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Demographics of Aging: Why is Our Population Aging? How Will This Aging Affect Us?
National Press Foundation Presented by Karen Glenn and Steve Goss
Office of the Chief ActuarySocial Security Administration
April 8, 2013
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The US Population is Aging
What does this mean?
Shift toward more elders, because:– Slowed growth for younger ages– Faster growth for older ages
But why?
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The US Population is Aging
Is it the:– Baby boomers?– Individuals living longer?– Lower birth rates?
Yes, to all three
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Under 65 Growth Will Slow — Over 65 Speeding Up
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Age Distribution Shifting Older
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Why Is the Population Aging?
Boomers now reaching retirement age
Yes for a while, but:– This would be a temporary bulge– Would “pass through” over time
Permanent change for other reasons!
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Why Is the Population Aging?
Individuals are living longer
Death rates have been declining
Life expectancies have been rising
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Yes, Death Rates Are Dropping
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And Life Expectancies Are Rising(Note gender gap shrinking since 1980)
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Why Is the Population Aging?
Individuals living longer is just one piece of the puzzle
“Aging” of the Population–Changing age distribution–Recall growth in younger population is slowing
» This is not due to death rates
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The BIG Factor for the Next 20 Years…
Birth rates have dropped
This permanently changes age distribution
Immigration has provided some counterweight - but not enough
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Birth Rate Dropped from 3 to 2;particularly considering survival
U.S. Total Fertility Rate: With and Without Adjustment for Survival to Age 10
0
1
2
3
4
5
1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005
Ave TFR Ave AdjTFR1875-1925 3.67 2.851926-1965 2.84 2.691966-1990 1.99 1.951991-2003 2.01 1.99
TFR
AdjTFR
1313
Birth Rate Dropped from 3 to 2;increase in immigration helps some
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How Will This “Aging” Affect Us?
Fewer working-age people– Compared to aged “dependents”
Workers will need to support more retirees
Or more young or old individuals will need to work
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Consider Dependency Ratios; OK So Far
Total and Aged Dependency Ratios, 2011 Social Security Trustees Report
Historical Data
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1975 1980 1985 1990 1995 2000 2005 2010
Year
De
pe
nd
an
cy R
ati
o TOTAL dependency ratio
AGED dependency ratio
(Population under 20 and 65+ / Population 20-64)
(Population 65+ / Population 20-64)
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Big Increases Ahead; Not Due to LETotal and Aged Dependency Ratios, 2011 Social
Security Trustees ReportIntermediate projection compared to no mortality improvement after 2010
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Year
De
pe
nd
an
cy R
ati
o
No increase in Life expectancy
after 2010
Intermediate Projection
Intermediate Projection
No increase in Life expectancy
after 2010
TOTAL dependency ratio
AGED dependency ratio
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Stable After Shift for Lower BirthsTotal and Aged Dependency Ratios, 2011 Social
Security Trustees ReportIntermediate projection compared to no mortality improvement after 2010
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1975 1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2085
Year
De
pe
nd
an
cy R
ati
o
No increase in Life expectancy after 2010
Intermediate Projection
Intermediate Projection
No increase in Life expectancy after 2010TOTAL dependency ratio
AGED dependency ratio
1818
More “Dependents” per Worker
Ultimately, each year, each day:
– Goods and services of today’s workers are shared with all in the population
– Economics is just how we distribute the scarce resources
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Pay-As-You-Go System Depends on Current Population
OASDI Covered Workers per OASDI Beneficiary
0
1
2
3
4
5
6
7
8
9
10
1950 1970 1990 2010 2030 2050 2070 2090
Program Matures
Demographic Change
Low Cost Scenario
High Cost Scenario
2020
One Example: US Social Security Cost Rising as Percent of GDP Above Currently Scheduled Revenue
0
1
2
3
4
5
6
7
8
9
10
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090
Perc
ent
of
GD
P
Cost
Non-interest Income
Historical Projected
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This Aging Transition Is Not Just About Retirement (OASI); It Has Already Happened for Disability (DI)
0
1
2
3
4
5
6
7
Figure 2: OASDI Cost as Percent of GDP 1975-20902012 Trustees Report Intermediate Assumptions
OASDI
OASI
DI
Baby Boomers reach ages 45-64
in 2010
2222
What to Do ?
Aging population is largely due to lower fertility
With fewer workers per population:– Need lower consumption per person– Workers share more, or others just get less
Will we find ways to encourage working longer?
Political balance will determine the outcome