May 12, 2014

Down for the Count

The US Census Bureau released a new report this week about our aging population. Actually, it came out with 4 separate estimates, each based on slightly different underlying assumptions about developments in the next 40 years. The age structure of the population depends on 3 factors: fertility, mortality, and immigration. It turns out we can be fairly confident about the first two; the last one is far more uncertain. What was fascinating about the report is what most news media didn’t say about it.

Many major news outlets didn’t mention the report at all. I suppose it’s not exactly newsworthy, in that it’s just an updated version of earlier projections, based on the latest available statistics. The NY Times focused on 2 pieces of data: the absolute size of the elderly population: 43.1 million in 2012 and nearly double that, or 83.7 million, in 2050; and the fact that while this may seem dramatic, the numbers are far more dramatic in other parts of the developed world. People over 65 will make up just over 20% of the US population in 2030 (the peak year of the elder explosion, when all the baby boomers will have turned 65),  but in Japan they will make up 33% of the population and in Germany 28%.  Reuters, as reported by Business Insideralso points to the absolute and relative size of the aging population in the US. In addition, it comments on the male/female ratio among old people: right now, 66.6% of Americans over 85 are women, but in 2050 the gap between the sexes will have narrowed, and 61.9% will be women. Finally, Business Insider notes that our society in general and old people in particular will be more racially and ethnically diverse in another 40 years.

What I didn’t see commented on was the changing old age dependency ratio (the population age 65 and over divided by the population from 18-64, multiplied by 100). Right now in the US this ratio is about 21, which means there are roughly 5 working age people to support each old person. In 2030, the ratio will be 35, or only about 3 working people per oldster. That means that every person will have to devote a larger fraction of his or her effort to providing for their elders. But these projections are for the “middle series,” the average of the various predictions. Immigration will play a critical role in determining the actually age structure of the US population over the next 40 years. It will dramatically impact the size of the working age population, the people who will be responsible for most of the economic output of the country—and for supporting the older generation. By 2050, the “High Series” projects 10 million more people age 18-64 than does the “Middle Series." This is because we’re likely to see only modest changes in either fertility or mortality rates in the coming years. The one area where we do have a choice—because it reflects political, not scientific factors—is immigration. So if we want to have a maximally productive economy, and parenthetically if we want to have a way to care for all those old people, we need to increase immigration. And we better start now.

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