TABLE OF CONTENTS
Preface
Acknowledgments
Overview: The Birth Quake and Its Aftershocks - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0001
[baby boom, birth cohorts, cohort size, divorce, fertility, marriage, savings, inflation, wage]
This chapter summarizes the evidence that seems to explain how so much of the social and economic change over the last fifty years has been related to the post-WWII baby boom and that generation's passage through the life cycle, and how the baby boom itself was probably triggered. It also concentrates on birth cohorts and addresses the relative cohort size effects. Together with increasing divorce rates, declining fertility and marriage rates and increased female college enrollment and labor force participation seem to correspond with an economic model based on the female wage and on male relative income and the college wage premium. With respect to gross domestic product growth, savings rates and inflation indicate a possible link between changing age structure and some of the severe economic downturns experienced here and abroad. Finally, an overview of the chapters included in this book is provided. (pages 1 - 32)
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Part 1. Defining Concepts and Terms
Population Growth and Relative Cohort Size - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0003
[population growth, relative cohort size, international trade effects, immigration, Vietnam War, women, wages]
This chapter presents a discussion of population growth and relative cohort size. It also describes women's changing role in society; immigration or international trade effects (or both); the Vietnam War; and the possibility of asymmetry in relative cohort size effects. Women's responses to changes brought about by fluctuations in relative cohort size have provided a buffer against some of the extremes that might otherwise have occurred. There is a strong effect of both imports and exports on relative wages. Large cohort size did not just result in lower relative wages, but also in higher unemployment and higher incidence of “job mismatch.” Richard Easterlin introduced the concept of relative cohort size, the size of one's birth cohort relative to that of one's parents, and suggested that its effects on individuals might persist throughout their lifetimes. (pages 35 - 47)
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Male Relative Income and Its Significance - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0004
[male relative income, egalitarian, marriage, economic pressure, relative cohort size, women, cognitive dissonance]
This chapter investigates the importance of male relative income. It is noted that despite trends toward egalitarian gender-role attitudes and increasing income provision among women, cohabiting men's economic circumstances carry far more weight than women's in marriage formation. Improvements in mothers' relative income may eliminate some of the economic pressure for them to work outside the home, but it would be reckless to presume a mechanical symmetry in relative cohort size effects that leads all the way back to the attitudes of the 1950s just because relative cohort size declines. Underlying preferences regarding women's roles and desired family size do not change as much as current behavior might suggest. The principle of “cognitive dissonance” may tend to bring those underlying preferences more in line with current behavior. (pages 48 - 57)
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Defining Variables - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0005
[relative cohort size, baby boom, Richard Easterlin, earnings, labor market, migration, wages, unemployment]
This chapter covers the historic trends in various measures of relative cohort size and the concept of “asymmetry” around the peak of the baby boom. Richard Easterlin suggested that young adults compare their own recent earnings to their material aspirations. His hypotheses concerning the various effects of relative cohort size assumed that these effects were symmetric around the peak of the baby boom. Cohorts born on the leading edge of the baby boom tended to have higher earnings overall than those born either at the peak or on the trailing edge. Current labor market conditions might have an impact on current age ratios by inducing inter- and intranational migration, with workers moving to areas with higher wages and lower unemployment. (pages 58 - 78)
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Part 2. First-Order Effects of Changing Relative Cohort Size
Patterns of Male Relative Income over the Years - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0006
[male relative income, white young men, African American men, hump, recovery, United States]
This chapter deals with the description of trends in male relative income in the United States. It specifically illustrates the trends over the past thirty-five years for white and African American young men. Although the magnitude of the change in relative income differs, there have been strong underlying similarities among groups over the past three decades: a virtually continuous fall from 1970 to 1985 with a rally between 1985 and 1989, followed by another dip from 1990 through 1994, and then another rally. The male relative income was as high as 1.10 in the mid-1950s but then dropped to about 0.75 by the mid-1980s, with the same “humped” pattern of recovery thereafter. Despite the strong overall similarity among the trends in all groups, there have been significant variations—in the strength of the rebound in relative income in the late 1980s: the characteristic “hump.” (pages 81 - 85)
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First-Order Effects of Relative Cohort Size - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0007
[male relative income, unemployment, college education, relative cohort size, earnings, younger men, active military, trade, labor market]
This chapter concentrates on male relative income, unemployment, and returns to college education. It specifically utilizes aggregate data to look at the impacts of changing relative cohort size on the earning potential of younger men, relative to that of older men. It is assumed that the proportion of the active military aged 20–24 affected the relative income and earnings of young males. Furthermore, trade effects seem to have strongly operated, along with cohort effects, on the college wage premium, but the influences of trade appear to have been much less on male relative income. The male relative earnings will indeed be lower when relative cohort size is large. The cohort size effects have in fact been the most significant factor in deciding the labor market outcomes of young men and women, and are showing signs of exerting strong positive forces over the next few decades. (pages 86 - 102)
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Effects of Relative Cohort Size on Inequality and the Overall Structure of Wages - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0008
[wages, inequality, United States, relative cohort size, work intensity, unemployment, labor force]
This chapter analyzes the wages at all age levels throughout the workforce. It tries to identify whether the age structure of the population has had a significant effect on the primary dimensions of inequality in the United States over the last thirty-five years: on the return to experience, the return to skill, hours and weeks worked, and on the general structure of wages and level of inequality. Changing relative cohort size can explain a significant proportion of the variation over time in measures of work intensity, such as hours and weeks worked and the proportion working full time, at all levels of experience. Cohort size effects—on wages, unemployment, and hours and weeks worked—have occurred not just among younger workers, but throughout the labor force. Furthermore, changing relative cohort size has been a major factor increasing all types of inequality in the society over the past few decades. (pages 103 - 114)
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Part 3. Second-Order Effects of Changing Relative Cohort Size
Women's Roles - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0009
[women, wages, labor force participation, career woman, feminist movement, fertility, marriage, earnings]
This chapter evaluates women's wages, labor force participation, and occupational choice. Married women's labor force participation increased more in that twenty-year period than in the preceding seventy-five years combined. The emergence of the “career woman” in the absence of financial inducements is also explained. The strong feminist movement of the late 1960s and 1970s was largely responsible for changing attitudes, together with a general disillusionment with the role of housewife. Declining fertility decreased the significance of women's role in the home, making labor force participation more attractive. Lower marriage rates appear to increase the average labor force participation rate of young women. Women who can “afford” to, who are married and have children, are beginning to choose to work part time rather than full time. It appears that women still value family and will use additional earnings to “buy back” time with family. (pages 117 - 134)
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Boom and Bust Cycles in College Enrollment Rates - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0010
[young men, young women, college enrollment rates, relative cohort size, college wage, high school wage, education, international trade, globalization, baby boom]
This chapter discusses young men's and women's college enrollment rates. It is expected that relative cohort size should exert a significant effect on college enrollments. The large cohorts face a declining college wage premium—the difference between a college wage and a high school wage—and this effect of cohort size will decreases their motivation for further education. The net effect of cohort size on their enrollment probability will be a combination of positive and negative forces. Rising levels of international trade tend to produce rising college enrollment rates. Increasing globalization is increasing the incentive for higher college enrollments, as imports weaken the earning power of less-skilled workers and exports increase the competitive position of more-skilled workers. A significant proportion of the increase in young women's educational level appears to be yet another repercussion of the baby boom. (pages 135 - 143)
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Effects of Changing Male Relative Income on Marriage and Divorce - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0011
[marriage, divorce, male relative income, baby boomers, college enrollment, young women, wages]
This chapter considers the closely related issues of marriage and divorce. Divorce rates appear to have topped out since about 1985 and have even begun to decline, as male relative income has stabilized and begun to improve. For the baby boomers, higher divorce rates appear to leave permanent scars. There is no apparent trend in divorce rates at each age among the baby boomers themselves. Marriage postponement that may have led from relative income effects showed up as simple college enrollment in the Wisconsin sample, which has a strong negative effect on propensity to marry. Young women will be “squeezed out” of the marriage market when there is a relative shortage of unmarried men about two years older than themselves. Rising women's wages appear to have encouraged marriage and discouraged divorce among young working women. (pages 144 - 160)
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The Disappearance of the Marriage Wage Premium - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0012
[marriage wage premium, married men, relative cohort size, male wages, labor force, jobs]
This chapter describes the marriage wage premium. Married men with stay-at-home wives earn a much higher premium than married men with working wives and use this to argue in favor of real productivity effects. Number of years married would be expected to increase a man's marriage wage premium. Increasing relative cohort size was a major factor in the loss of the marriage wage premium and stagnation in average male wages observed over the last twenty years. Women's tendency, as they entered the labor force, to replace their own home production with purchased goods and services generated a marked increase in the proportion of jobs in low-wage retail and service sectors—and men holding such jobs tend to benefit little from any increased specialization in marriage. (pages 161 - 166)
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Relative Cohort Size and Fertility - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0013
[fertility, young women, United States, price of time, relative income model, parental income, female wage]
This chapter addresses the patterns of fertility among young women in the United States. It concentrates on the “price of time” model and the “relative income” model. Young couples in the 1950s entered enthusiastically into marriage and family formation, causing the postwar baby boom. The bust occurred when those baby boomers flooded the labor market twenty years later. Both men and women in the African American community enjoyed a pronounced economic recovery after 1985. At the same time, African American women's fertility rose more sharply than white women's. Data show a significant positive effect of young men's income on the fertility of women in their first five years out of school, and a significant negative effect of parental income with an estimated positive effect of the female wage. Furthermore, a positive effect of women's wages on fertility emerges at all ages. (pages 167 - 183)
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Relative Cohort Size Effects—Even in Developing Countries - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0018
[relative cohort size, fertility, demographic transition, developing countries, mortality]
This chapter addresses the global evidence of a strong relationship between relative cohort size and fertility, even in developing nations during the fertility transition. “Demographic transition” is the period during which a country passes from high to low death and birth rates. Relative cohort size has played a crucial role in bringing about the fertility transition in developing countries during that period. Total fertility rates are constant or even increasing until relative cohort size begins to increase: at that point, the total fertility rate begins to decline. Relative cohort size can be thought of as the mechanism that prevents excessive rates of population change—reducing fertility when previous high rates, in combination with low mortality rates, have caused relative cohort size to increase, and increasing fertility when previous low rates have caused relatively small younger cohorts. (pages 184 - 196)
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Part 4. Third-Order Effects of Changing Relative Cohort Size
Aggregate Demand Effects of Changing Population Age Structure - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0014
[consumption, saving, age structure, expenditure, United States, baby boom]
This chapter reports some of the preliminary findings on U.S. patterns of consumption and saving. The macrolevel studies find very strong and significant age structure effects on a wide range of phenomena from inflation and interest rates to housing and other durable goods expenditures. The chapter shows pronounced age effects on patterns of expenditure and saving, but it also indicates that the dependency effect dramatically changes as national per capita income rises. The overall net effect of children on savings is negative at low levels of real per capita income, but in post-WWII United States, children began to cause a reduction in overall consumption as a share of income, relative to the average, rather than an increase. Additionally, the baby boom has had a major impact on the U.S. economy. Changes in age structure would have induced swings of up to 25 percent in total consumption demand during the twentieth century. (pages 199 - 219)
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Population-Induced Economic Slumps - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0015
[economic performance, recessions, depressions, population age structure, economic dislocation, United States, relative cohort size, fertility]
This chapter presents some of the preliminary findings on overall economic performance across all nations (the incidence of recessions and depressions). The unforeseen changes in population age structure have the potential for triggering catastrophic economic turmoil—and virtually always appear to cause at least a degree of economic dislocation. There have been pronounced fluctuations in the proportion of the population aged 15–24 across all nations during the twentieth century, which seem to coincide with major fluctuations in economic activity. The United States has experienced only one episode of declining relative cohort size that seemed to translate almost immediately into increases in fertility. It seems likely that the effects of wartime expenditures will prevent from unraveling the true effects of changing cohort size. (pages 220 - 230)
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Macroeconomic Correlations: GDP Growth, Inflation, Savings Rates, and the Stock Market - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0016
[GDP growth, inflation, savings rates, stock market, population age structure, economic performance, immigration]
This chapter considers some of the preliminary findings on the separate measures of U.S. GDP growth, inflation, savings rates, and the stock market. It performs a very simple analysis using time series of macroeconomic and population data to explore the possibility of correlations between population age structure and economic performance. Young people in the household- and family-formation stage are expected to have an inordinately strong effect on GDP growth. There is a strong relationship between age structure and longer-term change in measures of macroeconomic performance. The sharp dislocation between 1918–1920 is due to age structure effects of the flu epidemic at that time, in combination with war-time losses and drastic reductions in immigration. It is shown that changes in the age structure of the population might have been responsible for the marked cyclicality in the underlying patterns of longer-term change in these measures during the twentieth century. (pages 231 - 242)
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Conclusion - Diane J. Macunovich
DOI: 10.7208/chicago/9780226500928.003.0017
[fertility, women, college enrollment, labor force participation, cohort size, wage, marriage, economic growth]
This chapter characterizes the socioeconomic effects of changing demographics. Fertility rates may be declining slowly over the years because women move into careers and children become more expensive. Women's college enrollment and labor force participation rates must certainly have been on a slow upward trend since WWII. There are strong effects of cohort size on the wage structure at all ages. Marriage and fertility rates drop sharply, along with aggregate consumption demand in an economy bereft of the needed stimulus provided by young adults setting up new households on their own. The periods of decline in the proportion aged 15–24 coincide with eras of slow economic growth, while the periods prior to 1929, between 1954 and 1974, and since 1994 have all been characterized by growth in both spheres. The monetary and fiscal policies and controls have played a significant role in buffering shocks in recent years. (pages 243 - 254)
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Appendix A: Expectations in the Williams College Class of 1999
Appendix B: Data for Figure 4.1
Notes
References
Author Index
Subject Index
