Final answer:
The retirement of the Baby Boomer generation may lead to higher wages due to decreased labor supply and a potential increase in unemployment for jobs that require their unique skills and experience.
Step-by-step explanation:
As the Baby Boomer generation retires, there are expected changes in wages and employment. Theoretically, as a significant portion of the workforce exits, there should be a decrease in the labor supply, which can lead to a rise in wages due to the scarcity of workers if the demand for labor remains constant. Conversely, the departure of Baby Boomers can leave gaps in certain skilled positions, potentially increasing unemployment rates for jobs that require specific knowledge and experience they possess.
Impact on Wages
With fewer people in the workforce, employers may need to offer higher wages to attract and retain the labor they need to operate effectively. Graphically, this can be depicted by a leftward shift of the labor supply curve in a supply and demand diagram, resulting in a higher equilibrium wage.
Impact on Employment
The retirement of Baby Boomers is likely to alter the employment landscape with a shortage of workers, especially in sectors where they predominate. This labor shortage creates opportunities for other generations to move into these roles, possibly lowering unemployment in the long run.