Of Population Pyramids and Value Chains

It is by now well known that the main hope for developed societies subject to rapid population ageing who wish to maintain their relative standard of living lies in increasing their collective productivity more rapidly than they increase their dependency ratio via-a-vis the older age groups. Now in the comments thread on the recent ‘Reform is a Dirty Word‘ post I ventured to say that I found it obvious that at some stage we would reach a point where the rate of population ageing was going to outstrip the rate of productivity increase (in which case relative income per capita would inevitaby start to fall). David, unsurprisingly, asked me why I thought this to be the case. I was not happy with the response I offered (which was essentially some ‘rigmarole’ about the biology of ageing which is coming in a separate post), and since that time I have been scratching my head trying to find a simple way to get this point across. Perhaps I now have one.

All you need to get to grips with what follows is a basic understanding of geometry and a vague interest in football.

Population Pyramids

We are all aware that the demographic transition can be conceptualised as a process of pyramidal transformation. This transformation is brought about by a continuous process of age structure change, and this age structure change is in turn produced by a steady decline in fertility and a steady increase in life expectancy.

Essentially, in high-fertility low-life-expectancy societies, the pyramid has a very thick base (rather like this one for Mali). As the transition advances and countries pass through their ‘demographic dividend’ growth-spurt, the pyramid starts to be transformed (as can be seen here for Turkey). Later, as populations age even further, you get the high-elderly-dependency pyramid (Japan is a pretty clear case of this).

Now so far I hope there is not really anything controversial being said. The next analytic tool we need is the simple geometric idea of ‘centre of mass‘ (or, if you prefer, centroid). And what we need to be clear about is the fact that as societies transit, from having a pyramid structure like Mali to having one like Japan, the centre of mass moves steadily up the pyramid.

The Value Pyramid

Now, side-by-side with the transition process there is a development process. Most societies with the ‘Mali-type’ population pyramid, are agricultural societies, which means that the majority of their population work in agriculture, and the majority of their GDP comes from the agricultural sector. This process can now be seen at work in India, where some 60% of the population still participate in the agricultural sector, while some 30% of GDP is produced there. India is, of course, already well into the transition, and if we were to go back twenty years we would undoubtedly find a far higher share of the population working in agriculture and a majority of GDP being produced there.

Then, as societies develop, there is a steady movement in economic activity up this value pyramid. Again, as we can see in China and Turkey, this begins with a shift into low value industry. Then the balance changes into a higher value industry profile, and eventually we get the dominance of a services (or knowledge industry) sector.

So what we can see is that alongside the population pyramid there is a value pyramid. The value pyramid also to some extent inverts as economic activities move up the value chain. The two pyramids are related, but as we should be able to see immediately from the Indian example, the correspondance is far from being one-to-one. In fact the centre of mass of the value pyramid moves in a way which is somehow related to the movement of the centre of mass in the population one, but it is precisely this ‘somehow’ which remains to be determined. In essence my proposal is that if we could perform the mapping operation between the two pyramids we would have a much clearer idea about the productivity dynamics of ageing populations.

OK, I said we needed football. I mention football, since professional footballers have a more-or-less undisputed age productivity profile. Young footballers are below their peak, whilst older ones are already past it. If we take the club which is so dear to my very own heart (Barça), it is easy to see that Leo Messi has his best years out there in front of him, that Ronaldinho Gaucho is more or less in his prime, and that Lilian Thuram while still being a very good player (and has experience which to some extent compensates for his loss of speed), is now well past his ‘optimum performance’. All of these factors can be readily seen in little details like salaries and transfer values.

Now populations (collectively) are not so different from footballers in this respect. The centre of mass moves up the pyramid and productivity and collective performance rise (in a way which is also reflected by movement of the centre of gravity up the value pyramid). But when you think of this on a theoretical (and consequently rather abstract) level it is also clear that the ‘Thuram effect’ will mean that at some point in the process the directional movements of the centres of mass in the two pyramids will start to diverge, in that in societies which have a certain proportion of the economically active population who have passed their peak, the centre of mass will strat to drift down again. I am not saying where this point lies – that is a question for empirical research – I am simply trying to demonstrate that theoretically such a point *must* exist. After this point has been passed any society whose centre of mass continues to rise will experience declining per-capita incomes.

Q.E.D.

Obviously this ‘proof’ is extremely simplified. It is, after all, written for a blog. Clearly it needs to be modified and extended by taking account of the fact that there is more than one country in the global economy, and that values are thus relative to values being generated in other countries simultaneously as reflected in the level of global prices.

A second issue is that the model is static, in that the vaue pyramid does not, in fact, simply shift across a pre-exisiting space, but rather is subject to a constant process of evolution: that is, the apex of the value pyramid is constantly moving upwards, in a way which means that the relative values of all the points below are constantly changing. I think this makes the whole thing much more difficult to model, but does not change the substance of the argument. At some given moment in time one group of developing countries will be moving nearer to the centre of mass of the value pyramid in just the same measure as another group of older developed economies will be moving upwards and away from it.

31 thoughts on “Of Population Pyramids and Value Chains

  1. The average age productivity peak is also shifting upwards as people live longer and healthier lives. As the center of gravity in the value pyramid moves into services, and as labor becomes less and less physical, there is probably no physiological reason why e.g. an average Japanese couldn’t work till age 75 in 2050. Do you know of any studies of age-specific productivity in different professions? (Actually, it would be easy to calculate for scientists, using citations. It would give us nice S-curves with the peak at the inflexion point. Certainly the productivety peak for mathematicians has moved up significantly).

  2. What about the impact of technology on productivity? I realise this may be difficult to predict, but it’s worth considering before claiming that productivity is bound to peak in the foreseeable future. On the one hand, technology tends to improve over time, so a person of a given age in 2050 is likely to be more productive than someone at that age in 2000, even working in the same industry. Indeed, technology tends to breed more technology, leading to an exponential model of technological improvement in some quarters. On the other, people’s ability to produce and assimilate worthwhile technology probably follows a similar curve to productivity in other areas, only more extreme and with an unusually young peak age, so as the population ages, it will tend to have a slowing effect on the pace of technological change.

  3. Lars,

    “and as labor becomes less and less physical, there is probably no physiological reason why e.g. an average Japanese couldn’t work till age 75 in 2050.”

    This Lars is the big question. I have been thinking about this a lot. Unfortunately there *are* physiological reasons. This was what all the ‘rigmorole’ about physioogical processes (oxidants, telomeres etc) was all about.

    So I’m going to duck this issue on this post. During the next week or so there will be two more posts, one on life expectancy and economic growth, and a second on the biomarkers of ageing. More than likely there will be a further one on research on calorie restriction and ageing mechanisms. This is all a very complex picture, and I hope you will bear with me in the meantime. What I am trying to set up here is a framework for looking at the question. Of course, if you are right, and the functional capacities move up in tandem with life expectancy, then the centroid keeps moving up. No question there. But I don’t think the empirical evidence on ageing supports this.

    The Japanese labour reforms mean that most people are now out of their lifetime jobs at 55, quite simply because they have peaked. Some go off to China and work in management there, where their skills, though no longer cutting edge, are still better than what is currently available in China (given their lack of experience).

    The rest, and this is also the UK experience where growing numbers of people are working post 65, is that people accept work with a lower skill category.

    “Do you know of any studies of age-specific productivity in different professions?”

    This is still very limited. It is an area work work urgently needs to be done. Then we could be working with data rather than anecdotal impressions. The Italian economist Francesco Daveri has been working in this field:

    http://www.igier.uni-bocconi.it/whos.php?vedi=1076&tbn=albero&id_doc=177

    This paper with Mika Maliranta about new technology in Finland is quite relevant:

    http://www.igier.uni-bocconi.it/folder.php?vedi=3358&tbn=albero&id_folder=182

    This earlier paper from Japan points in a similar direction (ie as the workforce ‘matures’ the value of their accumulated experience declines):

    http://www.e.u-tokyo.ac.jp/cirje/research/dp/2002/2002cf145.pdf

    Our results suggest that information technology development in the 1990s has a negative impact on the past strength of the Japanese economy: productivity increase through high-education workers’ learning by doing. In manufacturing industries where Japan has been strong, the rate of technological progress in the 1980s has positive (though weak) correlation with “maturing” high-education labor force. That is, the ratio of old well-educated workers in the total labor inputs has a positive (though weak) effect on technological progress. This suggests that the increased average skill among well-educated workers due to longer experience has a positive effect to improve productivity. However, the relationship changes significantly in the 1990s, and we have rather negative relationship. The nature of technological progress apparently changed adversely.

  4. Colin,

    “What about the impact of technology on productivity?”

    This is a very complicated problem Colin. When Solow left technology out of the standard neo-classical growth equation he did this for a reason, and the problem wasn’t essentially the well known ‘endogeneity’ one (Paul Romer and New Growth Theory).

    Basically productivity as you (and I) are addressing it is being thought about as a supply side question. But in economic systems we have what is known as the ‘scissors phenomenon’, that is prices are determined in the market place by *both* supply and demand factors.

    This is hellishly complicated, but it is this process which sets an economic system off from a purely technological one: relative prices and values are determined in a market place.

    So while it is obvious that we will have an accelerated process of technological change (and that more will be produced with less effort), this is not productivity in the economic sense, since it is the relation of value per unit of effort, and not the number of those infamous widgits per unit of effort that counts.

    This gets us into what is caled ‘general equilibrium’ issues. This is then deep water, since the models we have to hand can’t adequately handle these things, since there are so many parameters, and so many of them are non-linear.

    Basically you have to do all this in your head, and it is the capacity to carry out some thought process approximation to reality here that separates the ‘cracks’ (another football term) from the ‘also rans’ among professional economists.

    What I’m trying to say is that all these projections by people like Goldmann Sachs about what relative GDPs will look like 50 years from now really aren’t worth the paper they are written on.

    I would remind you that India and China are currently growing at around 10% per annum, which gives them a current GDP doubling time of around 7-8 years, and then you need to take into account that – as everyone keeps calling for but we aren’t there yet – at some stage there will be a massive relative currency adjustment in favour of the Yuan and the Rupee. This isn’t small beer.

    “On the other, people’s ability to produce and assimilate worthwhile technology probably follows a similar curve to productivity in other areas, only more extreme and with an unusually young peak age, so as the population ages, it will tend to have a slowing effect on the pace of technological change.”

    Yes, you’ve got the basic point, this is an ‘arms race’ between speed and experience.

  5. I remember seeing, perhaps over at demographymatters.blogspot.com, although I failed to find it there in a brief search just now, a plot of the average income by age for Japanese males, at various point during the postwar period. The striking feature was that, although capitalization and technology have made people of all ages more productive, the peak in the lifetime income profile remained fixed near (if I recall correctly) age 55.

    Now one might argue that in the past, when there were large numbers of young people, industrial innovation was directed to increase the productivity of young people, and that, in the future, when the largest pool of underutilized labor is older people, it will make sense to innovate in ways that increase their productive capacities. In a mild sense this means industrial ergonomics becomes more important; in a more severe sense, this means the Kurzweilians might be right, and a significant fraction of us might become cyborgs at some point in our lives. I take no position on what is most likely.

    But then one has to realize that there still is a large pool of underutilized young labor elsewhere in the world. Perhaps better returns come from capitalizing youth where it still exists, rather than seeking out the uncertain returns of innovation.

  6. Robert,

    “I remember seeing, perhaps over at demographymatters.blogspot.com, although I failed to find it there in a brief search just now, a plot of the average income by age for Japanese males, at various point during the postwar period.”

    This would be the post you were looking for I think:

    http://demographymatters.blogspot.com/2006/03/neo-classical-growth.html

    “Perhaps better returns come from capitalizing youth where it still exists, rather than seeking out the uncertain returns of innovation.”

    This is almost certainly going to be the future that is out there waiting for us, and I think it is also important to remember that thee are going to be the market where growth is going to be found for companies looking to innovate and sell.

  7. A compensation system such as the Japanese based on seniority hurts the employment prospects of older workers. A company will maximize output per $ paid, not per hour worked. In some cases it could pay to get rid of workers before they reached their per hour productivity peak. A smaller fixed salary with a larger variable component would help employment.

  8. No, it would. People wont find it fair (because in reality it isn’t as the biggest asskisser will get the highest wage) and would actively sabotage it. Even more so than they already do.

  9. Edward,

    Of course, the service component in manufacturing is also increasing. I think Anita Wölfl at OECD did some work on this.

    Charly,

    You could e.g. pay old school teachers a basic salary, plus pay them for 5 or 10 hours teaching per week. What is wrong with that, asuming that old teachers are not significantly less good than young teachers (let’s have someone run PISA results against teachers’ age, sex, and subject)?

  10. School teachers are not a good example as there has been a significant shift in the type of people who become teacher. In the past the smarter kids became teacher while today you should speak slow and repeat often when talking to somebody who is studying to become a teacher.

    But that is not the big problem. In most jobs you don’t become more productive in a particular hour by working less (this is something else than the average productivity which does rise when you cut the less productive hours)

  11. What about value creation by older people which is not counted in the GDP? Caring for grandchildren (or elderly parents)? Volunteering for charities and NGOs? Etc…

    Putting seniors into the formal economy will destroy all the life-enhancing, if not GDP enhancing, activities. How do you take that into account?

  12. Edward,

    This doesn’t seem right to me. If I understand you you’re
    asserting that population structure determines the
    nature of economic activity in society.

    Quote:

    “Then, as societies develop, there is a steady movement in
    economic activity up this value pyramid. Again, as we can
    see in China and Turkey, this begins with a shift into low
    value industry. Then the balance changes into a higher value
    industry profile, and eventually we get the dominance of a
    services (or knowledge industry) sector.”

    Counter-examples leap to mind, like for example the United
    States. For most of its history (not now) the U.S. has had
    a population pyramid more like that of Mali than the other
    two examples. And yet at the same time it went from being
    a dominately agricultural to dominantly industrial society.

    Given this hypothesis how could that be? Or flip it, if
    population structure determines economic activity why doesn’t
    Mali look like the United States of a century or two ago?

    Or look at eastern europe. Eastern europe has a population
    pyramid similar or rapidly approaching that of Japan. Yet
    the pattern of economic activity looks not at all the same.

    I wouldn’t be surprised if there’s a moderate statistical
    correlation between population structure and kinds of economic
    activity. But statistical correlations hardly prove causation.
    (Between any two real world phenomena there will be a large
    number of possible connections, most of which are never even
    humanly imagined, and therefore can’t be tested and compared to
    the possibilities that we do think of.)

    And the simplest reason I would expect a correlation is that we
    have so many economically stagnant nations with high percentages
    of children. We also have alternative hypotheses (other than
    children) as to why these nations accomplish so astonishingly
    little.

  13. Edward,

    I think you dispose of the “technology as force multiplier” far too quickly. Basically, although the productivity in economic terms (in Euros) might decrease, it matters little so long as the productivity in goods and services continues rising. I don’t think you’ll have big problems if, through automation, biotech, &c, you get European economies to produce goods and services at a higher gradient than its population gets older, since people will still have rising levels of access to consumption. Perhaps other economies, if they are in a condition to apply the same automation and biotech solutions, will get even higher gradients of goods and services growth, but I don’t see why that should overly concern us. Europe is a big enough market that we won’t have to sell our products terribly cheaply to import things made abroad which we entirely lack.

  14. Explaining Eastern Europe is simple. There growth is purely due to using late 20th century technology instead of mid 20th century tech.

    America was more comparable to Saudi Arabia than Mali

  15. Mark:

    “If I understand you you’re asserting that population structure determines the
    nature of economic activity in society.”

    Not quite. What I say is:

    “The two pyramids are related, but as we should be able to see immediately from the Indian example, the correspondance is far from being one-to-one. In fact the centre of mass of the value pyramid moves in a way which is somehow related to the movement of the centre of mass in the population one, but it is precisely this ’somehow’ which remains to be determined.”

    So I am not asserting one-to-one causality, I am simply suggesting that this opens a research agenda which might prove fruitful.

    All I am saying here is that:

    1/ Humans have a lifetime productivity cycle.
    2) With time population median ages rise.
    3) As they rise, and given (1), a point *must* be reached where productivity (in the economic sense) per capita must turn downwards.

    I don’t say where this point (3) lies.

    Your points about how the US (and Canada, and Australia for that matter) differs from the rest is not without interest, but I think it forms part of a different debate (why, for eg, is US fertility so comparatively high) which we have from time to time on Demography Matters. The Demographic Transition model which is described here more or less applies (in one way or another) to the rest of the planet, and in this case it is also surely not without interest.

  16. “I think you dispose of the “technology as force multiplier” far too quickly.”

    Maybe, but look, ecnomics is not technology. That there will not be a shortage of products (and new ones) I don’t doubt, but what will be their price and value? That is the economic question.

    What we need to think about here are intergenerational liabilities, debts accumulated and how they are going to be paid. If GDP and prices are declining as workforces decline, yet the number of people who are dependent is increasing, then it is not clear how you balance the books here. I am not offering a solution, but I do think this is a problem.

    Take housing. If house prices start to trend down as populations decline, but the book value of the mortgages are maintained, then how are the people who have contracted those mortgages going to pay. This is an economic question. Ditto, of course, with pensions.

  17. If GDP and prices are declining as workforces decline

    If prices don’t decline, how are the old to be maintained? Concerning house prices, isn’t this just a redistribution of wealth from old to young, considering the older people are likelier to own houses?

  18. Edward,

    It’s very interesting actually. I’m quite curious to see
    what kind of relationship you’re going to come up with.

    I understood:

    “1/ Humans have a lifetime productivity cycle.
    “2) With time population median ages rise.
    “3) As they rise, and given (1), a point *must* be reached
    where productivity (in the economic sense) per capita must
    turn downwards.”

    Once articulated it seems in retrospect that it has
    to be this way.

    It’s the hypothesis that the center of mass of the value
    pyramid is a function of the centroid of the population
    pyramid that I’m having doubts about. Given the statements
    above it has to be a factor, but how major or minor is,
    if I understand you, the question.

    Have you read “The Elusive Quest for Growth: Economist’s
    Adventures and Misadventures in the Tropics” by the way?
    The author is William Easterly.

  19. Once articulated it seems in retrospect that it has to be this way.

    Stated this way it only seems so. The conclusion is inescapeable only if the curve mentioned in (1) is unalterable and, secondly, there is no other influence on productivity.

    You can only conclude there must be a speed of a median age rising above which productivity per capita will go down.

  20. “but how major or minor is, if I understand you, the question.”

    Yes, this is what the debate is about. Undoubtedly all this will come up in future posts here and on demography matters. I’m trying to do this a step at a time.

    “Have you read “The Elusive Quest for Growth: Economist’s Adventures and Misadventures in the Tropics”

    No, I haven’t I’m afraid.

    “if the curve mentioned in (1) is unalterable”

    Well this is where you get into the realm of speculation. I can only state that for every society known in human history to date this seems to have held. It even seems to have been the case in hunter gathering societies, where curiously the curves which have been derived don’t look that different from the ones which Robert mentions above for Japan.

    You can find some examples of this work in the graphs which can be found in this paper:
    Sociality, Selection and Survival: Simulated evolution of mortality with intergenerational transfers and food sharing by Ronald Lee.

    Or in this power point presentation he once gave.
    Intergenerational Transfers in Broad Perspective. The graphs and comparisons are fascinating I think.

    “there is no other influence on productivity.”

    Obviously there are other factors. What I would suggest though is that in a globalised world ‘best practices’ tend to spread rapidly across societies on similar socio-economic levels, and then it is the human capital element which is the key.

    A good example would be the ICT revolution of the late 90s which the US obviously leveraged first, but which Europe and Japan have subsequently also internalised. There is ‘first mover advantage’, but there is also ‘second mover advantage’, and from here on in things get complicated. Of course, if innovative productivity generating practices come not in bursts, but in a continuous ongoing surge (this is still a big argument about the ICT revolution, related to just how long the above speed productivity improvements are possible) but if there is a continuous surge then obviously it is possible to front-run the pack, but, and for the reasons I have already suggested, it would be the society with the most youth rather than the one which had most experience which would tend to be best able to do this.

  21. Well this is where you get into the realm of speculation. I can only state that for every society known in human history to date this seems to have held.

    Well, you don’t need to alter the underlying curves to change the aggregate. A 60 year old construction worker is old, an author of the same age might be at his prime. It is sufficient to change the weighting of the curves.
    Staying in your analogy, the football players take up golf.

    Obviously there are other factors. What I would suggest though is that in a globalised world ‘best practices’ tend to spread rapidly across societies on similar socio-economic levels, and then it is the human capital element which is the key.

    Absolutely. That means that an ageing society will have less growth. But necessarily negative growth?

  22. “A 60 year old construction worker is old, an author of the same age might be at his prime.”

    OK, your argument is theoretically valid, it is conceivable that we could have a society where the principal activities were things like judges, artists, central bankers, philosophers etc, and the rest was done by robots. I personally might not even mind living in such a society, but I am not sure we are anywhere near that at this point.

  23. “OK, your argument is theoretically valid, it is conceivable that we could have a society where the principal activities were things like judges, artists, central bankers, philosophers etc, and the rest was done by robots. I personally might not even mind living in such a society, but I am not sure we are anywhere near that at this point.”

    Such a situation is obviously science fiction when you take it to extremes. But if you look at the changing role of humans in the car industry since the introduction of robots, for example, you’ll see that this kind of thing really does take place, and the phenomenon could expand and accelerate in future. In some areas, the problem is not that we can’t replace menial workers with robots, but that we can’t train all those former menial workers to be philosophers, leading to demoralising inequality where some people are seen to have rare and precious skills and others are considered virtually worthless by comparison.

  24. Besides getting people to work longer, there is also a lot of room for improvement in getting people to start working at an earlier age. Think of university graduates in Continental Europe. It doesn’t solve the problem, but if we could start working 5 year earlier and work 5 years longer, that is not insignificant.

  25. “Besides getting people to work longer, there is also a lot of room for improvement in getting people to start working at an earlier age.”

    This is a very tricky issue Lars, and currently a very controversial one. I have a feeling that this is not like this, and have a post on Demography Matters which essentially says that:

    http://demographymatters.blogspot.com/2006/09/young-and-over-educated-in-sweden.html

    There are several points.

    The first would be that we live in democracies and that really young people have the right to choose, and the global trend ex-US is that people are choosing to have children later and to get more education. This is such a strong trend that there must be some logic behind it. That is what my research is all about, and that at the end of the day is what the pointed barb I have just sent Greg Mankiw is about.

    I don’t think we should be doing anything to discourage people from getting more education. At the end of the day it is the US that may have the bigger problem here, since they are definitely not producing enough qualified people, and some of their minority populations are seriously feeling the push.

    Maybe the US can contemplate mass importation of Indian and Chinese engineers to fill the gap, but I don’t think Europe should go down this road. Young people are a precious (scarce) resource, and I think we should leverage what we have here to the best of our ability.

    Secondly

    I think the model where you encourage our young people to enter the labour market at the lower-skilled end (and that is what entering at 22 means) and encouraging skilled inward migration from the third world is a serious mistake. I think this way round of doing things will only make ethnic tensions worse.

    Thirdly

    “What we need are electricians and plummers, not history graduates”

    This isn’t you, of course, but it is a view which exists.

    I think this whole discourse is off the mark. We used to hear it a lot in Spain, but now we have plenty of semi-skilled workers from Ecuador, Columbia etc, and we simply don’t hear it any more. I think people recognise that the push from the bottom is creating more openings in the middle and above.

    Fourth

    There is a time consistency problem here. Noone really knows what the skill-bias inherent in the 2020 labour market is going to be when we get to 2020, so there is no way of getting a viable reading on this. But if we all want to move up the value chain then the most likely thing is that well-paid jobs will go with more, not less education. And remember all those 22 year olds will by then be 37, facing downward trending earnings through global labour arbitrage with people with similar (or more) skills in the developing world, and probably wishing that they had gotten more education when they had the opportunity. You cannot pay for ageing populations like this.

    One example, earlier in the summer I read in the FT about how global corporations where no longer satisfied with candidates who have only one global language (the GLs being English, Chinese and Spanish), and how they are now demanding two. Soon this will be all three.

    Also, back in the summer I got a mail from my Singapore friend Eddie Lee (see latest Hungary post for more from Eddie). He wrote me this on this topic:

    Competition is pushing up the required qualification to land a ‘good’ job. Not just that there are more university graduates these days, but they spend more time acquiring their degrees. Incidentally, talking to 2 students last month, it seems the edge is to get a double degree enroute to an MBA. SO while I took 4 years to get my Masters, they will take 6 years to get their MBA. But its not just the length of their study period, it’s also the intensity.

    It’s hard to think the ‘optimum age’ can keep rising, afterall there is a tradeoff here as you point out, but still, its equally hard to see where competition might stop.

    Ok, this should give you some idea about why I feel I can’t really go along with you on this.

  26. Edward,

    I agree with most of what you say, but I don’t see that a 24 year old American with an MSc is worse off than a 29 year old German with the same qualification. On the contrary, the American can get an additional graduate degree and relevant work experience by the time the German gets his first graduate degree.

    In Scandinavia the average age of secondary (Gymnasium, lycee) graduates has been creeping upwards. There is a good reason for this, admission to universities is based on grades, and students get better grades the older they are in secondary school. So parents start them later in elementary school. An arms race!

    I also like that fact that it is easy to switch field without time penalty in the U.S. For example, one of my good friends in the U.S. did an undergraduate degree in biology, a PhD in economics, and then a Master’s in Public Health. It makes perfect sense, but in Europe he probably would not have been admitted to a graduate program in economics unless he had an undergraduate degree in the same subject. U.S. universities use a spiral approach to teaching. When you start in graduate school, you start at the beginning, but at a higher level and at a faster pace.

    Maybe a more flexible BA-MA-PhD system will eventually develop in Europe. Given the rapid changes in the economy you should think that a flexible system and degrees in different fields would be good ideas.

  27. I’m coming late, so apologies if this ground has been covered.

    Edward, I’m not at all sure that the a 28-year-old German with one university degree is so much more skilled than the 22-year-old American with one university degree. Furthermore, six years of work experience, or some fraction thereof with a second university degree, will bring about quite a bit of skill. Plus structurally, this tends to compress German careers to the considerable detriment of family life. Also, at the top end, people who feel that they can aim for the very highest reaches tend to stay in and get their second degree, which in Germany is generally a doctorate, so they are starting their careers in their early 30s, at which time they have maybe a decade and often much less to make the climb they have prepared for. This increased compression is also problematic. (Just some quick comparative thoughts.)

  28. Doug,

    “I’m not at all sure that the a 28-year-old German with one university degree is so much more skilled than the 22-year-old American with one university degree.”

    Obviously if this is the case then I don’t disagree with you at all, there is no purpose at all served by taking ten years to get a first degree when 3 will suffice. But somehow I doubt this is exactly the situation.

    German education surely can’t be *that* inefficient, and indeed outside Southern Europe I’m not that convinced that university education in Europe is *so* backward.

    “Furthermore, six years of work experience, or some fraction thereof with a second university degree, will bring about quite a bit of skill.”

    But isn’t this exactly what many people are doing. I can only really talk about Spain in any detail, but I do think this is something we should collectively be researching. In Spain labour market reforms have been very extensive in the case of young people, almost everyone is working on temporary contracts, yet no-one is really offered a permanent contract till 28 or 29. This is why there is the extensive phenomenon of the mil-euristes – people who can’t earn more than 1,000 euros. Paola, in the Italy supply constraint post is indicating she was only getting 600 euros in Italy at 25 and she is well educated and a very good economist.

    So if people are not being employed in well paid positions until the late 20s then this seems to suggest that their economic value to the companies hasn’t reached its prime level before that time, that is the conclusion I am drawing. Under these circumstances some combinations of internships, temporary work and more study would seem to be the logical conclusion. What we need are more flexible adaptable people for more flexible adaptable employment opportunities.

  29. Lars,

    “Maybe a more flexible BA-MA-PhD system will eventually develop in Europe. Given the rapid changes in the economy you should think that a flexible system and degrees in different fields would be good ideas.”

    I don’t think we disagree too much. Clearly there is room for reform in European education, and I’m certainly not opposed to that. But I suspect the situation is very variable. I myself did a first degree in economics, and I then went on to a masters in the philosophy and sociology of science and then a doctorate in something else again (Marshall McLuhan and the technology of communication). And all of this was 30 years ago.

    Indeed now I come to think about it my own son is a case in point. He is 26, and has already taken 2 years out of his studies. One to do a one year degree (with some overlapping compensation) in health management and administration (yes, he did do some economics) while he was actually doing a degree in medicine (it is quite easy in the UK to do things like this) and a second year he went to work in a hospital in Australia for six months – he wanted to see the country – and then when he came back he did six months teaching anatomy to undergrads. He is now studying to become a brain surgeon. Will he be any the better for all this? I think we’d better wait and ask the patients.

  30. Doug, Lars,

    And after a night’s sleep on the topic.

    What I think I want to make clear is that I am not saying everything is just fine the way it is, far from it. What I am attempting (rather clumsily) to do is situate what is happening in a more general context.

    I think some of these data points don’t just happen for any old reason. There are underlying processes at work. There is an area of research call Life Course Theory which is quite relevant to all this.

    Basically LCT is all about co-movements in things like age on leaving school, age at marriage, age on taking first employment, age at becoming a parent, age on retirement etc.

    This is quite distinct from another body of theory РLife History Theory Рwhich studies the biological parameters and how these shift: menarch̩, menopause, fecundity, longevity etc.

    And there is a third one, Life Cycle Theory, which studies economic parameters like saving and consumption and how these vary across the life cycle.

    Now essentially all these three are surely inter-connected, but at the present time we don’t really understand how.

    But if we take puberty (biological) and adolesence (social) these two parameters seem to have been moving in different directions in recent years, with people entering puberty earlier, but leaving adolesence later. There must be some sort of explanation for this.

    Again, ages of entry into the productive labour market do move around historically, and there seems to be a technological rationale for this.

    In the hunter-gathering societies studied by the anthropologist Hillard Kaplan, young males didn’t go to work hunting – they were encouraged to act out role-play games – till they were 20, quite simply because they were not strong enough, or proficient enough, and would more than likely have gotten themselves (or others) killed.

    Then came the agricultural society, and a lowering of the general skill requirements, so children started working earlier, and fertility went up to a certain extent.

    Then we get early industrial society, and the age of entry goes up, but not too much. Then the late industrial society and again there is another small rise. Now we have the knowledge economy, and there seems to be a general phenomenon that people aren’t considered to be sufficiently mature to be really productive till they are in their late 20s. So they are – like in the hunter gathering times – encouraged to play. We shouldn’t simply look down on play as a useful formative structure.

    Incidentally, it isn’t of course only in football that people peak earlier. I guess IT workers become productive much earlier, and this was seen as something of a ‘phenomenon’ in the late 90s (and with a lot of emphasis on the ludic component of the work).

  31. A little late in the day maybe, but I thought a little real life case study might be useful as an illustration of what I mean here. Like the case of my friend Ernest Orts. Ernest is a talented young Jazz musician in his late 20s. You can find him here:

    http://www.tomajazz.com/clubdejazz/jazzpana/orts_ernest.htm

    Now to many external observers Ernest appears to spend a lot of time doing ‘nothing’. Barcelona has a lot of people like this. But from all this doing ‘nothing’ he may one day become a world class jazz musician, or maybe he won’t, the only thing he knows is that he has to try.

    Ernets writes to me to practice his English, in this mail he expains the three levels of his life:

    Let me try to explain to you my different “levels” in life, in the same way you were talking about this in the bar.

    The first level of my life consists of doing something to earn money to eat and to maintain my home and my deal with the bank. I’m sure you know what I mean.

    In order to do that I work in a Conservatory, as you already know. I’m lucky because most of my friends who were studying music ten years ago are now working in private schools and earning less money than a “cleaning person”. Well, I know to be able to work in a Conservatory you have to excel and to pass a very difficult test. And I’m also very happy because the Generalitat has just approved a new project I proposed to teach in the Conservatory. It is a collective-theorical-practical jazz subject. I am able to do this because I studied this approach in France some years ago. As far as I’m concerned nowadays it is necessary to spend time doing and improving and learning a lot of things, all them in a precise way, all them with discipline, to become a complete person and to be able to go into the labour market.

    Besides, I often play in Jams, and rarely I play concerts. Just a few concerts, but good ones, and ‘well paid’ ones as well. This needs a lot of work at home and some rehearsals too. That would be the second level in my life.

    The third one encapsulates a lot of things. Swiming, listening to a lot of music apart from my current work, and last but by no means least, writing to you and trying to improve my English, because I love travelling, apart from the need to learn languages and to apply them in life. My objective now is to become a four-languages-speaker, and to achieve the same level in Catalan, Castellano, English and French.