4 Critical Global Concerns: Debt, Demographics, Underemployment & Inequality - Modern Distribution Management

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4 Critical Global Concerns: Debt, Demographics, Underemployment & Inequality

Speaker examines key factors that will impact economic policy in the next 5-10 years.
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The global economy is improving, according to Zanny Minton-Beddoes, economics editor for the The Economist. "At a global level, 2013 will be better than 2012," she said, speaking at the 2013 National Meeting of the National Association of Electrical Distributors. "… It's not quite the rose-tinted view we had just a few years ago; we're a long, long way from a 'normal economy." But things are getting better.

And the U.S. is, in the words of Bill Gross, founder of global investment firm PIMCO, "the least dirty shirt in the laundry basket." It's the country that is closest to unwinding the imbalances driving economic uncertainty.

That said, there are still several factors that may influence the strength of that global recovery in the medium term, Minton-Beddoes said, and define the parameters in which policymaking is done. Here are the four "big concerns" she sees driving economic policy in the next five to 10 years.

Debt: Government debt has risen dramatically over the past five years. "It's a natural consequence of the financial crisis, but nonetheless we're in unprecedented territory," Minton-Beddoes said. How much does it matter? There's no magic number that says we've reached too much. But, she said, it's probably true that the more debt accrued, the more precarious the economic situation. And that's something policy-makers will be keeping in mind.

Demographics: We've heard a lot about the aging workforce with the baby boomer generation reaching retirement age. In the past, young people entering the workforce would make up for those transitioning out. But around the globe, the number of young people entering the workforce has slowed dramatically. In the U.S., fewer than 200,000 people – the number once considered the benchmark for a healthy workforce – enter the workforce each month; in Europe, 2013 will be the first year that the labor force actually shrinks. And conditions are more dire in China, where by 2025 there will be fewer than two young workers for every old one; currently that level is five. This could have significant consequences on the growth and productivity potential of the global economy.

Un- & Underemployment: Currently, there are about 300 million people worldwide between the ages of 15 and 25 who are not working, not in school, not contributing in any way to the workforce – nearly the same number as the entire U.S. population, Minton-Beddoes said. Because of this, growth is slower than it could be, and there's an enormous amount of frustration from people not building skills and not having the opportunity to build a productive life. "It's a huge irony that just as the labor force is beginning to slow and as the existing workforce is aging, that we have so many young people that aren't working," Minton-Beddoes said.

Inequality: "Regardless of what you think of the merits of the inequality debate," it will influence the economic policy discussion in the next few years, Minton Beddoes said. Over the past 30 years, income distribution has shifted dramatically, and that may be having an impact on the American ideal of equal opportunity. "There are many ways to measure this, but the one that was most striking to me was this," she said. "The gap in SAT scores between the children of the richest 10 percent and the bottom 10 percent in the U.S. has widened by 30 percent in the last 20 years. … The consequence is that this broad sense that there is equal opportunity seems less true." Because of this, inequality is almost certainly going to be a part of economic policy discussions, she said.

Politicians will be forced to deal with these four factors, Minton-Beddoes said. "The challenge will be to deal with those things in a way that maximizes the country's and people's potential for the long-term."

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