Much has been written in business and social science research literature during the past ten years about the fact that the demographics of age in the United States are poised for a significant shift in the coming decades. As the Baby Boomer generation ages, the federal government and employersworry about whether the traditional structure and delivery of the pension plan system will be adequate to support the number of senior citizens who will be accessing it[1]. As Galasso and Profeta explain, “The increasing ratio of retirees to workers lowers the rate of returns of unfunded pay-as-you-go social security, and induces citizens to prefer smaller such systems and a larger role for private savings.”[2]At the same time, however, the fact that the electorate has aged and that the elderly populationtypically constitute an active voting bloc means that “the relevance of pension spending on the agenda of office-seeking policy-makers [increases] and tends to increase the size of unfunded pension systems” as a result.[3]Clearly, then, a dilemma arises which is not easily understood, much less easily solved. Governments and employers alike must begin now to plan for the dramatic increase in demand that will be placed upon political and pension and economic support systems in general as the population continues to shift disproportionately towards the elderly cohort.

Although this challenge is preoccupying politicians, policy makers, and employers in the United States, the aging trend with its many health and mental issues is by no means unique to this country.?Many other countries, including?China,[4]Japan[5], France, Germany, Italy, Spain, and the United Kingdom[6]are experiencing the same sort of demographic shifts. As a result, governments and employers in these countries are also aware that their pension plan and social security systems are in need of review and, in many cases, dramatic overhaul.[7]Policy makers and program administrators recognize that if they do not plan adequately to anticipate the needs and demands that the aging population will present, they will face crises that are not limited to the care of the aged, but which may threaten the very stability of national economies, and even the world economy.[8]Yet while the economic needs of the aging population may be clear, the competing interests of various stakeholder groups make the development of a viable policy challenging work.[9]

As Galasso and Profeta point out, for instance, politicians who want to retain their positionsin the government or who have their vision set on a higher office often capitulate to the demands of the elderly electorate, which calls for more generous pension plans and social support resources and services.[10]The reforms that the politicians then enact by means of political legislation create undue burdens on the rest of the economy, locking the priorities of the elderly into place while sacrificing other important components of national finances. Furthermore, Galasso and Profeta observe, while the reforms that are enacted in favor of the elderly do respond to that electorate bloc’s perceived needs, such legislation is often not based in a thorough assessment of actual needs, which can only be substantiated through economic research and thoughtful forecasting practices employed by economists.[11]Galasso and Profeta contend that the political ambitions and motivations of legislators always triumph over meaningful economic analysis, setting developed countries up for future economic crises when the predicted and inevitable demographic finally does occur.[12]

There are at least two dominant ideological arguments that have been posited to anticipate the potential effects that the so-called graying of the world’s population may have on economies, both on the micro-level (i.e.: national) and on the macro-level (i.e: global).[13]The first scenario, which is the more frequently discussed of the two,?is the typical doomsday forecast. This scenario is characterized by worries about a massive vacuum left in business by professionals retiring in exodus.[14]This scenario is particularly worrisome for particular professions, such as teaching and nursing, in which acute shortages of skilled and trained employees already exist, but the impact of the exodus, if it in fact occurs, will be felt throughout the economy. As Purcell explains,?a mass retirement will affect the total density of the labor force.[15]In turn, the size of the labor force will determine the extent to which the country can produce its core goods and services, both for domestic consumption and for export, the cornerstone of many countries’ economies.[16]In an ideal situation, Purcell argues, the rate of retirement is held steady.[17]As he explains, “Other things being equal, fewer retirements in any given year would result in a greater supply of experienced workers available to employers and fewer people relying on savings, pensions, and Social Security as their main sources of income.”[18]It is not yet clear whether this ideal scenario will play out, though it will be important to develop a contingency plan for the possibility that the exodus theory will be realized.

Another possibility, though, and one which has been?studied less than the employee exodus theory, is that older people will work longer than ever before.[19]The reasons why the age of the workforce may lengthen in proportion to the lifespan vary. First, as some social scientists and economists note, the ever-increasing cost of living in developed countries and already under-funded pension programs compel older adults to work throughout the second half of their lives, even if it was never their plan to do so.[20]There is already evidence in the?United States, for example, of a trend in which older workers who reached retirement age and exited their employment have felt themselves forced to return to work in order to fulfill their economic needs.[21]Second, the advances made in medicine and technology in developed countries and the relative accessibility of medical procedures, both necessary and cosmetic, have made it possible both to prolong life and improve its quality. As Oeppen and Vaupel explain, “For 160 years, best-performance life expectancy has steadily increased by a quarter of a year per year, an extraordinary constancy of human achievement.”[22]These advances signify that poor health is less a motivating factor for retirement than was the case historically.[23]Quite simply, people can work longer. Coupled with the steep cost of living in a developed society, many peopleareworking longer than ever before.

Another interesting theory that has been proposed to explain why older adults might begin working later into life has been forwarded by Freedman.[24]Freedman argues that the current generation of aging adults simply refuses to “accept the old notions of later life and retirement.”[25]This generation does not want to be seen as disposable, out of use, or playing marginal roles in the affairs of business and society.[26]For these reasons, Freedman contends, older adults will insist upon their right to and interest in maintaining employment until they simply are unable to perform the duties their profession requires of them.[27]While this theory may be somewhat less compelling than the other two arguments already discussed, there is evidence that supports the theory’s veracity; one need only consider aged executives like Viacom’s 82 year old CEO Sumner Redstone[28]to find anecdotal substantiation for this idea.

While this second theory about prolonged employment into the second half of one’s life may seem to be the antidote to the exodus theory as explained above, it too presents particular challenges that must be taken into consideration. One potential problem noted by Purcell, for instance, is that if older adults stay in the work force longer than has traditionally been the case, this will create constricted employment opportunities for younger adults who are poised to enter the workforce.[29]Thus, while older adults may be working longer to provide for their own economic needs, new needs will emerge in a younger demographic and the consequences may be more severe than the acute need among the elderly who receive federal assistance or dividends from their pension plans. In a worst case scenario, the younger generation could lose a sense of the work ethic and could become dependent upon the government, creating a unique set of economic burdens for which no developed country is likely to be prepared. Thus, regardless of which theory ultimately reflects the reality of older adults’ employment trends, policy makers and program administrators must look at the entire panorama of variables, both domestic and foreign, both at the end of the lifespan and towards its beginning, that might influence and impact economic policy.

Regardless of the theory that economic analysts espouse, the consensus among economists is that any circumstances or situations that result in a profound imbalance in the work force will be likely to cause significant upsets in the economy. The critical questions, of course, are how severe those upsets are likely to be, in what ways they will impact the domestic economy and patterns—both historic and contemporary—of labor, and how persistently they might affect the domestic and global economies. Interestingly, analysts also seem to have arrived at a general agreement about the features that policy makers and program administrators should consider when developing pension plan and social security systems that can realistically respond to the demands that the aging demographic will present in the coming decades. Galasso and Profeta, for instance, call for a diversified strategy that has as its centerpiece a higher minimum age for retirement.[30]Other scholars and analysts call for phasic retirement plans, in which retirement-aged employees can opt to continue working or can choose to retire at the legal retirement age; the theory behind this plan is that the option to continue working will be attractive and will prevent the mass employee exodus theory from being realized. This theory has been experimented with in the United States, producing mixed results, and the literature remains somewhat indecisive with respect to how the phasic plan can best be implemented so that all of the goals of economic stability—for the individual worker, for the national economy, and for the globally economy—can be satisfied.

Worldwide, the population trends in developing countries are reflecting a dramatic shift towards disproportionate representation among the elderly. Despite competing theories that are used to explain the potential effects that this phenomenon might have on the economy, as well as differing theories about what kinds of strategies might be implemented to anticipate and respond to the demands caused by the demographic shift, most developed countries are far behind the curve in terms of planning that should have already been in process to develop functional pension plan and social security systems. Most developed countries, ranging from Australia, China, Japan, the United Kingdom, and other western European nations, as well as the United States, are not well-prepared for the challenges that will inevitably confront their economic, political, and social systems as their populations become grayer. There is still time—though not much—to begin forecasting the different scenarios that could play out and to brainstorm strategies and policies that could be applied to those different possibilities. While it is clear that different stakeholder groups in this debate have competing interests and needs, politicians must set aside their personal ambitions for office and recognize that the economic impact that aging will have on national and international economies will be dramatic and short-term expediency can not be favored over long-term stability.

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[1]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 63.

[2]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 63.

[3]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 63.

[4]Estelle James, Cheikh Kane, and Monika Queisser, “How Can China Provide Income Security for its Rapidly Aging Population?” (1996) World Bank Policy Research Working Paper Number 1674.

[5]Robin Brooks, “Population Aging and Global Capital Flows in a Parallel Universe,”IMF Staff Papers50.2 (2003): 200.

[6]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 63.

[7]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 63.

[8]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 63.

[9]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 63.

[10]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 63.

[11]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 65.

[12]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 64.

[13]James H. Schulz, Allan Borowski, and William H. Crown,Economics of Population Aging: The “Graying” of Australia, Japan, and the United States,(New York: Auburn House, 1990).

[14]Patrick J. Purcell, “Older Workers: Employment and Retirement Trends,”Monthly Labor Review123.10 (2000): 19.

[15]Patrick J. Purcell, “Older Workers: Employment and Retirement Trends,”Monthly Labor Review123.10 (2000): 19.

[16]Patrick J. Purcell, “Older Workers: Employment and Retirement Trends,”Monthly Labor Review123.10 (2000): 19.

[17]Patrick J. Purcell, “Older Workers: Employment and Retirement Trends,”Monthly Labor Review123.10 (2000): 19.

[18]Patrick J. Purcell, “Older Workers: Employment and Retirement Trends,”Monthly Labor Review123.10 (2000): 19.

[19]Jim Oeppen and James W. Vaupel, “Enhanced: Broken Limits to Life Expectancy,”Science296.5570 (2002): 1029.

[20]Anna M. Rappaport and Sylvester J. Schieber,Demography and Retirement: The Twenty-First Century, (Westport, CT: Praeger, 1993): 106.

[21]Anna M. Rappaport and Sylvester J. Schieber,Demography and Retirement: The Twenty-First Century, (Westport, CT: Praeger, 1993): 106.

[22]Jim Oeppen and James W. Vaupel, “Enhanced: Broken Limits to Life Expectancy,”Science296.5570 (2002): 1029.

[23]Anna M. Rappaport and Sylvester J. Schieber,Demography and Retirement: The Twenty-First Century, (Westport, CT: Praeger, 1993): 106.

[24]Marc J. Freedman,Prime Time: How Baby Boomers Will Revolutionize Retirement and Transform America,(New York: Public Affairs, 1999): 24.

[25]Marc J. Freedman,Prime Time: How Baby Boomers Will Revolutionize Retirement and Transform America,(New York: Public Affairs, 1999): 24.

[26]Marc J. Freedman,Prime Time: How Baby Boomers Will Revolutionize Retirement and Transform America,(New York: Public Affairs, 1999): 24.

[27]Marc J. Freedman,Prime Time: How Baby Boomers Will Revolutionize Retirement and Transform America,(New York: Public Affairs, 1999): 24.

[28]Ken Dychtwald, “Ageless Aging: The Next Era of Retirement,”The Futurist,39.4 (2005): 16.

[29]Patrick J. Purcell, “Older Workers: Employment and Retirement Trends,”Monthly Labor Review123.10 (2000): 19.

[30]Vincenzo Galasso and Paola Profeta, “Lessons for an Ageing Society: The Political Sustainability of Social Security Systems,”Economic Policy19.38 (2004): 65.