A recent working paper by Guillaume Vandenbroucke explores how much the demographic shift of Baby Boomers entering the labor market in the 1970s affected the productivity slowdown of that decade. Because some of the relevant economic concepts involved in understanding the labor market (such as human capital and total factor productivity) can't be directly measured, it has been difficult to determine how much the two phenomena contributed to the 1970s slowdown. The paper also asks whether the 1970s data can give us any clues about whether or not the expected widespread Baby Boomer retirements will affect productivity in the 2020s.
The analysis found that the Baby Boom accounts for 75% of the slowdown in productivity in the late 1960s, just as the first Baby Boomers were entering the workforce. The effect of the demographic shift diminished over the next decade, accounting for only 2% of the productivity slowdown by the late 1970s. Vandenbrouke's mathematical model implies that Baby Boomer retirement is likely to contribute to productivity slowing in the next few decades, as a mirror of that generation's effect on the 1970s.
Read the full-length academic paper here.
