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In the 1880s, at a time when life expectancy was 45 years, German Chancellor Otto von
Bismarck set the retirement age at 65. In 1999 the first of the baby boomers will be 53
and have just a decade to get ready for that milestone age, and as with all the others,
they are expected to change that life phase forever.
Boomer Impact
From its beginning the influence of the Baby Boom Era has been
remarkable. The years between 1946 and 1964 produced approximately 76 million American
children, an average of four million births per year for 19 years. For the five decades
since 1946 this generation has burst into every life phase, and reactions to its wants and
needs have resulted in major changes and innovations. In its early childhood it brought
success to the baby-care guidance of Dr. Spock and the geared-to-children entertainment of
Howdy Doody, The Mickey Mouse Club, and Sesame Street. When the first boomers became
teenagers, "Teeny Boppers" were recognized as a significant target-market, and
with the sixties the world recognized the cultural impact of America's deep-thinking,
soul-searching, "Flower Children." Who would have suspected then that in the
seventies and eighties the boomers would become "Yuppies" pursuing an upscale
life style, that contributed to both the refurbishment of urban neighborhoods and the
suburban development of open farmland?
A report compiled by The Urban Institute and released by the U.S.
Department of Labor in June 1997 acknowledged that at each stage in the life cycle, the
baby boom generation has changed the demand for public services. In the 1950s and 1960s,
the public policy challenge centered on the need for schools; by the mid 1960s, the labor
market and institutions of higher education were challenged to absorb larger numbers of
individuals; in the 1970s and continuing today, there has been a redefinition of a number
of social and economic institutions such as family and work. The social and policy
phenomena associated with the baby boom result from a complex interaction of (a) sheer
numbers of people in this generation and (b) the coincident occurrence of important events
and developments in society and the economy as a whole.
The Generational Cohort
According to the Urban Institute, demographers define a generational
cohort as "a group of people born over a relatively short and contiguous time period
that is deeply influenced and bound together by the events of their formative years."
The U.S. boom generation is categorized into two distinct groups. The first half was born
between 1946 and 1955, the second half, between 1956 and 1964. The distinction between the
two groups is especially defined by the very different labor market and economic
conditions each faced as they entered their work years.
In a May 1993 article for American Demographics magazine, Diane Crispell
described six different generational groups: the GI generation, the Depression generation,
war babies, baby boomers, baby busters, and the baby boomlet. When the boomers retire, the
baby busters and boomlets are the workers who will have to carry the Social Security
program, and once again the boomers' size and longevity (now in terms of
life-expectancy) pose the challenge.
Impact On Social Security
Having the boomers so close to making demands on the program has brought
a sense of urgency to long-needed Social Security reform. A Scripps Howard Newspapers
article from December 1998, "Summit goal: Social Security as a pension, not a
pittance," notes that the Social Security system won't go broke, but by 2032 it
will be able to pay benefits only at 75% of today's level. For years, Social Security
has received more in payroll taxes than it pays in benefits so that it now has about $700
billion in a "trust fund" of no-risk U.S. bonds. However, in 2022 Social
Security will start spending more than it collects, with no cushion left by 2032.
Currently 3.3 workers pay into the system for every retiree drawing benefits, but by 2025
there will be only 2.2 workers for every beneficiary, while recipients are expected to
live and collect Social Security longer than their parents and grandparents.
Boomers As Investors
Several options have been raised to save Social Security; some
involve self-investment. For prior generations that might have been an unlikely option,
but once again boomers are different. The Federal Reserve Bank of San Francisco's
June 26, 1998 Economic Letter discusses the Life Cycle Hypothesis which predicts that
household income will reflect the stage of the earner's life cycle. It notes the
impact boomers have made in their working years: "When people grow a bit older and
begin to think about retirement, one would expect that they would begin investing more in
financial assets. The arrival of a large cohort at that stage of the life cycle would
raise the price of financial securities. The first wave of baby boomers reached age 35 in
1981, which coincides roughly with the beginning of the long bull market in stocks. This
may reflect (at least in part) the predicted Life Cycle effects." It is apparent that
working age boomers are involved investors. As a result, if self-investment becomes part
of the solution for Social Security reform, boomers will probably step up and set the
example for those who will follow.
Ongoing Impact
Unlike Von Bismarck's 1880s, the life expectancy is now over 75
years in the U.S., and some experts say the upper limit of human life is about 115 to 120
years. (Earl Fairbanks, Oregon Labor Trends, June 1997). Given that life span, the
influence the boomers have had on their first five decades will continue on in decades
six, seven, eight, nine, ten and eleven!
Last year, SB 599
"The Cluster Bill" enacted critically important changes - broader
applicability of the 6 percent research and development (R&D) tax credit to smaller
companies and allowance of the R&D tax credit carry-forward for 15 years. The 1999
"Cluster Bill"will further enhance opportunities for small and medium
entrepreneurial firms that commonly incur losses in formative years as well as stimulate
investor interest in Connecticut companies. Accordingly, the 1999 bill will likely
provide:
- An increase in the net operating loss (NOL) carry-forward period from 5 to 20 years,
allowing Connecticut to join more than 30 other states currently at the federal NOL level;
- A permit to resell or allow the refundability of R&D tax credits for at least small
companies (less than $50 million in revenue);
- Elimination of the capital gains and income taxes on investments in small Connecticut
companies that are held for more than five years.
A previous University of Connecticut's Center for Economic Analysis (CCEA) study,
showed the increase from 5 to 20 years in the carry-forward period for net operating
losses (NOLs), would add about 600 jobs annually. The growth associated with expanding and
selling tax credits exceeds 6,900 jobs.
Commissioner James F.
Abromaitis of the Connecticut
Department of Economic and
Community Development today
announced that Connecticut
communities authorized 1,129
new housing units in December
1998, a 81.5 percent increase
compared to December of 1997
when 622 were authorized.
The Department further indicated
that the 1,129 units permitted
in December 1998 represent
an increase of 38.2 percent from
the 817 units permitted in November
1998. The year-to-date permits
are up 27.5 percent, from
9,054 through December 1997, to
11,541 through December 1998.
"The Connecticut housing
market continues to show
strength," Commissioner
Abromaitis said. "The increase in
housing starts, especially in our
urban areas, is particularly noteworthy."
Reports from municipal officials
throughout the state indicate that
Windham County with 311.1
percent showed the greatest
percentage increase in December
compared to the same month a
year ago. Middlesex County
followed with a 156.5 percent
increase.
Fairfield County documented
the largest number of new, authorized
units in December with 374.
Hartford County followed with 186
units and New Haven County had
147 units. Totals for 1998 indicate
that Danbury led all Connecticut
communities with 926
units, followed by Manchester with
483 and Newtown with 252.
Get ready tailgaters and fire
up your grills, football is
coming to Hartford. As part of the
$1 billion Adriaenís Landing
project, The National Football
Leagueís New England Patriots will
be playing their games in downtown
Hartford in a brand new
68,000 seat $350 million stadium
beginning in the fall of 2001. In
addition, the University of
Connecticutís football team will
upgrade their status to Division 1-
A and become co-tenants in this
new stadium. It is also expected
that major concert acts will make
the stadium a stop on their tours.
Game Plan
In May 1998, Phoenix Home
Mutual Insurance Company
proposed the construction of
Adriaenís Landing. The proposal
consisted of a 35,000-40,000 seat
domed stadium to house University
of Connecticut football which
would be attached to a convention
center along with 400,000 to
500,000 square feet of retail and
entertainment space. In November
1998 the plan was modified
when the stadium plan was
changed to accommodate the
Patriots. Robert Kraft, owner of
the Patriots, has pledged to build a
hotel connected to the stadium
and also a National Football
League retail center.
The question to be asked is
whether or not this is a worthy
investment. The State of Connecticut
will allocate more than
$300 million in state bonds for the
stadium and convention center.
These bonds are projected to be
paid for by a tax on tickets. The
Capital City Economic Development
Authority must find $210
million in private investment. The
Patriots will play 10-12 games per
season in this stadium, while
UConn will play six games. Even
when concerts are included, this
stadium will be utilized only about
20 times per year. Even the
staunchest supporters of this
plan would not call this a good
investment.
This is where the convention
center comes into play. The
Capital City Economic Development
Authority estimates a convention
center could draw 120,000
visitors a year to the city and
pump $75 million into the regionís
economy. The authority also
projects that the retail and entertainment
section of Adriaenís
Landing would include specialty
stores, entertainment venues, a
large movie complex, jazz clubs,
music and interactive entertainment
and parking. It is expected
to create 700 permanent jobs.
There are only two other
convention-stadium complexes in
the country, located in St. Louis
and Indianapolis. Indianapolis,
which opened their complex in
1984, has seen the creation of
49,000 new jobs since that time
and more than $211.4 million in
local and state government revenue
has also been generated
since that time. The number of
meetings at the convention center
has gone up from 30 to 380. In
essence, the complex has revitalized
the downtown core. Even
Market Square Arena in Indianapolis,
which houses basketball
and hockey has seen an increase
in other bookings such as concerts
and gymnastics.
Fumbles?
Even though this plan looks
like a big win for Hartford, there
are still concerns. Urban Strategies,
Inc. of Toronto in an economic
impact study presented a
different view of Hartfordís future.
While Urban Strategies is in favor
of a stadium and convention
center complex, they are against
the allocation of several hundred
thousand square feet of retail
space. Urban Strategies feels that
while festival marketplaces have
been successful in places like
Boston and Baltimore, Hartford is
not large enough from a tourist
standpoint to support such a
project. Urban Strategies instead
advocates the construction of
1,250 units of downtown housing.
It is also not entirely appropriate
to compare Hartford to St.
Louis and Indianapolis due to the
fact that those two cities have
domed stadiums which can
accommodate more events than
the open-air stadium in Hartford
can. It is also pointed out that the
other two cities have a better
infrastructure, better public
transportation system and better
parking than Hartford. Hartford,
though, is easily accessible by
both air and highway. Many
people also remember the Hartford
Whalers who broke the hearts of
many fans by moving to North
Carolina after playing in Hartford
for more than twenty years.
Touchdown!
Is this a good investment? That
question is almost impossible to
answer objectively. Sports fans
will think that it is, non-sports
fans will think that it is not.
However, remember that last year
at this time people were questioning
whether a $19 million baseball
stadium in Bridgeport was a good
investment. That question was
answered when 300,000 fans
attended the games, 500 jobs were
created and a $1 billion Harbour
Place development was begun.
National news organizations
reported on how a baseball team
revitalized an entire city. If the
same results can occur in Hartford,
the investment will be worth
it.
The Connecticut coincident
employment index
rebounded to a new peak with the
release of (preliminary) November
data. The coincident index recovered
all of its September fall after
having reached new peaks in
June, July, and August. The
coincident index now lies just
above its prior peak in August.
The leading index declined once
again, making it the fifth decrease
in the last six months. (The October
number was revised upward.)
The leading index, however, still
lies above its August and September
levels. As noted before, the
August and September retrenchment
in the leading index probably
reflected in large measure the GM
and SNET strikes. As such, considerable
uncertainty still exists
about whether a downturn in the
Connecticut economy is around
the corner. We are not yet prepared
to call a reversal of direction
for the leading index. Despite this
we shall continue to monitor the
situation closely to identify if and
when the leading index signals
such a downturn.
As noted before in this column,
the growth of the labor force
provides an effective constraint on
the growth of the Connecticut
economy. The construction of the
new football stadium for both the
New England Patriots and the
University of Connecticut football
team as well as the other construction
associated with Adriaenís
Landing will provide a boost to the
Connecticut economy. The Hartford
labor market area will experience
the largest share of this
activity. Similar construction
activity, if on a smaller scale, is
also scheduled for New Haven and
Bridgeport. Thousands of new
construction jobs should generate
a significant growth in income and
economic activity. In light of such
developments, it is difficult to see
how the Connecticut economy can
slip into recession. But at the
same time, a labor shortage
produces an untimely drag on
economic expansion. Of course,
the needed construction employment
may be filled partly by out of
state workers, which also occurred
during the construction boom in
the late 1980s.
In summary, the coincident
employment index rose from 92.5
in November 1997 to 96.4 in
November 1998. All four index
components, once again, point in a
positive direction on a year-overyear
basis with higher nonfarm
employment, higher total employment,
a lower insured unemployment
rate, and a lower total
unemployment rate.
The leading employment index
decreased from 90.5 in November
1997 to 89.6 in November 1998.
Three of the five index components
sent negative signals on a yearover-
year basis with a higher
short-duration (less than 15
weeks) unemployment rate, higher
initial claims for unemployment
insurance, and lower Hartford
help-wanted advertising. The other
two components sent positive
signals on a year-over-year basis
with a longer average work week of
manufacturing production workers
and higher total housing
permits.
SOURCE: Connecticut Center for or Economic Analysis, University of Connecticut. Developed by Pami Dua [Economic Cycle
Research Institute; NY,NY] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Kathryn E. Parr and Hulya Varol [(860) 486-3022, Storrs Campus] provided research support.
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