Reframe the 'Growth vs. Austerity' Debate
By MICHAEL HODIN,
Posted: May 11, 2012
From Athens, Greece, to Madison, Wisconsin, the common theme today is said to be “austerity versus growth.” In reality, we’re hearing little about what’s driving the growth side and a great deal about the disasters to come from cutting benefits. This dichotomy is perhaps most pronounced in Europe, where the “austerity versus growth” headlines rage. The terms “austerity” and “growth” have appeared within ten words of each other 380 times in major world publications in the past week alone, according to a Lexis Nexis search.
The discussion of these concepts continues to be framed as an either/or. There are the tight-fisted Germans led by Angela Merkel – and Mediterranean Europe that’s holding onto 20th-century ideas of work, life, and aging. The debate has become so entrenched that one can be forgiven for thinking it is either austerity or growth.
But there’s an alternative to this bifurcated rhetorical gridlock. If aging populations can break out of traditional roles of dependency to contribute to social and economic life, societies can find the magical balance of growth and what is now called austerity. Sound fantastical? It shouldn’t. It’s actually straightforward arithmetic and can be summarized in a 21st-century model of working life that connects to the fact we’re regularly living into our 90s.
The Economic Promise of Aging Populations
Take Greece, as an example, where much of the debate started over two years ago. The median age in Greece now is 41.4, while the country’s average retirement age is 53! By 2030, the average Greek will be 47, just six years shy of retirement. What’s more, the country’s old-age dependency ratio is at 3 to 10: For every ten people who are of working age, three are retired and economically dependent. By contrast, when President Roosevelt instituted Social Security in this country, there were over 40 workers for every one recipient.
There’s simply no demographic relief ahead. The Greeks have one of the lowest birth rates in the world, with just 1.39 babies born per woman in her lifetime. Of 222 countries analyzed for birth rates by the CIA World Fact Book, Greece ranks 203rd.
According to U.N. estimates, the country’s old-age dependency ratio will be 37 to 100 by 2030, and 55 to 100 by 2050.
Think about it: By mid-century, every two working Greeks will be responsible for supporting one elder. It’s a shocking ratio that makes today’s already devastating demographic balance seem quaint.
At its core, the debate in Wisconsin is similar. The governor’s leadership has challenged the trade union demands for a youthful retirement to be paid for by the state.
In the face of the overwhelming demographic facts, Greece and Wisconsin will have to shed their antiquated notions of work and retirement. Governor Walker is effectively leading a progressive 21st century approach to work and life that might be followed by politicians in Athens, where an unsustainable 30 percent of the citizens will be over age 60 by 2030. Even if you believe in the economic promise of austerity, there are simply no cost-cutting measures to buoy an economy with one-third of the people retired and a sub-replacement birth rate.
If we can begin to integrate our aging population into economic life, the payoff would be two-fold. First, it would stop the bleeding brought about by bygone retirement schemes and entitlements. Second, it would add GDP to the economy by growing the skilled workforce. Sure, the workplace of today is far different than it was 20 and even 10 years ago – but this can’t be an excuse to marginalize the aging. Instead, the older population is Greece’s and the world’s greatest hope for economic growth and recovery; and this group has decades of experience and expertise to offer.
Throughout Europe, the story is much the same. Only Turkey, France, and Ireland have birth rates over 2.0, and the average old-age dependency ratio in Europe is 25 to 100; it will climb to 47 to 100 by 2050.
The developed world’s economies are headed for social, political, and economic disaster if the terms of the debate are not transformed to include the extraordinary and untapped potential of aging populations as a central part on the growth side.
Michael W. Hodin, Ph.D., is Adjunct Senior Fellow at The Council of Foreign Relations and Executive Director of The Global Coalition on Aging.