Aging Populations Are Good for the Old and the Young
You can't escape talk of rising intergenerational conflict between aging boomers and young Millennials.
Among the more powerful beliefs in Washington, D.C., is that thanks to Social Security and other old-age programs, boomers will absorb more scarce economic and government resources, starving programs that benefit the young. The tug-of-war extends deep into the workplace, too. With many (though not all) boomers holding onto their jobs, some Millennials perceive their path into meaningful work and career advancement blocked.
A Phony Intergenerational War?
And with the world rapidly aging, the generational blame game has gone global, heating up particularly in countries with public benefits for retirees and plenty of unemployed and underemployed youth. "The older generations have eaten the future of the younger ones," economist and former Italian Prime Minister Giulano Amato fretted in Italy's leading newspaper, Corriere della Sera, in 2011.Scary, isn't it? Actually, not really.
Intergenerational warfare is a phony war.
The underlying narrative is, in reality, a far more powerful and nuanced story of generational interdependence. Simply put, a workforce with more employed aging boomers is good for the younger generations, adding to the vitality of the overall job market, making it easier to pay the tab for old-age programs and opening up a host of economic and social possibilities.
The Risk: Not Seizing the Opportunities
"A serious risk for future generations is that everyone will not be able to seize the opportunities. We need to take advantage of the opportunities," says Maurizio Bussolo, a top economist at The World Bank and co-author of the recent publication Golden Aging: Prospects for Healthy, Active, and Prosperous Aging in Europe and Central Asia.
Bussolo is spot on.
To illustrate just how misleading the concocted intergenerational struggle is, let's look at what's known as "the old-age dependency ratio," typically tapped to underpin Millennial vs. boomer jeremiads. It compares the number of people between 15 and 64 (the "workers") with people 65 and older (the "retired").
The ratio highlights the growing numbers of so-called "dependent elderly," which some say will overwhelm government safety nets worldwide with too few workers struggling to support too many seniors.
For example, five German workers between age 15 and 64 supported about one person 65 and older in the 1990s, but by 2060, according to estimates, there will be three German workers for every elder, a tripling of the old-age dependency ratio from 0.22 to 0.62. The U.S. had a similar old-age dependency ratio in the '90s and ours is expected to rise to 0.37 by 2060, a more muted, but still impressive increase of 68 percent.
Trouble is, this ratio is bogus. During a recent three-day conference at Columbia University I attended, called Age Boom Academy: Global Aging: Danger Ahead?, a number of world-renowned presenters dismissed the ratio's demographic determinism.
Why the Dependency Ratio Is Flawed
Among its flaws, they said: the ratio fails to capture critical changes in behavior.
For instance, the dependency ratio assumes everyone 65 and over is dependent or not working. That certainly isn't true in the U.S. Our labor force participation rate of workers 65 to 74 years old climbed from 16.3 percent in 1992 to 26.8 percent in 2012 and the U.S. Bureau of Labor Statistics projects it'll jump to 31.9 percent in 2022.
Personally, I think the government's projection is too conservative, since boomers are at the early stages of pursuing paycheck possibilities during their traditional retirement years and employers are only beginning to see the profitable opportunities offered by an aging workforce.
Bussolo offered a different, and more useful metric at the conference: An adult dependency ratio.
It compares the number of inactive people (those not working and not looking for work) with active people (those working or looking for work) in the adult population, ages 15 and older. One advantage of this measure is it captures the trend toward longer working lives; The World Bank's Golden Aging report notes that extending work lives by 10 years between 2030 and 2060 is enough to keep current ratios more or less constant.
What Elderly Burden?
Looked at this way, the odds are the elderly "burden" won't increase much — if at all — in coming decades. What's more, if women's labor force participation rates converge with men's, dependency ratios will actually decline.
So much for an aging population overwhelming the economy and public purse!
OK, but what about jobs? Doesn't an aging workforce translate into fewer job opportunities for young adults? That's a myth, too.
The evidence is overwhelming that young and older workers are essentially in the same macroeconomic job market, both on the way up and on the way down. The Pew Economic Mobility Project notes that from 1977 to 2011, a 1 percentage point increase in the employment rate of older workers was associated with a decline in youth unemployment and an increase in youth employment.
Economists call the belief that the job market is a zero/sum game the "lump of labor" fallacy.
"This horse has been beaten to death," economists Alicia Munnell and April Yanyuan Wu at the Center for Retirement Research at Boston College have written. After slicing and dicing the data in a number of nuanced ways, they "found no evidence to support the lump of labor theory in the United States."
What the Generations Have In Common
Don't get me wrong. There are generational differences. Boomers, Gen X'ers, and Millennials have been exposed to different technologies, educational practices and other world-shaping experiences. But what's remarkable is how each generation essentially values many of the same things professionally — from a healthy job market to engagement at the workplace to good urban transportation.
I like the way Allen Glicksman, director of research and evaluation at Philadelphia Corporation for Aging, put it at the Gerontological Society of America annual meeting in New Orleans in 2013. An expert on policies that transform urban environments into age-friendly communities, Glicksman was asked for the main lesson he'd learned about generations living together. "What's good for old people is good for everybody and what's bad for older people is bad for everyone in the community," he said.
I'd offer this corollary: What's true for communities holds for nations. Let's finally put the intergenerational warfare talk to rest.