In the coming week we’ll see a convergence inside the Beltway of the ongoing budget debates and the annual meeting of the American Society on Aging (ASA) – an occurrence that underscores the grave mismatch between this century’s demographics and the 20th century’s social welfare policies. As Americans live longer (and we’ve added 30 years in the last century), is it any wonder the country can no longer afford those “entitlements”?
This debate goes far beyond American shores: In the UK, a contentious budget debate is underway, and in Singapore, special employment credits are now given to businesses for older workers, who are an increasingly important resource.
But keeping aging workforces active relies on healthful aging, and this is a crux of the ongoing debates. In the U.S., with Paul Ryan’s 2013 federal budget on the table, health care spending is sure to dominate the coming election. To find the right solution to the health care question, first we need to fundamentally rethink what it means to age in the 21st century. There are two areas where this focus is especially critical: decreasing the old-age dependency ratio, and increasing our efforts to enable healthy aging.
One: The Old-Age Dependency Ratio Needs to Drop
In the U.S., some 77 million baby boomers are passing through traditional retirement age. With life spans commonly running into the 80s and 90s, the number of older dependents within the American economy will skyrocket. Already, the U.S. old-age dependency ratio is 22, meaning that for every 100 working-aged individuals there are 22 people over 65, roughly a 5:1 ratio. Already almost double that of China, this ratio is going to devastate the American economy if it continues on its current trajectory.
Sound exaggerated? It’s not. Just look across either ocean, which is why in Singapore – even “older” than America, the UK or China – has gone back to re-employing older workers. But it’s equally true across Europe. In Italy, where the dependency ratio is 34 and where the European social welfare system has failed to adapt to new demographic realities, the national economy has tanked. Many are now predicting that Italy, once one of Europe’s strong economies, will become the next Greece. And in Japan, where the old-age dependency ratio is the highest in the world at 38, the country is on the brink of crisis.
The underlying reason for the meltdown of these two traditional economic powerhouses is the failure to integrate aging populations into the fabric of social and economic life. Retirement and pensions for 20 to 30 years for as much as 40 percent of the population relies upon an impossible arithmetic.
Two: Efforts to Enable Healthy Aging Need to Increase
The second key to economic growth given the aging phenomenon is to invest in and create paths for healthy aging. This means, first and foremost, treating and preventing the non-communicable diseases (NCDs) directly related to aging. As the U.N. recognized last September in a historic summit, the new global health threat is comprised of diseases like Alzheimer’s, diabetes, and cardiovascular disease. The World Health Organization agrees, referring to NCDs at “the invisible epidemic.”
As the American population ages, NCDs rates will skyrocket. The risk of death from cardiovascular disease, for example, rises dramatically with each decade of life, and the story is similar with diabetes and Alzheimer’s. So the burden of NCDs is two-fold. It costs billions each year to treat the diseases, and yet millions of workers become isolated from the rest of society when they suffer from these diseases. From an economic standpoint, the sword is double-edged.
Looking ahead, we need to concentrate not on who pays for Medicare but on how to reduce the overall costs. Not only does the Ryan or Obama budget fail to recognize this, it’s also not being addressed elsewhere around the world. A solution may not be in budgets but in a culture shift on what “old” means in our new century, and how one remains an active economic contributor into the 70s and 80s. It’s a great topic for the ASA next week in D.C. as it grapples with the future of our increasingly older populations.