Greybeards and Hipsters: The Clash Begins

Greybeards and Hipsters: The Clash Begins

In Spain, the sky is sunny and the wind warm.

Yesterday we took our daughter to the castle on the hill that towers over the village.

She liked it so much that we took her to another one down the road. There sure are a few of them around here.

Later the girls left me alone to work for a while.

There was a knock on the door. I wasn’t expecting anyone.

It was Julito. The way the Spanish say the name is something like this: HOO-LEE-TOE.

Julito is one of the old boys of the village. His face is brown and weathered. He spends most of his days gardening. I see him occasionally zipping around on his motorbike.

Somebody joked the other day that he’s been wearing the same shirt for 40 years. I can believe it. They’re bred very thrifty in these parts. It wasn’t so long ago that food and money were scarce.

Julito handed me a massive bag of cherries and said it was nice to see me again.

You get given a lot of vegetables around here. Many men that never married spend their days in the garden or go hunting. There’s not much else to do except drink wine or smoke cigars.

The most notable thing about the place is how the numbers of old dominate the young. Villages all over the country will keep depopulating as the older generation dies off.

It’s all part of the brewing labour shortage worldwide.

Half a million guest workers needed here

Yes, I know, you’ve probably been led to believe that robots are going to create a massive surplus of labour.

It’s an easy dystopia to believe in — except what’s happening in front of our eyes refutes every part of it.

The Financial Times reported this week that Japanese companies are flagging a rise in capital spending on robotics and automation to offset the current labour shortage.

Last month the Japanese government said it’s going to change immigration rules to allow 500,000 guest workers into the country.

What else do we see? The European Union’s number crunchers are now saying that wages saw the biggest increase since 2013 over the last year.

Germany’s minimum wage is also going up 4%. That reminds me in February I did a Facebook video pointing out the fact that German workers were pushing for better wages and benefits — and won them with ease.

The Wall Street Journal also printed a story this week about US workers happily quitting their jobs, finding new ones, and winning pay rises.

And here we are being barraged every day with how this trade war is going to derail the US and therefore the global economy.

Do you really think young Americans are going to delay buying a house, getting married and having children because China might not buy as much US soybeans?

The baton passes from the baby boomers to a new generation

I say that because one of the biggest drivers of the US economy from here is going to be the household formation of the millennial generation (those born between 1985 and 2004) as they enter their peak earning years.

If you happen to see someone around this age, you should be pleased. There are plenty of countries that would love to have them.

Take Russia. Vladimir Putin is regarded as a strongman. But even he appears to tremor at the thought of raising the retirement age in Russia.

It’s hard to believe but the retirement age has not risen since Josef Stalin, the former dictator of the Soviet Union, set it at 60 for men and 55 for women.

Russia is currently on track to have more retirees than workers paying into the pension system by 2035.

The relationship between the number of retirees and those of working age is known as the ‘dependency ratio’.

In 1980, for example, there were 19 Americans aged 65 or older for every 100 people between 18 and 64.

Within seven years, the numbers are going to be 35 for the US, 44 for Germany and 58 for Japan.

There’s a major clash coming around 2030 stemming from this.

But for now the world can ignore the problem a little longer.

That’s what makes Trump’s crackdown on immigration and his mooted wall with Mexico so ironic.

Soon the US will be actively encouraging people to settle in the country to attract more workers. No doubt places like Spain will be doing the same.

The more immediate problem is that strong labour markets are going to keep building inflationary pressure on the global economy.


Callum Newman Signature

Callum Newman,
Editor, The Daily Reckoning Australia