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June 30, 2014

"Obama's Economy: Where Did All The Young Workers Go?"

Seems to sink the falling-participation-rate-is-due-to-retiring-Baby-Boomers story.

What isn't so well-known is that a major reason for the decline is that fewer and fewer young people are holding jobs. This exit from the workforce by the young is counter to the conventional wisdom or the Obama administration's official line.

The White House claims the workforce is contracting because more baby boomers are retiring. There's some truth to that. About 10,000 boomers retire every day of the workweek, so that's clearly depressing the labor market. Since 2009, 7 million Americans have reached official retirement age. The problem will get worse in the years to come as nearly 80 million boomers hit age 65.

But that trend tells only part of the story. The chart above shows the real problem: The largest decline in workforce participation has been those under 25.


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And for the explanation of why the labor force participation rate for the portion of the population under Age 25 has been falling:

(Note that the federal minimum wage reached its current level in July 2009 - since then, a series of state-level minimum wage hikes have prevented any meaningful recovery for teen jobs - with Califonia set to boost its minimum wage on July 1, look for teen employment levels to resume falling again soon.)


Minimum wage and recession are part of the story, but the graphic in the article deals with almost a 30 year period. There is one additional wrinkle -- more young people are staying in school longer.


Higher prices and taxes is not a recipe for growth. Higher taxes increase prices and lower profits. This will reduce the amount of money consumers have to spend and will dissuade businesses from investing in new plant and equipment. We must bring down government spending and revive investment in the country. Monetary policy is impotent in the presence of bad fiscal policy.

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