More on the Economics of Aging

Last week I posted an article describing what the OECD was finding about the economics of aging issue, especially in Europe. You may find this recent analysis by the National Bureau of Economic Research (NBER) to be of interest as well. Download the NBER paper here.

In short, here is what it says. Population aging, early retirement, limited but increasing retirement saving, more expensive medical practice patterns, and an established national entitlement to income and health care support after age 65 -- all of these factors largely define the economic environment of the United States (and much of the world) at the beginning of the 21st century.

Over the past 30 years, life expectancy has increased from age 71 to age 77, while the most common age of retirement has decreased from age 65 to age 62. Retiring at age 62, the typical American retiree today faces another 20 years of living, consuming and, at one time or another, and in many cases regularly, needing expensive health care services. These trends already have placed significant financial pressure on the public and employer-sponsored programs that provide income and health care support to older Americans.

Meanwhile, the massive demographic bulge in the population -- the baby boom generation -- begins turning age 62 in 2008. Going forward, the number of Americans age 62 and older is projected to double from 40 million today to 80 million 30 years from now, while the working age population is projected to grow by just 12 percent over the same period.

Compounding the demographic situation is the continuing rise in medical costs. National health care expenditures have grown from $250 billion annually in 1980 to $1.4 trillion today, and show little sign of slowing down. The combination of economic, labor market, health and demographic trends points to any number of social and economic challenges in the decades ahead. Understanding the complexities of this situation, and the relationships between demographics, policy, behavior, economics, and health -- this is the substantive aim of the NBER Program on the Economics of Aging.

Once again, this is an issue that local and state economic developers need to be thinking about now. It affects every community in America.