The Big Picture
Throughout the annals of time, children have always outnumbered the elderly in population. However, according to a joint research publication from the National Institute on Aging (NIA), National Institutes of Health (NIH) and the World Health Organization (WHO), within a five year time span, the elderly will outnumber children across the globe.
This new demographic landscape presents many potential challenges across many aspects of our current infrastructure and economic stability here in America. How will the healthcare system be affected, and what is the outlook on the future economic impacts this shift will have on our labor force and families?
One thing for sure is that the more foundation we build now, the more effortlessly this current and still impending transition will come about. We have a lot to learn and apply to our current model of aging, not just in America, but on a global scale. It is time to coordinate research and close any gaps in knowledge that would hinder cost-effective strategies.
In the end, the main issue has always been and should remain quality of life.
Just How Significant Is This Generational Swing?
WHO and the NIA cite United Nations projections of an estimated global growth chart for people over the age of 65 through the year 2050. The UN projected that the greatest increase will occur in less developed countries by a growth of around 250%. Growth is projected to be around 70% in developed countries like America. That translates to 1.5 billion elderly people worldwide, up from the 2010 count of just 524 million.
At the same time, the percentage of the population expected to decrease the most is people under the age of five. They are expected to see a decrease of around 8% due to continuing fertility declines and shifting cultural values, a trend that is already well documented. This puts the number of elderly people above children for the first time ever recorded, and it will take place just a couple of years from now.
To put the elderly population growth statistics into perspective, one hundred years ago, there were fewer than 14 million people over the age of 80 in our entire global population. If projected estimates are correct, in China alone, there will be 100 million people over the age of 80 by 2050. Adding to that, life expectancy increased for much of the world during the twentieth century, with the exception of African countries crushed under the weight of the HIV/AIDS epidemic.
Infrastructures Already Being Challenged
We can look to the two most populous nations on our planet as examples of the impact of aging, both with the highest populations of poor people: India and China. We are seeing that their health systems and other national infrastructures are already being tested beyond their limits. According to WHO's China Country Assessment Report on Ageing and Health there are four main areas in which their national healthcare system is being challenged by a burgeoning elderly population:
These are challenges our very own health care system is currently facing as we move towards a national healthcare system. As China is facing them a step ahead, there may be an advantage for us to become better prepared by learning from China's situation. For example, some experts caution against a national healthcare system like China's, saying that these challenges will be unavoidable and too much of a burden for a federal government to carry. Let's take a closer look at how our healthcare policies have been impacted so far.
The Impact on America's Healthcare System
It is no secret that as we age, we experience greater health complications. The World Health Organization has been taking a globalized research approach to gaining a better understanding of this process in hopes to uncover possible ways of improving aging health and at the same time, decrease the healthcare expenditure demand.
When looking at overall health status in China, Russia, South Africa, Mexico, Ghana, and India around 2009, health scores go from better to worse as people age. All scores were found below 60% for both males and females by the time they turn 80 years old. In order to arrive at this impactful demographic, WHO implemented a continuous Study on Global Ageing and Adult Health (SAGE) and for the first wave of data gathered, they looked at risk factors: biomarkers of pulse rate, blood pressure, BMI and waist/hip circumferences, mobility, vision, and cognitive tests to arrive at overall health status. What they found was that across the board, developing and developed countries were all facing the same decline in health.
This could mean an unbounded increase in the demand for caregiving, both professional and family. Caregiving is known to improve overall health, quality of life, decrease risk factors, and promote independence for as long as possible. But will there be enough caregiving support to go around?
Inevitable Increase in Health Care Spending May Have Uncovered a Potential Solution
With the continuous increase of healthcare costs associated with a rapidly aging global population, it is important to look towards solutions, and America is wasting no time. MetLife and the National Alliance for Caregiving (NAC) conducted a study to answer the question of whether or not caregiving coverages should be accounted for in employer health care budgets. They wanted to see if the increased cost of such benefits would be offset by the returns it would provide. To see the benefits, one must look at the negative influences, or hidden costs associated with no employer-funded caregiving support.
The results showed:
Knowing that caregiving for elders is important to employees and that 73% of family caregivers are employed, providing eldercare benefits and additional wellness programs for employees turned out to be a vehicle by which employer healthcare costs were beneficially affected. Like any caregiver already knows, there are hidden costs associated with caregiving. What the 2011 MetLife study concluded was that there was a bare minimum 8% increase in employer health care costs associated with the hidden cost of employee caregiving and that by providing the increased benefits and programs, overall employer healthcare costs were actually reduced while improving quality of life for employees and their families.
Establishing Policy beyond FMLA
The Family Medical Leave Act (FMLA) was federally enacted in 1992 to secure 12 weeks of unpaid leave for employees without having their jobs in jeopardy. But companies like Nike, AT&T, GlaxoSmithKline, and Intel have already been implementing additional eldercare programs to promote a better work/life balance for employees facing family caregiving challenges. Programs include more flexible schedules, online caregiving support groups, telecommuting arrangements, more generous PTO programs, and even skill building courses for caregiving employees called "Powerful Tools for Caregivers." Companies are also taking advantage of referral programs to each region's federally-funded Area Agency on Aging that can direct employees to additional services for aging in place and transitional care benefits.
With the global rise in health care costs, it is important that more and more companies step up and provide eldercare and caregiving incentives, not only to help protect their bottom line, but to uphold ethical standards in a globally transitioning society. America is still in a unique position to provide for our aging population. Unlike China, whose government shoulders the entire financial burden for healthcare, including home care for seniors, corporate America still has the ability to shift the tide in caring for our aging loved ones, in turn creating jobs for caregivers and having a positive economic impact on our nation at a time we need it the most.
The Economic Impact of Global Healthcare Costs
As the population continues to age at a rapid pace, the economic effects are felt at all levels of local, regional, and global economies. The impacts are felt in health-related expenditures, the labor supply, and in regard to pensions and investments. As social program costs continue to escalate from the increasing number of eligible recipients, along with the increase in life expectancy, how can an assessment of these demographic changes help Americans of all ages prepare for the escalation of such an economic swing? What is more, how can we prepare for the impact of global healthcare costs on our economy as the population of the world ages?
Economic Losses from Healthcare Costs and Disease
In America, the greatest culprits of failing health are cancer, stroke, and heart disease, as is usual in most high-income, developed countries. Failing health associated with such non-communicable diseases as the above increases long-term healthcare expenditures across the board, with no respect to income level. While the prevalence of infectious disease, or communicable disease, is related to developing nations with lower-income and younger populations, there is a growing transition in the landscape of our global disease burden. In nations rich and poor, mortality rates are going down from infectious diseases that once prevented many people from reaching old age at all. Meanwhile, the rates of non-communicable diseases are going up, requiring long-term healthcare for longer periods of time worldwide.
The economic impact of this disease burden has been estimated by the World Health Organization to result in annual economic losses from $20 miillion in America to around $1 billion in India and China. With no preventative measures those economic losses are estimated to burgeon. From a global perspective, the economic losses these countries face will in turn affect the United States.
Preventative Measures to Minimize Health-related Economic Losses
SAGE has been moving to create awareness and further study the health care costs associated with aging in less developed countries. As health care costs continue to rise, as does the life span, a globalized pressure will be felt in the coming decades. Data collection projects, like SAGE, play a crucial role in linking the changes in overall health status to health expenditures in countries rich and poor. This data may impact household decisions, such as hiring home health care and personal aides to alleviate the economic pressure by adopting a more cost effective, family- and home-centered model.
The Workforce Impact on Economic Productivity
Labor Shortage and Productivity Losses
Another area in which economies will feel a greater pinch, some more than others, is the area of lost labor as a large percentage of the working force phases out and into retirement. Combined with a decrease in the working age population from a global decline in fertility, countries will be facing a downsizing of the workforce. While less developed nations are able to shift their economies to more capital-intensive sectors rather than labor driven, it is harder to do so in developed nations like America. Yet it isn't all doom and gloom.
Minimizing Labor Shortages with Immigration and Collaboration with other Nations
With its usual innovative resolve, America has looked for solutions. There has been an expansion of opportunities for growth during this transitional time. One particular strategy that seems to be paying off is the migration of workers from nations less affected by a surging elderly population to a developed one that is being affected more. An example of this is found in immigration from South East Asia, the Caribbean, and some African countries coming to America to work in the health care industry. Immigrants from these three countries now comprise 22% of our doctors and 12% of our nurses. But as the issue of an aging population is felt worldwide, the solution found in immigration is not a complete one.
Peak Productive Ages and Strengthening the Economy
When Americans retire, their source of income is generally three-fold. They receive Social Security benefits, use private retirement funds, and tap savings. The amount saved and contributed to retirement funds while working greatly affects the rate of consumption we have in putting money back into the economy later in life. The concept of peak productive ages corresponds to a peak age for savings. So, at the time we are making the most money, we are also saving the most. The peak productive age is a person's 40s and 50s. Given where we are at in the expected timeline for the rest of the Baby Boomer generation to enter retirement, the next 20-30 years could play a vital role in economic stability.
According to researchers across an interdisciplinary longitudinal study base, the following implementations can go a long way to boost saving capacity and increase returns back into the economy through a theory known as the life-cycle of consumption and savings. These implementations would include:
The theory states that as households accumulate wealth during the working years, they are more prone to set aside savings so that consumption, or way of life, can be maintained in retirement. In countries with higher proportions of elderly people, more savings are being used, causing a scarcity of capital.
The key is to improve returns, or consumption, in a labor-driven economy when the elderly population is greater than the workforce. To do this, the economy must be strengthened and opened up to encourage workforce participation. When countries have higher rates of inflation, high unemployment or underemployment rates, and large numbers of lower-income based populations are relying upon underfunded social programs, those in their peak production age group are less likely to save enough money to ease financial burdens later in life for the simple reason that there just isn't enough money to go around.
To ease the economic burden of an aging population, a nation must bolster its economy...
The workforce problem of an aging population is felt in relation to the strength or weakness of the economy long before the impact actually hits. During the most recent recession, which America has not yet fully come out of, many people lost a significant portion of their retirement, lost their homes, and many lost their jobs or had to take underpaid positions and mandatory furlough days. To ease the economic burden of an aging population, a nation must bolster its economy while at the same time experiencing an unprecedented labor shortage. This is not an easy task and we have not faced it to this degree before.
To help solve this globe-spanning, unprecedented challenge, numerous cross-national efforts have developed to help provide policy makers with evidence-based solutions. Groups such as SAGE, the Survey of Health, Ageing and Retirement in Europe (SHARE), and the International Network for the Demographic Evaluation of Populations and Their Health (INDEPTH), are just three efforts currently working towards practical strategies and cross-collaboration between nations. It would appear we are in a learning curve and in a time when our economy was not prepared to handle the demands we are facing.
However, some companies are working towards increasing private contribution rates to help counter the burden of a swelling retirement population, and governments may look at reshaping certain programs to reflect a higher eligibility age given longer life spans. The statistics from ongoing studies will go far in influencing policymakers and help to lessen the economic impact of a globally aging society, but as of now, we are behind the curve and have a lot to learn.
Learning From China: Poverty and Economic Growth
In looking at China with their aging population crisis, time spent as a communist country did them no favors. The workforce was highly specialized, and undiversified work experience contributed to a less dynamic labor market. Lower labor participation rates in the older generation were also found. The People's Republic of China is more socialist today and the country is developing in its own way to a more free market system, which is bolstering their economy.
However, even with great speculation and controversy surrounding China's still "developing" label and currency manipulation, the best evaluations put the percentage of Chinese living in poverty only between 7 and 15% of the population, depending on which poverty standard is used. While that number has seen leaps and bounds of improvement and is dramatically down from 85% in 1981, they are facing an overburdened public service program, including the previously mentioned healthcare crisis. This was partially brought about by previous low-income generations unable to contribute to savings and private investments.
America is currently hovering at around 15% of its population living below the current federal poverty line. There has been congressional talk over the recent years about ways to reflect a more accurate poverty level to account for healthcare costs, ever rising inflation, and, most importantly, geographic locations. The same poverty measurement shouldn't be used in San Francisco as it is in a rural Kansas town, but right now it is. Yet adjusting the poverty level has not been met with open arms. As soon as a proposed updated model is applied, our national poverty level soars upwards to 20% and more. It appears poverty level reform is in gridlock.
Nevertheless, increasing the population that is in poverty...
This is significant as America continues to swirl in a politically intense storm and faces the possibility of moving towards a socialist economy that prioritizes redistribution of wealth-a good for some and not for others system. Nevertheless, increasing the population that is in poverty (and thus in need of government funded programs) during a time of an already historically occurring economic shift of less available capital from an aging society, would pressure social programs greatly and render middle class citizens less capable of savings contributions at a time when we need them the most. Without taking economic precautions now to increase labor productivity, increase capital, and promote a generation of savers, we could set ourselves up for a situation such as China is trying to climb out of.
Family Challenges Associated with Aging Demographics
As we age, family becomes more important. We realize that we have less time with those we care about most. Children grow and grandchildren become a highlight of our lives. Yet for a larger percentage of people than ever before, being unmarried has become more common from a cultural perception change and/or a high divorce rate. According to the Why Population Aging Matters study, averages of 20% of women are remaining childless in modern societies, with numbers rising in Southeast Asia, Latin America, Europe, and North America. Some estimates are as high as 33%.
The lack of children to become future family caregivers has left an impression; however, it seems to be fitting modestly within a more modern approach to aging. According to multiple research studies across the board, people want to remain as independent as possible. Just a couple generations ago, living alone and independently was seen as being ostracized by the family. Today, it seems the stage has been set with longer life spans, technological advances to increase mobility, and the proliferation of senior citizen communities for the elderly, to diminish the need for more family involvement. Yet not everyone is comfortable with this model, and it doesn't conform to what most experts agree on: the way to remain independent longer is with the help of family caregivers.
...many women do not have the accumulated assets and other pensions of their male counterparts.
In America, the rate of unmarried women has increased and is expected to rise sharply in the next twenty or so years. With this trend comes the reality that many women do not have the accumulated assets and other pensions of their male counterparts. Men are more likely to have accumulations, but less likely to form social and familial support systems. For these reasons and others, the way people have always aged is on a track to becoming more difficult.
It would appear that many of the solutions will be arrived at by trial and error and nations learning from one another what to do and what not to do. Our planet is faced with a demographic swing we have never seen before, and we have been caught largely off guard. The impact is far greater than the post war Baby Boom and the Baby Bust during the Great Depression combined.
The dimensions of a globally aging population have created a delicately interwoven fabric where a wrinkle on one end creates a wrinkle on the other. There are no easy solutions, and solutions vary from nation to nation. In America, our best way to navigate this new territory is to find ways now that will bolster our economy, free up much needed capital, continue to encourage private pension participation, and prioritize caregiving with aging in place.
Our older generation still has much to contribute to our society and to the well-being of our families. The demographic challenges that are to peak in 2020 will present unavoidable bumps in the road and necessary course corrections in America. As long as we can maintain the goal of upholding quality of life, we should be able to look back on this time and see the resolve of the American people shine through.
National Institute on Aging, National Institutes of Health, U.S. Department of Health and Human Services and the U.S. Department of State. (2007). Why Population Aging Matters: A Global Perspective. Available at http://2001-2009.state.gov/documents/organization/81775.pdf. Last Visited February 5, 2016.
National Institute on Aging, National Institutes of Health, U.S. Department of Health and Human Services and the World Health Organization. (2011). Global Health and Aging. Available at https://d2cauhfh6h4x0p.cloudfront.net/s3fs-public/global_health_and_aging.pdf. Last Visited February 6, 2016.
National Institute on Aging. (2015). Assessing the Costs of Aging and Healthcare. Available at https://www.nia.nih.gov/research/publication/global-health-and-aging/assessing-costs-aging-and-health-care. Last Visited February 5, 2016.
McClam, Erin. (May 3, 2013).There May Be Millions More Poor People in the U.S. than You Think. NBC News. Available at http://www.nbcnews.com/feature/in-plain-sight/there-may-be-millions-more-poor-people-us-you-think-v17671753. Last Visited February 6, 2016.
MetLife Mature Market Institute, National Alliance for Caregiving, and University of Pittsburgh Institute on Aging. (February 2010). The MetLife Study of Working Caregivers and Employer Health Care Costs. Available at https://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-working-caregivers-employers-health-care-costs.pdf. Last Visited February 4, 2016.
World Health Organization. (2015). China Country Assessment Report on Ageing and Health. Available at http://apps.who.int/iris/bitstream/10665/194271/1/9789241509312_eng.pdf. Last Visited February 6t, 2016.