Demographics And Economics

Inflation is too high but yet there are plenty of jobs available, in fact many companies cannot find enough workers. Maybe these too facts are actually related. So much of what happens is often a matter of simple demographics.

What is happening is that the Baby Boomers are retiring, and many need medical care. The Baby Boomers are the demographic bulge in the population brought by children being born to returning veterans of the Second World War. Baby Boomers are generally defined as having been born from 1946 to 1964. 

The enduring popularity of Rock Music is because it is the anthem of the Baby Boomers. The deadliness of the Spanish Flu pandemic, which killed people in their prime, can be easily seen in how we do not see a "baby boom" after the First World War, as we do after the Second World War. It is because the Spanish Flu killed so many people in their prime.

What the retirement, and increasing medical requirements as they age, of the Baby Boomers has done is to make the economy, in effect, into more of a service economy. The fundamental basis of the economy is production but as time goes on, and production becomes more efficient, fewer of the workers are actually producing anything tangible.

But yet their spending is needed to keep the economy going. So what happens is that service jobs are created. These are jobs that provide some useful service but do not manufacture anything tangible.

The basis of the economy remains actual production. So the new service jobs must be carried on the actual production jobs, in terms of wages. This is why countries with more of a service economy have higher both wages and prices that do more of actually making things.

Remember my tier of workers. Those who actually make things come first, and the others "ride" on them.

1) Those who make things

2) Those who fix things

3) Those who move things

4) Those who run things

The increase in jobs taking care of Baby Boomers is making the economy into more of a service economy, because it is not actually producing anything. But their wages have to "ride" on those that are producing things. This drives up wages and, since there is not a corresponding increase in production, it must also drive up prices.

This is the driving force behind the inflation of today. There is a more detailed explanation in "The Wage And Price Disparity", on the World and Economics Blog. Here is a link to it:

www.markmeekeconomics.blogspot.com/2011/08/wage-and-price-disparity_18.html?m=0