For the first time in recent history GDP is growing faster than per capita GDP. That means the economy is growing faster than our individual output is. It’s a sign we’re all less productive than we used to be. And it started as we were coming out of the recovery. It doesn’t seem all that worrying if you aren’t sure what you’re looking at, so let’s dive deeper into this number.
There are two concurrent events going on that are contributing to this shift in our economy:
- Baby boomers are retiring: Boomers were supposed to be retiring starting about now anyway. The financial crisis and recession have forced them to stay in the workforce longer than they expected, but many are still able and are retiring. Many continue to work part-time either out of necessity or desire. However on the whole as boomers retire we will continue to look less productive because the average economic output per person will look diminished.
- Companies have made a shift to hiring workers part-time: Firms are taking advantage of the abundant labor force and hiring more workers on part-time pay. Sure the cost of training is higher, but employers are able to weed out who is really committed and promote when the opportunities arise. But this is creating a labor force of 16-50 somethings that are working less than they want to. An undesirable outcome of the recovery, that if the recovery continues, should fade in time.
This leaves us with a growing economy, but not as much growth as we could have. Boomers shouldn’t necessarily be retiring. It’s great they have the option, but the pension system wasn’t really designed to sustain a retired employee for 30 years or so. And the economy would be better off if that employee were still sharing their knowledge with the workforce. An experienced veteran with lots of skills and contacts is almost infinity more valuable than some new person recently hired. But that’s who will be used to fill the role of the veteran. Some people who can retire do choose to continue to work, but without a direct financial need they will hold back and not put in 110%.
The more concerning development is the push for part-time employees. It’s giving rise to the number of people who appear to be “employed” but they are very much underemployed. And many qualified candidates may turn down a job because it’s only part-time and they’ll earn more collecting unemployment.
You can’t blame companies with the means to hire two PTers instead of one at FT. They can see which one is better and then give the good employee more hours when the opportunity becomes available. Employers should be careful though because the highly skilled workers aren’t going to be willing to work part-time for long. When a full-time opportunity comes along they’re going to jump ship.
Hopefully this shift towards less economic output per person will change back as we enter a more stable economic environment. But in order for that to occur we need more people getting hired (and hired with FT hours), and retiring people continuing to make a contribution in some form or another.