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The U.S. economy is performing better than expected with inflation pressures moderating even as 517,000 jobs were added in January and the unemployment rate fell to 3.4%.
The unemployment rate for workers 55 years and older dropped from 2.7% in December 2022 to 2.3% in January 2023.
That said, there is an underlying unease in many corners of Wall Street and in Washington, D.C. The worry is that the risk of long-term stagnation and the aging of the population gets much of the blame.
We know the numbers, but to give one illuminating figure, the Census Bureau expects America’s 65 and over population will exceed those under 18 in 2034—a historic first. Labor force growth is expected to stay low, thanks to the combination of lower fertility rates (fewer children) and longer life expectancy (more retirees). The combination of too few working-age adults supporting too many dependent elderly is considered toxic for growth by many economists. The costs of paying for Social Security and Medicare will weigh on the economy.
Read: 7 tax tips for seniors to make the most of your deductions
The dire demographics of aging was best captured recently by Ross Douthat, columnist with the New York Times. He was reacting to the news that China’s population fell in 2022 for the first time in decades.
“This means that just as China emerges as an almost-superpower, it’s staring into a darkened future where it grows old and stagnant before it finishes growing rich,” Douthat writes. “Meanwhile, variations on that shadow lie over most rich and many middle-income nations now—threatening general sclerosis, a loss of dynamism and innovation, and a zero-sum struggle between a retired population and the overburdened young.”
Read: If the labor market weakens, older workers will be among the hardest hit
Sclerosis! Zero-sum! Loss of dynamism! (At least he didn’t say “silver tsunami.”) How about a historic opportunity for greater innovation, creativity and productivity among experienced workers and second-act entrepreneurs? Seriously. Rather than hand-wringing about success at achieving gains in longevity over the decades, how about spending the time and resources to find ways to improve the quality of long-lived lives for everyone, as well as lengthening their time at productive and meaningful work?
Now that’s a challenge worth embracing.
The sheer scale of the 50-plus cohort’s current economic contribution is vastly underappreciated. For instance, in 2018 the 50-plus population accounted for $8.3 trillion in annual economic activity, or 40% of the total (plus an additional $745 billion in unpaid activities like caregiving and volunteering), calculates AARP and the Economist Intelligence Unit in The Longevity Economy Outlook.
One of the most powerful social and economic trends of the past three decades has been older workers staying employed or looking for work well into the traditional retirement years. The labor-force participation rate—the share of people employed or actively seeking a job—for those 55 years and over rose over the past 30 years from 29.2% in January 1993 to 38.7% in 2023. (The rate declined from 40.2% in January 2020 with the pandemic.) The most impressive change is the embrace of entrepreneurship and self-employment by experienced workers. The 55- to 64-year-old age group accounts for about a quarter of all new entrepreneurs in recent years, up from nearly 15% in 1996.
Retirement is being reimagined and redefined to include some kind of attachment to the job market, such as part-time work, encore careers, phased retirement, and bridge jobs. A variety of factors lie behind the shift. Experienced workers are better educated and healthier (on average) than their parents were at comparable ages. Work is less physically taxing in a high-tech service-oriented economy. Many people don’t want to walk away from the skills and knowledge developed over the years —although they often want to change jobs and put in fewer hours. On the negative side, most people nearing retirement have nothing or little in retirement savings. They need to earn an income for another couple of years if possible.
Age-pessimists underestimate how automation will encourage longer work lives by reducing the physical and mental strain of many jobs. In “Secular Stagnation? The Effect of Aging on Economic Growth in the Age of Automation, ” economists Daron Acemoglu (MIT) and Pascual Restrepo (Yale) couldn’t find confirmation of the popular bias that there is a negative relationship between population aging and slower growth of GDP per capita. They speculate one reason is automation, “the adoption of technologies performing tasks previously done by labor.”
Since the Industrial Revolution at least, the diffusion of technological innovations and organizational improvements have dwarfed the impact of demography. There is every reason to anticipate with the rise of artificial intelligence, robots, automation, and other advances that productivity gains will continue to dominate demographic trends.
Read: Five steps to guide you through the retirement-decision-making process with your partner
The economic and social task is to avoid ageist fearmongering and instead adopt a mind-set geared toward seizing the investment opportunities opened up with aging. Building an economy and society that taps into the knowledge and experience of older workers for longer periods of time involves everything from convincing management to abandon ageist stereotypes to getting policy makers to invest in lifelong learning institutions. Enormous strides toward healthy longer work lives for everyone could be made by eliminating deeply entrenched health and income disparities in the U.S.
Read: Some older workers are being welcomed back to the workforce
Transitions are never easy, and they always take longer than expected, whether it’s individuals trying to change careers or society attempting a massive cultural overhaul. But the mind-set of opportunity rather than scarcity will accelerate the transformation for the better.
“Longer lives mean changes to when we are educated or married, when we have children, how long we work, and how we spend not just old age, but also youth and middle age,” writes Andrew Scott, professor of economics at the London Business School in an essay for the International Monetary Fund.
“From this perspective the question is not ‘How do we afford an aging society?’ but ‘How do we restructure behavior to make the most of longer lives?’”
