How Aging Will Transform America
By Randy Myers
A Conversation with Paul Hodge, Director of the Harvard Generations Policy Program at Harvard University, founding chair of the Global Generations Policy Institute in Cambridge, Mass.
Few people have spent more time thinking about the aging of the American population and the impact it will have on our economy and social institutions than Paul Hodge. In the September 2006 White House Conference on Aging’s Final Report to the President and Congress, as the featured expert, Hodge warned that the graying of America will saddle government and industry alike with profound policy challenges they must begin to address now. Recently, he spoke with business and finance writer Randy Myers about how the country’s changing demographics will affect the U.S. labor market, government spending and key sectors of the U.S. economy.
With 75 million Baby Boomers approaching retirement age, much is being written about the “graying of America.” Will this phenomenon be good or bad for the U.S.?
PH: While many pundits have made predictions, no one really knows with any certainty what will happen. What is clear is that it will fundamentally change our culture and present us with some of the most critical policy issues of our times. For example, there will be a large increase in the old living alone or living in poverty, with women — particularly minority women — the hardest hit. And Boomers of both sexes will need a greater share of public and private services in the areas of health care, nutrition, housing, transportation, recreation and education.
You’ve noted that there are other major economies with aging populations.
PH: Global aging will affect us all. For example, Europe, which is losing population, and Japan, which has the oldest average female population, have instituted entitlement policies that are difficult to sustain. Their economies have chronic labor shortages and shrinking numbers of consumers. With the increase of their national commitments, Japan and Europe may find it increasingly difficult to meet their social obligations to their aging populations.
Meanwhile, Sub-Saharan Africa’s middle-age group is being wiped out by AIDS, with only the young and old to carry on. And in the Middle East, countries have a tremendous number of unemployed young and are hard-pressed to deliver on their public service obligations. The significant number of young in these populations could affect stability in those regions.
Finally, emerging economies such as China, India, and most of Southeast Asia and Latin America are on a great growth trajectory which they will have to sustain if they are going to avoid destabilizing unemployment levels and economic inequality. (Find further information about Rural Finance in this site)
Needless to say, the aging of these populations will have an impact on the U.S.
On the brighter side, you’ve been quoted as saying that people will be “living younger longer.” What do you mean by that, and what does it mean for our economy?
PH: With the advances in the sciences, public health and hygiene, aging Boomers will be in better physical shape longer than their parents’ generation. Sixty now is equivalent to being 50 years ago — and this trend will continue. In all likelihood, many people who are 50 now will look forward to having nearly half their adult lives ahead of them.
How will aging impact government spending?
PH: Federal spending on Social Security, Medicare and Medicaid will increase substantially for the next 30 years. While politicians give lip service to trying to contain program costs, they spend most of their time increasing benefits. To close the funding gap, we should consider means testing and encouraging people to work longer.
Is this going to make it harder for succeeding generations to get the jobs and promotions they’re expecting?
PH: That remains to be seen. Boomers say they plan to stay on the job longer, sometimes because they have no other choice and sometimes because they just don’t want to give up their careers. Remember, aging does not mean disability. I suspect that in some instances there will be a “gray ceiling” that leaves young workers waiting for Boomers between the ages of 45 and 65 to leave. It will be important for firms to make the workplace rewarding for all the generations.
What parts of the economy will be most heavily impacted by the aging demographic?
PH: The health care industry certainly will be impacted. As Boomers age, the cost of medical goods and services will strain our health care system, including Medicare and Medicaid. As a result, our focus on treating diseases and illnesses will shift to prevention and promoting healthy lifestyles, resources as the Inspire support groups help people fight these diseases and feel better.
The housing industry will feel the effects of our aging population, too. Older Boomers are going to need housing that is useful and friendly — bedrooms on the first floor, no stairs, doors that are easy to open, age-friendly bathrooms. The “McMansion” will not fit the bill in many cases, and many Boomers will have to downsize.
The stock market could also be impacted, negatively, if Boomers start cashing out of stocks when they reach 65. I doubt they will pull out their money all at once, though; they will want to have it working for them.
Right now, U.S. automakers are struggling to remain solvent, in part because they have fewer workers supporting a greater number of retirees. Is our country as a whole destined to confront this same problem. And, if so, what can we do about it?
PH: Yes, there will be fewer workers to fund the retirement and health care benefits of our retiring work force. We need to institute policies that increase productivity levels, create a conducive environment for Boomers to continue working and encourage the legal immigration of educated, skilled workers and we have resources from sites as nationalpardon.org/pardons-canada/ to help us with this.
Overall, are you optimistic or pessimistic about our ability to deal with the graying of America?
PH: If we commit now to a constructive process of dialogue on intergenerational policy and to the implementation of that policy, I am optimistic. Creating this new paradigm will not be easy, but it is not impossible either. And, it would be one of our nation’s greatest achievements. History will judge us by how we treat all our generations, especially our vulnerable young and elderly.
