Tyler Le/Insider
Their greed destroyed the economy — and now millennials and Gen Z are paying the price
Parents: Is there anything we can't blame on them? They bear the responsibility for our neuroses, the less flattering aspects of our appearance, and, now, the worst inflationary crisis since the 1970s.
The story of our inflation headache is one of scarcity: not enough people, homes, or ships. But while the arguments about post-COVID price chaos have focused overwhelmingly on short-term, pandemic-created triggers — such as closed factories and government rescue spending — inflation is also a story of larger tectonic shifts within the population.
Boomers, who were for a long time the largest generation in global history, are entering their twilight years. And as they ride off into the sunset, they're leaving behind an economy that isn't really built to accommodate the demands of the 21st century. Boomers have spent the past few decades shaping the world in such a way that has made the current crunch more painful and sets up future generations for continued deprivation.
The boomers' economy is brittle, stingy, and built on undersupply. While inflation may be cooling a bit, future prosperity for millennials, Gen Zers, and beyond depends on reversing this economywide bottleneck created by boomers.
Forget quiet quitting — let's talk about loud retirement
Among the more intensely discussed economic disruptions of the pandemic has been the widespread lack of workers. At the start of the COVID-19 emergency, there were too many potential causes of this labor shortage: loss of childcare, fear of illness, and surprisingly strong consumer demand that scrambled staffing needs. Many economic conservatives also blamed generous pandemic welfare measures like stimulus checks and enhanced unemployment insurance, which they claimed discouraged work. The shortage of labor pushed up wages for people able to keep a job and led the more obnoxious bosses and friends of your parents' to complain that "no one wants to work anymore."
Three years on, even after the programs that shouldered the blame for there being "no workers available" faded away, the labor shortage remains. The labor-force participation rate — the percentage of adults in the US who are either employed or actively seeking work — remains well below pre-pandemic levels. And researchers have determined the core source of this labor shortage: a wave of retirements in the generation complaining that young people lack a work ethic. The labor-force participation rate among people in their prime employment years, 25 to 54, is incredibly close to its pre-pandemic level, while the rate for those 55 and older is still down significantly. A working paper from researchers at the Federal Reserve found that a surge in retirees accounted for almost all of the decline in the labor-force participation rate up to October. A breakdown by the think tank Employ America in November found that a decline in participation by part-time workers 70 and older accounted for more than half the fall in employment of the older cohort.
It's a good thing that people over 70 are able to retire. But the flood of boomers now kicking back and relaxing has created a world with fewer people to replace them or to take care of them in their dotage. Experts at the Bank for International Settlements have concluded that over the history of modern capitalism there's been an extremely strong relationship between a population's age structure and inflation. The connection makes intuitive sense: If inflation is caused by a mismatch between supply and demand, then a surge in the number of retired people simultaneously increases the demand for certain kinds of labor-intensive, low-paying work like home-care aides or hospitality while shrinking the overall labor force. These dynamics will cause labor-force churn and drive up costs.
Boomers shrank the labor force they need now
The baby boomers ensured the labor market of the generations after them would be inadequate in a few major ways. First, they had substantially fewer children per household than their own parents. From the end of the baby boom in 1960 to most boomers' entrance into the workforce in the late 1970s and early 1980s, the American fertility rate declined from 3.7 births per woman to about two births per woman. While there are many reasons for the decline, some were positive developments. For example, more women pursued higher education and entered the labor market rather than resigning themselves to providing uncompensated care work, a societal shift that has persisted.
One way for a country to make up for a slowing fertility rate is to open its doors to immigrants. But as boomers became a steadily more powerful political bloc — peaking as a share of the electorate in 2004 and remaining the largest generational slice of voters until sometime shortly before 2020 — they elected politicians who pursued immigration policy that has slowly closed the door to prospective residents.
The politicians who ran the country during the boomers' childhood and young adulthood governed in the shadow of the Cold War, when competition from the Soviet Union led many in both parties to soften America's long-held racist laws like Jim Crow in the South or restrictions on non-European immigration. Both liberals and conservatives passed laws like the 1965 Immigration Act, which opened the country to major immigration for the first time since the 1920s, and the Immigration Reform and Control Act of 1986, which granted legal status to millions of mostly Mexican immigrants. After decades of progress, boomer politicians who ascended to power after the fall of communism felt no such pressure to adopt fairer, more inviting immigration policy. And cultural backlash to the growing number of immigrants in the country helped shift the tide against America's open door.
Democratic President Bill Clinton may have been more liberal than his two Republican predecessors, but his primary contribution to immigration policy was a massive militarization of the southern border, which set the template for federal policy. During the post-9/11 war on terror, George W. Bush went even further, transforming the federal immigration bureaucracy into Immigration and Customs Enforcement, or ICE, an arm of a global security and intelligence apparatus, and enlisting local police in the deportation system. While Barack Obama, a late boomer, pulled back from the most aggressive deportation strategies and enacted Deferred Action for Childhood Arrivals, or DACA, which protected the children of immigrants from deportation, he didn't try to increase immigration. Simultaneously, boomer governors in border states imposed anti-immigrant measures of their own. And Donald Trump ramped up deportations and used nearly anything — security, the pandemic — as pretext to shut down immigration. The result of all these actions is a byzantine immigration system that makes it nearly impossible for people to seek out opportunities in America. After slowly recovering from a historic low in the 1970s, the percentage of US residents born abroad has stalled out. Valuable, highly skilled immigrants who've worked in America for years are under threat of being thrown out, and recent surveys have suggested the US is no longer the top destination for international migrants.
Despite the obvious economic downsides and harm to America's international image, politicians continue to support these draconian immigration policies in large part because of boomers. Those born between the end of World War II and the Immigration Act of 1965 grew up in the nadir of American immigration, when under 5% of the population was foreign-born. Sociologists have found that exposure to people from different countries and backgrounds during childhood strongly influences peoples' attitudes on immigration later in life. So it's no surprise that polling has indicated that boomers want to tamp down the flow of migrants while younger generations are more likely to know and sympathize with those who bear the brunt of harsher immigration policy.
The consequence of boomers' smaller families and anti-immigration policies is that as they retire they're creating a gap in the labor force they haven't planned to fill. And the once steady but now increased demand for labor leads to labor shortages and higher prices.
Boomer-driven shortages don't stop at workers
Boomers spent years depriving the economy in other ways beyond squeezing the labor force. One of the most glaring and obvious areas of this boomer bottleneck is housing. In 2019, boomers, only about 22% of the population, owned 42% of American homes, and they especially dominated homeownership in coastal markets.
Though boomers are retiring en masse, they only just began selling their longtime homes, and aren't downsizing fast enough to keep up with demand. Meanwhile, household formation is on the rise as millennials leave roommates, start families, and settle down. But many people in their late 20s and 30s are struggling to set down roots, because there aren't enough homes they can settle into near the strongest job markets. A few cities, like Houston and Atlanta, have greeted the surge in demand for new housing by encouraging tons of new supply, but many others, especially rich coastal metropolises like New York and San Francisco, have not. In the age of remote work, frustrated millennials who might be ascending the career ladder but couldn't get a grip on the property ladder in larger coastal metros have taken their big city salaries to smaller and less wealthy places where they can get bargains compared to Brooklyn — and outbid locals.
The longtime drag on construction in the country's strongest housing markets is largely due to zoning regulations that control which types of buildings can be built and where. These laws are ostensibly imposed to preserve local "character" and prevent "overdevelopment." But in many cases, these aesthetic and nostalgic concerns are a smokescreen for naked self-interest: Limiting the number of houses in prosperous places ensures sky-high valuations. Considering the pain falls mostly on those trying to enter the market — millennials and Gen Zers — it's not surprising that attitudes on housing are hardening into generational warfare between older homeowners wanting to grow their home-value nest eggs and younger pro-building renters trying to get on the housing wealth ladder.
The boomer ethos on housing, which views homes not as places to live but as financial assets, is mirrored in the rest of the economy boomers made. As the journalist Steven Brill has written, the shareholder revolution and financialization of the economy was largely a boomer affair, as they were the generation who staffed the financial firms that exploded in size and influence during the 1980s. Instead of investing productively into critical operations, boomers focused on pleasing shareholders and investors on Wall Street. That led to miserly "capital discipline" in essential sectors like energy: As demand rose, businesses increased prices to drive up profits and returned money to shareholders via dividends instead of investing in more capacity. Elsewhere, the relentless shareholder focus on cost cutting birthed the just-in-time supply chain, which shrank inventories and grew margins but couldn't handle shocks like the pandemic.
In sector after sector, as boomers took ownership of the economy's assets, they essentially pulled up the ladder of investment in favor of maximizing short-term personal gains.
Breaking the boomer bottleneck
America needs more stuff. Despite being a land of plenty, the country lacks the workers, homes, energy, and logistical capacity it needs to help future generations thrive. This has been the primary factor behind the so-called abundance agenda that has become popular over the past year.
The need for more stuff was caused by boomers' relentless starving of the economy. And even now, the boomer-driven solution to our problems focuses more on sacrifice and deprivation than on expanding supply. Beyond a few interventions in the oil market by the Biden administration, the federal government has largely responded to inflation through Federal Reserve rate hikes. Rate hikes, at their core, are about restricting the economy by reducing demand. They make loans, investment, and housing more expensive — putting the economy on a diet instead of growing the pie.
Tackling the fundamental problems facing our economy isn't just a matter of becoming more efficient or trying to make do with less. It means changing our communities' composition: accepting more immigrants, accommodating more neighbors, and prioritizing investments that grow the economy instead of companies' bottom lines. Economically, these changes are no-brainers. Culturally and politically, though, they require confronting a large and powerful demographic's deeply held feelings about the way things ought to be.
Alex Yablon is a Brooklyn-based journalist who writes about politics and policy. His writing has appeared in The New Republic, Slate, Foreign Policy, Jewish Currents, and other outlets. He has worked for Netflix's Patriot Act and The Trace.