Friday, December 18, 2009

Boom, Bust and Echo

We're going to do something a little different today and take a stab at something I've been curious about for a long time, age demographics and the effect of baby boomers. I've also prepared a neat little graph the displays an interesting phenomena resulting from our recent economic boom here in Alberta.

Canada - Demographics - Age
This is something of a time lapse graph to show the progression of the 'wave' of baby boomers. We see the first big spike there on the 1971 plot at 24 years old (as well as the other plots at 5 year intervals), those were the ones born from July 1946-June 1947... whose conceptions appears to be not so coincidentally closely correlated with the end of WWII. I wonder why that would be?!

The wave of boomers subsided a bit after the initial rush, but after a couple years started climbing again and did not crest until about 15 years later. Those would be people that are between 45-50 years old today.

We see in the graph that over time the graph seems to shift lower. This is due to expanding population, and that it largely expanded outside the boomer generation. This is from factors like immigration, the ripple effect of their own offspring, and advances in technology and living conditions allowing people to live longer (median age has risen from 26 in 1971, to 39 today), reduced infant mortality rates (10.9/1000 in 1979, to 5.4/1000 in 2005), etc, etc.

What is also interesting to note is the reduced birth rate that started in the mid-90's and has been very pronounced in the last decade (extreme left of graph, light green and blue lines nearest the bottom). This is probably due to societal shifts towards smaller family. We saw the initial drop off from the boomer generation that was at a certain level... then when they started having kids we saw something of a leveling off again as the echo generation were born... and now echo generation are having their own offspring and we seem to be seeing a second downward shift down and leveling as the generation twice removed from boomers arrive.

Some time in the future I'll do a point discussing the macroeconomic effects of the exodus of baby boomers from the work force and into retirement, or more specifically, their move from being a crucial tax revenue base to increasing health care liabilities. Within that we'll look at the individual provinces and see who should weather storm and who could get crushed by the retirement wave.

Economic Boom = Migration Boom = Baby Boom?
A time lapse graph for Alberta using the same time intervals looks very similar to the Canadian one, but I did notice one thing that I wanted to explore further. Upon further inspection and decreasing the intervals it was very noticeable even over just the last decade. This was the influx of young workers during our recent economic boom.

Keeping a close eye on the 20-30 age range we can see a very big bubble form seemingly out of nowhere. It was starting to protrude in '04, then was very noticeable in '06, and is now glaringly obvious in '08. In fact as of '08, 24 and 25 year olds were the largest demographic, even more plentiful then the peak baby boomers.

Now, before someone gets excited and starts pointing to that little bubble as the silver bullet in justifying our little housing bubble... bear in mind that entire bubble above the mean for 20-30 year olds only represents about 30,000 spread out over a province of 3.3 million. So while it looks quite impressive, we're really just dealing with something much closer to a drop in the bucket than a whole new paradigm.

Considering the availability of jobs, this would typically be the age group you'd expect to see a spike in since they're generally far more mobile (not established in careers, or tied down with family). It will be interesting to see this plays out over time, as they're still young and can leave as quickly as they came should they be so inclined.

Some will no doubt set down roots and settle though, and I think we may already be seeing the effects of that on the extreme right of the graph as the birth rate is increasing (unlike the rest of the country where leveled out). Our little economic boom brought a migration boom, and with most of those being young adults we're also starting to see a bit of a baby boom.