Memo to the winner of Tuesday’s presidential election: Creating jobs, and how you do your job, Mr. President, will depend on whether and how you deal with the most massive shift of resources the world has ever experienced – the demographic aging of our population. Don’t be lulled into addressing merely the short-term financial needs of this country, serious as they have been since ‘08.
You’ve got to also change the trajectory of the long-term “burden of aging-related spending,” as the S&P report, Global Aging 2010: An Irreversible Truth, warned two years ago. “The sharp rise in government debt as a result of the financial crisis and the recession that followed has made action more urgent,” the report said. It concluded that if urgent action wasn’t taken, 60 percent of countries around the world would be bankrupt by mid-century, including the U.S.
It’s a sobering thought. And it’s why the winner of America’s presidential race will need to deal with the profound structural demographic facts that have been masked and exacerbated by this country’s financial crisis. The aging of our population is a tsunami with huge economic consequences that are far more profound than the immediate recessionary conditions we’ve been addressing.
There is a great need for profoundly new approaches to retirement, given this new century’s demographic realities. Alarm over the issue is increasingly evident in surveys and studies from financial institutions on both sides of the Atlantic. This past week, research from Bank of America Merrill Lynch revealed that Americans are planning to work longer due to the inadequacy of their investment portfolios.
The retirement phenomenon is extending globally, as populations age globally. And Aegon's CEO Alex Wynaendts got it exactly right a few months ago when the firm released its own research: “A concerted effort is needed to reconsider traditional retirement models and provide greater flexibility for phased retirement. If current pension systems are not adapted to the new realities of longer life spans and declining government and employer funding, the burdens placed on society will be a source of even greater economic and societal turmoil in the future.”
In America, the point was driven home by the recent Wells Fargo study that said that more people believe a realistic retirement age might just be closer to age 80. “Thirty percent of middle-class Americans believe they will need to work until they are at least 80 years old in order to retire comfortably… an increase of 25 percent from a year ago,” the study said. It also showed that Americans are beginning to take greater ownership of their finances for retirement, “saying their savings and investment should make up 50 percent of their retirement funding, 27 percent through a pension or savings account and 24 percent through Social Security.”
So, Mr. President-elect: Pay attention to the policies and institutional reforms relevant to the fact that retiring by 65 is an obsolete artifact of the 20th century. Longevity and the stunningly low birth rates have conspired to reconstruct the age of our population. Since this is increasingly a global challenge, as countries from Turkey to Brazil and Mexico to China join the U.S., Europeans, Japan and South Korea with citizens over age 60 a rapidly larger proportion of their overall population, it is also a chance for America to lead.
The call for an American strategy for older workers to remain vital economic contributors is a classic win-win. Americans ages 60 to 80 can continue to create wealth and contribute to economic growth. This will shorten the time they’ll need to tap public and private entitlement systems, which are becoming increasingly meager as ratios of old to young become further imbalanced and unsustainable. A new administration would then have a powerful platform for American leadership – on the most massive demographic shift the world has ever experienced.