[Vision2020] Graying of America
Dale Courtney
dale@courtneys.us
Fri, 18 Jul 2003 16:12:24 -0700
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In case someone should think "why should I care about Europe's
Population Implosion" or "what does that have to do with Moscow"...
Population Aging
Following World War II, there was a dramatic increase in fertility =
rates
in the United States. Rates began to soar in 1946 and, although they =
peaked
in 1957, their effect on annual birth rates persisted until 1964. =
Following
the post-war increases, fertility rates plummeted and, since the early
1970s, have remained below zero population growth.
<http://www.courtneys.us/MSD/images/Fertility.jpg>=20
The baby boom generation (those born between 1946 and 1964) is 50
percent larger than the generation it is now supporting in retirement. =
The
post-1964 baby bust generation, on the other hand, is smaller than the
generation that it will eventually have to help to support.
Not only are there relatively fewer younger people, but the older =
people
they are expected to help support in retirement are living longer as =
well.
When Social Security began paying benefits in 1940, only about half of
21-year-old men could expect to reach 65 to collect benefits, and those =
who
did could expect to collect benefits for 12 years. It's a dirty little
secret, but the African-American average age in the USA has been less =
than
65. So most African-American men could count on paying into Social =
Security
for their entire lifetimes and not expect to get a dime out of it.=20
By 1990, nearly 75 percent of them could expect to reach 65 and =
collect
benefits for 15 years. These trends are expected to continue at least =
until
the middle of the 21st century. At that time, an expected 83 percent of
21-year-old men will reach 65, and they can expect to live another 18 =
years.
The past and projected mortality gains for women are equally impressive.
Historic and Projected Changes in=20
U.S. Life Expectancies, 1940-2050
Year cohort
turns 65
Percentage surviving from age 21 to 65
Remaining Life Expectancy at 65=09
Male Female Male Female=09
1940 54 61 12.7 14.7=09
1950 56 65 13.1 16.2=09
1960 60 71 13.2 17.4=09
1970 64 77 13.8 18.6=09
1980 68 81 14.6 19.1=09
1990 72 84 15.3 19.6=09
2000 76 85 15.8 20.1=09
2010 78 87 16.3 20.5=09
2020 79 88 16.8 21.0=09
2030 80 89 17.2 21.5=09
2040 82 89 17.6 22.0=09
2050 83 90 18.0 22.4=09
Source: Retooling Social Security for the 21st Century, C. Eugene =
Steuerle
and Jon=09
As a result, the Social Security Administration estimates that the
number of beneficiaries will more than double by 2050. Moreover, because
longevity has increased, this level of beneficiaries will tend to =
persist
despite the baby bust. Longevity, then, can be expected to permanently
change the age distribution of the population, and even after the baby =
boom
is gone, the number of people over age 65 will not drop substantially.
Changes in the Size of the Workforce
The impact of these demographic trends on the labor force will be
dramatic. The traditional working-age population (those between the ages =
of
20 and 64) has increased by 13 to 20 million in each decade since 1970.
However, it is expected to grow by only seven million between 2010 and =
2020,
and between 2020 and 2030 it is expected to actually decrease by =
700,000.
So, at the same time that the number of expected Social Security
beneficiaries is doubling, there will be fewer potential wage earners
entering the labor force. As a result, the potential number of workers
supporting each over-65 person will plummet. Between 2010 and 2020, the
ratio of the working-age population to the elderly is projected to drop =
from
4.7 to 3.6, and by 2030 it is expected to have fallen to 2.8 working-age
persons for each person over 65.
<http://www.courtneys.us/MSD/images/Ratio.jpg>=20
So what we see for the future is a decreasing workforce trying to
provide more benefits for an ever increasing graying population. By 2030
there will be less than 3 working people for every retired person =
(assuming
that people retire at 64). That means that the tax burden on the next
generation just for Social Security will nearly double from what it is
today.=20
<http://www.courtneys.us/MSD/images/SSA_Outlays.jpg>=20
By 2010, workers will be unable to keep up with the outlays for =
Social
Security. At that point, there will only be a few decisions open to us:=20
* Cut benefits,=20
* Raise taxes, or=20
* Push out the retirement benefit age even further -- perhaps past the
average mortality age again, so SSA only has to pay back a few people.=20
While our predicament is not nearly as critical as it is in Europe, =
we
are facing our own near-term crisis in the Graying of America.
Source: American Academy of Actuaries.
Best,
Dale Courtney
Moscow, Idaho
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<DIV><FONT face=3DArial color=3D#800000><SPAN =
class=3D107340323-18072003><FONT=20
face=3D"Times New Roman"> In case someone should think =
"why=20
should I care about Europe's Population Implosion" or "what does that =
have to do=20
with Moscow"...</FONT></SPAN></FONT></DIV>
<H2><FONT color=3D#800000>Population Aging</FONT></H2>
<P><FONT color=3D#800000> Following World War II, =
there was a=20
dramatic increase in fertility rates in the United States. Rates began =
to soar=20
in 1946 and, although they peaked in 1957, their effect on annual birth =
rates=20
persisted until 1964. Following the post-war increases, fertility rates=20
plummeted and, since the early 1970s, have remained below zero =
population=20
growth.</FONT></P>
<P align=3Dcenter><FONT color=3D#800000><IMG height=3D647 =
src=3D"images/Fertility.jpg"=20
width=3D750 border=3D0></FONT></P>
<P><FONT color=3D#800000> The baby boom generation =
(those born=20
between 1946 and 1964) is 50 percent larger than the generation it is =
now=20
supporting in retirement. The post-1964 baby bust generation, on the =
other hand,=20
is smaller than the generation that it will eventually have to help to=20
support.</FONT></P>
<P><FONT color=3D#800000> Not only are there =
relatively fewer=20
younger people, but the older people they are expected to help support =
in=20
retirement are living longer as well. When Social Security began paying =
benefits=20
in 1940, only about half of 21-year-old men could expect to reach 65 to =
collect=20
benefits, and those who did could expect to collect benefits for 12 =
years. It's=20
a dirty little secret, but the African-American average age in the USA =
has been=20
less than 65. So most African-American men could count on paying into =
Social=20
Security for their entire lifetimes and not expect to get a dime out of =
it.=20
</FONT></P>
<P><FONT color=3D#800000> By 1990, nearly 75 percent =
of them=20
could expect to reach 65 and collect benefits for 15 years. These trends =
are=20
expected to continue at least until the middle of the 21st century. At =
that=20
time, an expected 83 percent of 21-year-old men will reach 65, and they =
can=20
expect to live another 18 years. The past and projected mortality gains =
for=20
women are equally impressive.</FONT></P>
<DIV align=3Dcenter>
<CENTER>
<TABLE id=3DAutoNumber1 style=3D"BORDER-COLLAPSE: collapse" =
borderColor=3D#111111=20
cellSpacing=3D0 cellPadding=3D3 border=3D1>
<TBODY>
<TR>
<TD colSpan=3D5><B>
<P align=3Dcenter><FONT color=3D#800000>Historic and Projected =
Changes in=20
<BR>U.S. Life Expectancies, 1940-2050</FONT></B></P></TD></TR>
<TR>
<TD rowSpan=3D2>
<P align=3Dcenter><FONT color=3D#800000><B>Year cohort<BR>turns=20
65</B></FONT></P></TD>
<TD colSpan=3D2>
<P align=3Dcenter><FONT color=3D#800000><B>Percentage surviving =
from age 21 to=20
65</B></FONT></P></TD>
<TD colSpan=3D2><FONT color=3D#800000><B>Remaining Life Expectancy =
at=20
65</B></FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000><B>Male</B></FONT></TD>
<TD><FONT color=3D#800000><B>Female</B></FONT></TD>
<TD><FONT color=3D#800000><B>Male</B></FONT></TD>
<TD><FONT color=3D#800000><B>Female</B></FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>1940</FONT></TD>
<TD><FONT color=3D#800000>54</FONT></TD>
<TD><FONT color=3D#800000>61</FONT></TD>
<TD><FONT color=3D#800000>12.7</FONT></TD>
<TD><FONT color=3D#800000>14.7</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>1950</FONT></TD>
<TD><FONT color=3D#800000>56</FONT></TD>
<TD><FONT color=3D#800000>65</FONT></TD>
<TD><FONT color=3D#800000>13.1</FONT></TD>
<TD><FONT color=3D#800000>16.2</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>1960</FONT></TD>
<TD><FONT color=3D#800000>60</FONT></TD>
<TD><FONT color=3D#800000>71</FONT></TD>
<TD><FONT color=3D#800000>13.2</FONT></TD>
<TD><FONT color=3D#800000>17.4</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>1970</FONT></TD>
<TD><FONT color=3D#800000>64</FONT></TD>
<TD><FONT color=3D#800000>77</FONT></TD>
<TD><FONT color=3D#800000>13.8</FONT></TD>
<TD><FONT color=3D#800000>18.6</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>1980</FONT></TD>
<TD><FONT color=3D#800000>68</FONT></TD>
<TD><FONT color=3D#800000>81</FONT></TD>
<TD><FONT color=3D#800000>14.6</FONT></TD>
<TD><FONT color=3D#800000>19.1</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>1990</FONT></TD>
<TD><FONT color=3D#800000>72</FONT></TD>
<TD><FONT color=3D#800000>84</FONT></TD>
<TD><FONT color=3D#800000>15.3</FONT></TD>
<TD><FONT color=3D#800000>19.6</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>2000</FONT></TD>
<TD><FONT color=3D#800000>76</FONT></TD>
<TD><FONT color=3D#800000>85</FONT></TD>
<TD><FONT color=3D#800000>15.8</FONT></TD>
<TD><FONT color=3D#800000>20.1</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>2010</FONT></TD>
<TD><FONT color=3D#800000>78</FONT></TD>
<TD><FONT color=3D#800000>87</FONT></TD>
<TD><FONT color=3D#800000>16.3</FONT></TD>
<TD><FONT color=3D#800000>20.5</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>2020</FONT></TD>
<TD><FONT color=3D#800000>79</FONT></TD>
<TD><FONT color=3D#800000>88</FONT></TD>
<TD><FONT color=3D#800000>16.8</FONT></TD>
<TD><FONT color=3D#800000>21.0</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>2030</FONT></TD>
<TD><FONT color=3D#800000>80</FONT></TD>
<TD><FONT color=3D#800000>89</FONT></TD>
<TD><FONT color=3D#800000>17.2</FONT></TD>
<TD><FONT color=3D#800000>21.5</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>2040</FONT></TD>
<TD><FONT color=3D#800000>82</FONT></TD>
<TD><FONT color=3D#800000>89</FONT></TD>
<TD><FONT color=3D#800000>17.6</FONT></TD>
<TD><FONT color=3D#800000>22.0</FONT></TD></TR>
<TR>
<TD><FONT color=3D#800000>2050</FONT></TD>
<TD><FONT color=3D#800000>83</FONT></TD>
<TD><FONT color=3D#800000>90</FONT></TD>
<TD><FONT color=3D#800000>18.0</FONT></TD>
<TD><FONT color=3D#800000>22.4</FONT></TD></TR>
<TR>
<TD colSpan=3D5><FONT color=3D#800000>Source: <I>Retooling Social =
Security for=20
the 21st Century</I>, C. Eugene Steuerle and=20
Jon</FONT></TD></TR></TBODY></TABLE></CENTER></DIV>
<P><FONT color=3D#800000> As a result, the Social =
Security=20
Administration estimates that the number of beneficiaries will more than =
double=20
by 2050. Moreover, because longevity has increased, this level of =
beneficiaries=20
will tend to persist despite the baby bust. Longevity, then, can be =
expected to=20
permanently change the age distribution of the population, and even =
after the=20
baby boom is gone, the number of people over age 65 will not drop=20
substantially.</FONT></P>
<H2><FONT color=3D#800000>Changes in the Size of the =
Workforce</FONT></H2>
<P><FONT color=3D#800000> The impact of these =
demographic trends=20
on the labor force will be dramatic. The traditional working-age =
population=20
(those between the ages of 20 and 64) has increased by 13 to 20 million =
in each=20
decade since 1970. However, it is expected to grow by only seven million =
between=20
2010 and 2020, and between 2020 and 2030 it is expected to actually =
decrease by=20
700,000. So, at the same time that the number of expected Social =
Security=20
beneficiaries is doubling, there will be fewer potential wage earners =
entering=20
the labor force. As a result, the potential number of workers supporting =
each=20
over-65 person will plummet. Between 2010 and 2020, the ratio of the =
working-age=20
population to the elderly is projected to drop from 4.7 to 3.6, and by =
2030 it=20
is expected to have fallen to 2.8 working-age persons for each person =
over=20
65.</FONT></P>
<P align=3Dcenter><FONT color=3D#800000><IMG height=3D563 =
src=3D"images/Ratio.jpg"=20
width=3D492 border=3D0></FONT></P>
<P><FONT color=3D#800000> So what we see for the =
future is a=20
decreasing workforce trying to provide more benefits for an ever =
increasing=20
graying population. By 2030 there will be less than 3 working people for =
every=20
retired person (assuming that people retire at 64). That means that the =
tax=20
burden on the next generation <U>just for Social Security</U> will =
nearly double=20
from what it is today. </FONT></P>
<P><FONT color=3D#800000><IMG height=3D563 =
src=3D"images/SSA_Outlays.jpg" width=3D530=20
border=3D0></FONT></P>
<P><FONT color=3D#800000> By 2010, workers will be =
unable to=20
keep up with the outlays for Social Security. At that point, there will =
only be=20
a few decisions open to us: </FONT></P>
<UL>
<LI><FONT color=3D#800000><SPAN class=3D013561023-18072003>C</SPAN>ut =
benefits,=20
</FONT></LI>
<LI><FONT><FONT color=3D#800000><SPAN =
class=3D013561023-18072003>R</SPAN>aise=20
taxes, or </FONT></FONT></LI>
<LI><FONT><FONT><FONT color=3D#800000><SPAN =
class=3D013561023-18072003>P</SPAN>ush=20
out the retirement benefit age even further -- perhaps past the =
average=20
mortality age again, so SSA only has to pay back a few people.=20
</FONT></FONT></FONT></LI></UL>
<P><FONT color=3D#800000> While our predicament is not =
nearly as=20
critical as it is in Europe, we are facing our own near-term crisis in =
the=20
Graying of America.</FONT></P>
<P><FONT color=3D#800000>Source: <I>American Academy of =
Actuaries</I>.</FONT></P>
<P><FONT color=3D#800000>Best,<BR>Dale Courtney<BR>Moscow,=20
Idaho</FONT></P></BODY></HTML>
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