Demography is destiny!
Like so many economic and social science theories, they explain historical data very well for a time and make reasonable predictions, but eventually they fail.
"In 1978, Richard Easterlin stood before the Population Association of America and predicted that the wages of young American men — falling since 1973 — would turn around by 1984.
He had earned the confidence. As we have discussed in the past, Easterlin’s relative cohort size hypothesis was the most successful applied demography of its era, and it had already explained the biggest population event in American history—the Baby Boom. He replaced the mysticism about returning GIs, swooning Rosie Riveters, and suburban optimism with actual social science. ...
Easterlin found the explanation for the unexpected Baby Boom in economics. The Depression produced small birth cohorts. Those cohorts came of working age in a booming postwar economy and immigration tightly restricted by the Immigration Act of 1924. The “lucky few” folks walked into a market starved for workers. They got high wages relative to what they’d grown up expecting, and so they married early and had a lot of children.
Tight labor markets and closed borders made the Baby Boom. That is the core of Easterlin’s thesis, and it is the part of his work that has aged best. ..."
From the significance and abstract:
"Significance
The large size of the baby boom cohort depressed economic opportunities for that generation as it flooded the labor force in the 1970s.
Contrary to the predictions of Richard Easterlin’s relative cohort size hypothesis, however, there was no rebound of opportunities with the advent of smaller cohorts in the mid-1980s; incomes of young adults remained depressed until the 2010s.
New measures of flows into and out of the labor force make it simple to assess the relative impact of retirement, female labor-force participation, and immigration in concert with the size of birth cohorts entering the labor force. The results suggest that the departure of baby boomers from the labor force will have profound implications for economic opportunities of new workers.
Abstract
This analysis revisits the relative cohort size hypothesis proposed by demographer Richard Easterlin in the 1960s.
Easterlin argued that the economic and social prospects of a generation are influenced by the size of the cohort relative to adjacent cohorts.
He hypothesized that relative cohort size affects wages, employment, marriage, and fertility decisions.
The theory fits the data well for the period from 1940 to 1980 but fails in later decades.
I present a more nuanced view of the impact of demographic factors on worker competition through the lens of a measure of decennial labor-force flows. This approach allows consideration of the effects of retirement, female labor-force participation, and immigration on labor-market competition.
I calculate these flows for the period from 1910 to 2040 and propose an index of employment competition. The results show that trends in labor-market competition are consistent with wage trends of young workers since 1940. Projections to 2040 show that we are on the verge of a radical reshaping of labor markets in which new workers will be in extremely short supply."
