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You Decide: What kind of economy will our youth inherit?
Story Date: 2/20/2012
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Source: Dr. Mike Walden, NCSU COLLEGE OF AG & LIFE SCIENCES, 2/17/12
Recently I was honored to speak at this year’s Emerging Issues Forum. The forum is an annual event focusing on key issues facing our state and our world. This year’s conference highlighted “Generation Z” -- those born between 1995 and 2010 -- and the challenges they will face as they move into the workplace.
The unique aspect of Gen Z, from an economic perspective, is that they have grown and matured in an economy that hasn’t lifted standards of living consistently for everyone. Gen Z has witnessed widening income inequality, the worst recession since the 1930s and a globalizing world that has reshaped virtually every aspect of our economy.
So I was asked to speak about what kind of economy Gen Z might inherit. I divided my presentation into two parts. First was an outlook for the near-term economy. Most of the economic gauges -- production, employment, sales, exports -- are pointing upward, but modestly. For example, we’ve recovered about one-third of the jobs lost during the recession, but that still leaves two-thirds to go! Getting the housing market back on its feet and restoring households’ financial solvency are the keys to more progress.
But I warned the audience there are plenty of bumpy roads ahead for many. We have a problem of too many potential workers without the skills businesses need. We have a record number of long-term unemployed. And we have millions of households whose finances were absolutely wrecked during the recession, and it will be years before these folks are back on their financial feet.
Yet what about years and decades down the road? What will the economy be like when Gen Z finishes their schooling and takes the reins of the workplace? Will this generation be able to get ahead and prosper?
As I told the attendees, hoping to get a laugh, economists are much better at predicting the past than we are predicting the future! (I did receive a smattering of chuckles). Mindful that forecasts of GDP, personal income, unemployment and sales 20 years ahead may be obsolete next week, I instead concentrated on trends and themes I thought would shape the future economy that Gen Z will encounter.
I identified four such trends and themes: world trade, training and re-training, commodity scarcity and generational shift. Let me highlight the key points for each.
World trade. It’s a worn cliché to say the world has gotten smaller, but it is true that advances in transportation and communications have caused the proportion of total economic activity generated by world trade to have tripled in the last four decades.
Economists think these trends will continue, with the fastest growing economic markets being in Asia, the Middle East, South America and Africa. So more Gen Z workers will be involved -- directly or indirectly -- with international trade. Those foreign language requirements in high school and college will now come in handy!
I added one footnote to this point. The coming growth in commerce on the east coast as a result of the Panama Canal expansion will have big impacts on North Carolina and the entire Southeast.
Training and Re-training. Gen Z has had it pounded into them that education and training are important. What they will likely see in the future economy is that education and training will be on-going processes. The necessary learning will never stop. Also, the way this learning takes place will be different from today. More of it will be outside traditional institutions (colleges, universities), being on-demand and virtual using information technology.
Commodity Scarcity. The world is running out of key commodities and inputs -- fossil fuels, metals, minerals and even water -- and consequently their prices are rising. An index of all commodity prices has doubled in the last decade.
Gen Z will face this scarcity, but maybe more importantly, we will all look to this generation to address and solve it. Gen Z will use new technologies, improvements in efficient use and proper pricing to make sure we’re able to do more with less.
Generational Shift. Demography is an area where we can make fairly accurate predictions, and the demographic future is clear. In the next 40 years, those over age 65 will almost double their share of the population, while those in the key working segment (ages 20-64) will become relatively smaller. This has huge implications for the financing of programs like Social Security and Medicare, and it could lead to -- and I know this may be hard to believe -- some labor shortages. The challenge facing Gen Z in coping with this trend will be both economic and political.
I ended my talk by saying Gen Z faces a future of “COFFEE,” a Challenging future with many Opportunities, which will be Fast-moving, requiring Flexibility and Energy, but which also will be Exciting. You decide if I hit the mark!
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