The problem with the labor market for the millennial generation is young adults need to get a college degree for jobs that previously didn’t require them. Four years of education and about $35,000 in debt later, young people are ready to enter the labor force. The chart below shows the tough situation young people are faced with.

Employment To Population Ratio For College Graduates Versus Student Loan Debt

Student debt has soared to about $1.5 trillion, while the labor participation rate for those who are 25 years or older and have a Bachelor’s degree has fallen and hasn’t recovered. Twenty years ago, getting a college degree was a distinguishing factor for prospective employees. Now it is the minimum requirement for most jobs. This is partially why diversified work has become popular as the standard requirements can be lower for those jobs. If you set a contract, the deal depends on if the worker can complete the task, rather than the qualifications on paper like a degree.

Labor Participation Rate

Sometimes the labor participation rate becomes a political football aimed to support the narrative that the economy is weakening. The reality is most of the decline has been caused by demographics. The aging population is why the chart below shows the forecast for the labor participation rate is expected to fall below 60% by 2030. This decline is daunting because healthcare costs have been increasing quickly. Therefore, fewer workers will have to support more older people who will be using more expensive healthcare.

Projected Labor Force To Population Ratio

The government needs to reign in healthcare costs through deregulations by allowing the free market to be more competitive. Additionally, the government will possibly be forced to raise the retirement age to account for this problem which will increase the deficit in the next 10 years. Keep in mind, there are already more workers than ever who are over 55, yet the participation rate has still been declining. It’s possible that in future generations people will be able to work longer because fewer jobs will be physically intensive due to automation. Another aspect to consider is that the 55 and older demographic has the lowest wage growth. This is why analysis of wage growth adjusts for demographic changes to provide an apples to apples comparison.