘age’, sure does stir the possums.

Helen
Helen
7 years ago
Reply to  Nicholas Gruen

Maybe you should resign from your position, Nick, if you feel BBs are clogging up the works. No? Thought not!

conrad
conrad
7 years ago

I think it’s entirely fine to look at differences between generations and other groups. It’s political correctness gone mad once you start trying to pretend differences don’t exist and not to look to at anything.

It’s also not all clear to me that suppressing things make things anything better. For example, in France racial information is not collected by the government in the mega surveys (i.e.,the census), so all it means is that people can make any old crap up and no-one will the know the better.

I also think it’s useful to know if there are big inter-generational differences. This is because you may have some groups that are experiencing bad inequality compared to others, and this is generally going to be bad thing. If rich baby-boomers happen to have all the money, I can’t see why trying to get some of it from them and targeting things they benefit from (e.g., superannuation perks) is really such a bad thing. Similarly, if some groups happen to be particularly poorly off, it would give you good incentive to leave them alone or spend things in areas that might benefit them. So you get a better bang for your buck with better info.

Murph the Surf
Murph the Surf
7 years ago

It was many years ago and in a newish company in a particularly tradition bound work environment. The friend of mine arrived , new boss for Japan and his only course of action as a 28 year old was to sack all the old staff.
They had to go for him to have any chance of success.
His next promotion was back to the UK where even this act of corporate daring meant nothing in the vicious backstabbing scramble to enter the inner circle of upper management.
My friend was a Gen Xer ………..just watch your back is all I learnt.

Peter WARWICK
Peter WARWICK
7 years ago
Reply to  Murph the Surf

Murph, how very true. I have witnessed many 45+ years employees pushed out due to their “resistance to change” despite the fact that these employees were the very ones who changed and adapted along the way and prepared the company to new challenges.

It was always Gen Xers leading the push. More brash than the older employees and with a good lexicon of buzzwords, they were able to convince the directors of the need for “generational change” and “reconfiguration to meet the dynamic diversity of challenges we face”.

Some older employees took change by the horns, and implemented change at a rapid rate, impressing all and sundry with their dynamism. It was ironic that with sufficient iterations many things returned to their previous state. But it was impressive, noticed and “dynamic”.

It was a case of “the squeaky wheel gets the grease” !

Like you said – watch your back !!

billie11
billie11
7 years ago

According to historians like the late Tony Judt, the post war era from 1945 to 1972 was remarkable in world history because it was a period of upward social mobility with a reduction of class inequality.

Baby boomers were lucky enough to take advantage of this felicitous time, growing up in a world of improving health care (if not universal health care in Europe) access to higher education and full employment policies, all conditions that permitted people to rise to the height of their ability.

Previous generations in the 1930s had their education and employment opportunities curtailed by the poor economy of the 1920s and Great Depression of the 1930s. Current generations have their employment opportunities curtailed by the Global Financial Crisis, increasing automation, globalisation and international mobility in the labour markets. Only the top 10% of the current cohort of 20 somethings are likely to afford their own home and like previous deprived generations the lowest 90% will have lower fertility rates.

PS I am thankful I am a baby boomer

conrad
conrad
7 years ago
Reply to  billie11

I think people look back far too favourably on the years the baby boomers grew up. For example, unless you were white and male, many of these apparent wonders would not have applied to you, and that’s clearly less than half the population. If you were female, for example, you would have been excluded from any number of jobs, and if you did have a job and got harassed, no-one would haven given a toss. As an another example, if you were black, you wouldn’t have even been allowed to vote and your likely lifespan would have been even less than now.

There’s also endless advantages of living now compared to then, and some of the things you see as bad I see as good. For example:
1) We live longer.
2) Healthcare is better.
3) Apart from housing, more or less everything else is cheaper, ranging from food to transport to consumer items.
4) More of us get more education
5) In part because of (4), far greater numbers of us can simply move to another place (including country) if we don’t happen to like it here.
6) Also in part because of (3), far greater numbers of us can work in another country for a few years just because it’s fun.
7) Apart from work, interstate and overseas holidays are cheap
8) Our workplaces are safer and better thanks to automization and technology. Was digging holes really that fun?

and so on.