Here’s a Reason Baby Boomers Could Curb U.S. Growth This Decade

Regardless of what's behind it, the discovery that the aging workforce could be weighing on productivity comes in contrast to other guesses and is important.

As Federal Reserve officials met in Washington this week, tepid growth in ouput-per-hour is likely to have been one of the economic questions they pondered. It's not clear why productivity growth has dropped off, and the change has real-world implications: it's one factor that caused Fed officials to lower their projections for where interest rates will settle in the longer-run, based on meeting minutes from their June meeting. 

Another notable feature of the new findings: they're really pessimistic. If growth over the next 20 years otherwise held near its average for the 1960-2010 period — about 1.9% — adjusting for the demographic shift would lower per-capita GDP gains to 0.7% this decade and 1.3% next, based on the estimates. Other research on the topic has suggested that population aging will have a smaller drag on output growth — for instance, a 2012 National Research Council report found that aging could knock 0.3 to 0.6 percentage point off of growth over the next two decades as the workforce structure changes, which it characterized as a "modest" macroeconomic consequence. The difference arises because the council didn't factor in productivity as a major way aging could drag on growth, Maestas said. 

"The real challenge next is to take a closer look at productivity and whether there are ways to redesign the way we work, and take a look at policy that can inadvertently encourage retirement by productive workers," she said.