In 2008, U.S. workers aged 55 to 64 who had 401(k)'s for at least 20 years saw their retirement balances drop an average of 20 percent. A recent YouGov poll showed two-thirds of this generation have not made the necessary adjustments in their financial planning. This is not a recipe for leaving the workforce anytime soon.There are lots of stories about the current economy creating "forced entrepreneurship," and perhaps with less ability to climb the corporate ladder, this may be another force pushing people into starting an entrepreneurial venture. The quicker the better, I say.
Younger workers who expected promotions when the boomers cleared out are going to have to stew in their own juices. With this job market, looking for a better opportunity elsewhere is not in the cards. Which means that Gen X-ers are going to have to listen to baby boomers doing what they do best -- talk about themselves.
Thursday, March 26, 2009
Forces Against Job Mobility
Snarky and whiny gen X-er Daniel Drezner (also a Political Scientist at Fletcher) has a Marketplace story about the financial crisis and its impact on office politics.
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There is some interesting research out there about the effects of large birth cohorts on wages and job opportunities. The eminently readable Richard Freeman (now at NBER) has written several key studies of the demographic factors on earnings. To sum up, when the U.S. baby boom entered the labor market, wages for workers age 20-34 dropped significantly relative to wages of older workers. The theory is that workers are not readily substitutable across ages brackets, and the baby boom shifted the supply curve of young workers. The vexing part, however, is that as the baby boom cohort aged, the gap between younger and older workers' wages continued to increase. Some argue that the baby boom cohort negotiated higher wages in their later years to make up for their early reduced earnings. I'm not sure that's the whole story. At the least, based on anecdotes, I fully agree with Drezner that the baby boom generation is clogging up the pipeline.
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