why is our population aging? how will this aging affect us?

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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 Actuary Social Security Administration April 8, 2013

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Karen Glenn & Steve Goss, with the Social Security Administration discuss the demographics of aging in the U.S.

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Page 1: Why is Our Population Aging? How will this Aging Affect Us?

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

Page 2: Why is Our Population Aging? How will this Aging Affect Us?

22

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?

Page 3: Why is Our Population Aging? How will this Aging Affect Us?

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The US Population is Aging

Is it the:– Baby boomers?– Individuals living longer?– Lower birth rates?

Yes, to all three

Page 4: Why is Our Population Aging? How will this Aging Affect Us?

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Under 65 Growth Will Slow — Over 65 Speeding Up

Page 5: Why is Our Population Aging? How will this Aging Affect Us?

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Age Distribution Shifting Older

Page 6: Why is Our Population Aging? How will this Aging Affect Us?

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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!

Page 7: Why is Our Population Aging? How will this Aging Affect Us?

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Why Is the Population Aging?

Individuals are living longer

Death rates have been declining

Life expectancies have been rising

Page 8: Why is Our Population Aging? How will this Aging Affect Us?

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Yes, Death Rates Are Dropping

Page 9: Why is Our Population Aging? How will this Aging Affect Us?

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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

Page 11: Why is Our Population Aging? How will this Aging Affect Us?

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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

Page 12: Why is Our Population Aging? How will this Aging Affect Us?

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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

Page 13: Why is Our Population Aging? How will this Aging Affect Us?

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Birth Rate Dropped from 3 to 2;increase in immigration helps some

Page 14: Why is Our Population Aging? How will this Aging Affect Us?

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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

Page 15: Why is Our Population Aging? How will this Aging Affect Us?

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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)

Page 16: Why is Our Population Aging? How will this Aging Affect Us?

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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

Page 17: Why is Our Population Aging? How will this Aging Affect Us?

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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

Page 18: Why is Our Population Aging? How will this Aging Affect Us?

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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

Page 19: Why is Our Population Aging? How will this Aging Affect Us?

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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

Page 20: Why is Our Population Aging? How will this Aging Affect Us?

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

Page 21: Why is Our Population Aging? How will this Aging Affect Us?

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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

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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

Page 22: Why is Our Population Aging? How will this Aging Affect Us?

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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