Will Millennials Suffer Because Retirements Create Job Openings for Them?

Robert Samuelson argues that they will. Samuelson apparently believes that people's standard of living is determined only by their tax bill. According to Samuelson's world view, Bill Gates is much worse off than the typical middle class family because he pays so much more in taxes.

Of course in real world land, well-being is determined by after-tax income. The greater sum that Bill Gates pays in taxes is trivial compared to his enormous income.

The same story applies for the millennials. The projections from the Congressional Budget Office, the Fed and all other standard sources show that before-tax compensation will rise on average at the rate of about 1.4 percent a year. This means that after 20 years their compensation will be more than 30 percent higher than what workers get today. This means that even if they pay substantially higher taxes than workers today, they will still have substantially higher living standards.

The retirement of the baby boomers is likely to help millennials. It will reduce the supply of labor -- creating opening higher up on career ladders -- thereby allowing millennials to get better jobs with higher pay.

The real threat to millennial living standards are:

1) inequality -- the continuation of the recent trend where more money goes to the top of the income distribution;
2) a broken health care system -- protectionists in control of policy want workers to give all their money to insurers, drug companies, medical supply companies and highly paid specialists;
3) ecological problems -- if the people in Bangladesh can make our children pay for the damage we have done to their land and lives through global warming, then our kids may be in trouble;
4) incompetent economic policy -- if geniuses like Alan Greenspan and Ben Bernanke continue to control economic policy, then they may be able to create poverty even in a world of enormous potential affluence.

These factors rarely get mentioned in Samuelson's account.

--Dean Baker

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