Are prices going up because the U.S. is too darn old?
One explanation for inflation is demographics.
You’ve probably heard that inflation is pretty off the hook right now, with costs of everything from energy to beef to housing going up, up, up. You’ve probably also read lots of stories trying to explain why (increased consumer demand, meet decreased product supply). There’s even an interesting Internet battle going on in which progressives like Bernie Sanders point their fingers at big corporations like Chipotle and blame inflation on everybody’s favorite scapegoat: corporate greed.
But I keep thinking that at its heart, inflation right now is also a labor problem. Why aren’t factories making all the goods we want? They can’t find enough workers. (Just read this story from Iowa factories that are having to cut production because of a lack of staff.) Or they can’t find the supplies they need, because their suppliers don’t have enough workers. Or they can’t find a trucker to bring their goods from Point A to Point B.
In a well-functioning economy, companies would just raise wages to entice people to do these jobs that they can’t fill. (And there are certainly some economists who say that jobs aren’t being filled because they are still too crappy.) But companies have been increasing wages—5.7% in January—and they still aren’t finding enough workers. Why not? One theory, that I write about in this story: because of demographic shifts, the U.S. just doesn’t have enough people.
The story is short, so you can go over to TIME and read it. (Sorry about the video ads. I know. They’re inescapable.) But the gist is this: The U.S. is aging, lots of people 55 and older have left the workforce, and immigration has dropped sharply in the last few years. “All of our gaps in the supply chain are because people aren’t there to make the goods. This is the problem. It’s a lack of labor,“ an economist told me.
I’m really interested in the intersection of demographics and economics, especially since I did a fellowship in Japan in 2017. Japan is, demographically, where the U.S. is going unless immigration goes up. It’s aging, it has a low immigration rate, and people aren’t having babies.
Here are a few of my favorite stories from Japan if you’re into this topic:
Can Anything Stop Rural Decline? I look at what will happen to all the rural towns in Japan that young people have left forever.
The Mystery of Why Japanese People Are Having So Few Babies A lack of good jobs drives procreation choices.
Robots Will Transform Fast Food One solution to an aging workforce? Automate everything.