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Opportunities and Challenges

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					Opportunities and Challenges of an Aging Society University of Michigan. Institute for Survey Research, September 19, 2007 John W. Rowe M.D. The unprecedented demographic transformation that is well underway in this country is driven by two distinct, well-defined processes. The first of these is the very significant increases in life expectancy, particularly in what‟s termed active life expectancy or disability free life expectancy. Most scholars think this trend is likely to continue, although there are some skeptics. The second process is the aging of the baby boom generation -- 78 million individuals who have gone through our population like a swallowed mouse through a snake and will transform this country into an aging society between now and 2030. It‟s worth thinking a bit about what an aging or mature society is. An aging society is not a society that just has a lot of old people. China has a lot of old people but it is not an aging society. Some scholars define an aging society as one in which the number of people over age 60 (obviously an arbitrary definition of “old”), is greater than the number of people under age 15. By that criterion China does not become an aging society until 2040. In contrast, the United States becomes an aging society as soon as 2013. When you think about an aging society think about a society that has more walkers than strollers. I am a member of a group of individuals that has been thinking together about this for several months.Very early on we discovered that there are several common biases about aging society issues. The first bias is that that the aging society is all about the solvency and the sustainability of Medicare and Social Security. But that‟s just not the case. In fact, if you put those fiscal questions to the side, there is left a whole series of very important social, behavioral, ethical, and broader economic issues that need to be resolved effectively for us to have a productive and equitable aging society. In order to have that society many of our core institutions and norms will need to undergo change -- our educational and religious institutions, the work force, the concept of retirement and, perhaps, even traditional concepts of the family. And it is only through successful analyses and reorganizations of those institutions that we‟re going to be able to deal productively, not only with the challenges, but also the opportunities that lie ahead. And that is the second bias --the perception that an aging society is all about challenges, not opportunities. Most that is written on this topic, especially in the popular media, has a negative gloom and doom perspective. My favorite title among these tracts is “Defusing the Demographic Time Bomb.” But the fact is that implicit in an aging society is the potential for a number of very significant positive outcomes.

2 The third bias is that an aging society is all about the elderly. In fact an aging society is about society as a unit of analysis not a particular group of individuals as the unit of analysis. If we focus on the different generations it may in fact be the middle-aged generation or even younger generations that are the most important and the most interesting from an analytical point of view with respect to the challenges and the opportunities in an aging society. So early on I think it‟s important for us to kind of toss overboard these biases and implicit assumptions that we have and cast a broader intellectual net as we go about addressing the issues of an aging society. If we exclude healthcare, and even if we exclude the fiscal issues related to Social Security, and we think about what‟s left it seems to me that there are a number of important themes that are worthy of our consideration. And there are a number of cross-cutting issues that are related to all of these themes that need to be understood. The first theme has to do with intergenerational issues. This is operative at both the level of society and the level of the family. The implicit bias here is that this is a negative not a positive -- that intergenerational relations are going to be a problem at the societal level. This bias has been fostered by many individuals, including Pete Peterson, co-founder of the Blackstone Group and a former Secretary of Commerce, and Lester Thurow, an economist, at MIT. They promote the notion that there will be a war between the generations, with the elderly and the non-elderly having it out over old-age entitlements. That in fact the young vs. the old will replace the rich vs. the poor as a class struggle in the United States.There really are no data to support their argument. The argument begins with the premise that an „elderly vote‟ is going to strongly disadvantage younger people as the numbers of elderly grow. Now I am not a political scientist, but my understanding is that the common perception of older persons as a voting bloc is vastly overblown. In fact, they tend to distribute their votes among candidates in proportions that are similar to younger middle-aged and older middle-aged voters, and the electorate as a whole. In the main, older people do not vote their own self interest against that of other generations. They generally vote the way they‟ve always voted. My mother was an example. She was a typical Irish-Catholic Democrat from Jersey City. She voted Democratic and that was it, and I mean there wasn‟t a discussion. She never changed this strategy, never considered whether certain candidates might be better for old people than middle-aged or younger people. In addition there are specific examples that are inconsistent with the concept that the older generation automatically votes for candidates that support greater old-age entitlements and against those who don‟t. When Ronald Reagan ran the first time in 1980 he got 54% of the elderly vote. After he was elected he froze an annual cost-of-living increase in Social Security benefits and he also proposed a cut in benefits. The second time he ran, in 1984, he got 60% of the elderly vote -- a figure right in line with the 59%

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3 Reagan received overall. Old-age issues were not on the ballot. Candidates were on the ballot. When issues are on the ballot, such as in a referendum, most older individuals voting in a community in which they‟ve grown up and lived in for a long period of time support the community rather than their self-interests, and approve issues such as bond issues to support schools. While it is true that in some areas of the country that older persons will tend to vote against school bonds, in most of these areas a high proportion of the elderly are migrant newcomers to the community rather than life-long residents. The „Merchants of Doom,‟ as my colleague Bob Binstock calls them, often predict that the middle-aged generation will rise up and get rid of Social Security. Survey data, on the other hand, consistently demonstrate support for Social Security by middleagers. For one thing, many of them feel that older persons are „deserving.‟ In addition, many middle-agers perceive that Social Security and Medicare serve their self-interests. They recognize that Social Security operates as a financial benefit for middle-aged people. It relieves adult children of the financial burden of having to take care of their older parents. It provides their older parents with opportunities to live independently outside the home of the middle-aged couple. Medicare relieves adult children from having to pay costly medical expenses for their parents. Moreover, these middle-aged individuals who‟ve been paying into the Social Security system for a long time often see themselves, quite appropriately, as future recipients of old-age benefits. So why would they support getting rid of or sharply reducing the benefits, given that before long they will become beneficiaries, themselves after already having paid into the system for many years? Although intergenerational tension over entitlements may not reach nearly the level proposed by some, there is however an intergenerational tension in another way that I think is a question that hasn‟t been asked often enough about our aging society and is really interesting. There are critical non-economic issues that come into play when you look at what our aging society is going to be composed of in terms of various racial and ethnic groups. For me it‟s not the question of whether the young generation will support the old generation but whether a young Latino generation will support an old White generation. I think the inter-generational issues also are fascinating when you look at the impact on not just the middle-aged but the youth. Gruber and Wise found that in Europe, when they were increasing entitlements for the elderly, those increases were not funded by raising taxes, but were funded out of reductions for education. So the intergenerational issue can skip over the middle-aged and influence the youth. From the positive aspect (and I think each of these things has a negative as well as a positive aspect), intergenerational issues can be very positive. We see this in a number of volunteer efforts where older individuals are helpful to younger individuals and at the same time become engaged in the community, and enhance their own self esteem and productivity. What we need to do is try to find ways as we go forward to organize American life so that we enhance these positive intergenerational opportunities. One of the most striking of these is something called the Experience Corps which is now in 20

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4 cities, involving 200 hundred schools with two thousand volunteers, where older individuals volunteer in kindergarten through third grade to assist students. And they volunteer at least 15 hours a week. The results suggest that this is very beneficial to the school and the students and the older individuals. In fact, as a former biomedical investigator I was most impressed and interested in the data emerging from Linda Fried‟s studies in Baltimore that show positive changes in brain function on imaging studies in older person who have participated there as Experience Corps volunteers A second broad aging society theme deals with the general issue I just touched on -- developing meaningful roles and responsibilities for older individuals late in life. Retirement in the United States is generally a „roleless role‟ and there is a significant body of information showing reductions in engagement and in self esteem progressively through late life. These reductions are associated with increased risk of cardiovascular disease and cerebral vascular disease. The Macarthur Foundation‟s Network on Successful Aging developed evidence with respect to the very significant importance of self esteem as a central predictor of well-being and function late in life. We need to find ways to enhance older individuals‟ roles. There are basically two places where we can enhance older persons‟ roles. One is the workplace. And that is very, very interesting. We need to find a way to maintain older people in the workplace. You often hear it said that the work force is going to be deficient in terms of its overall numbers. I don‟t believe that to be the case. The average age of retirement, is starting to rise after having declined for many years and then being stable the last several years. It has risen a year and a half over the last five or six years. And the age at which individuals first begin to take full Social Security benefits is also rising. Given these changes, if you assume stable immigration (which is only about a million workers a year in the United States), the projections are that the work force overall, in terms of numbers of workers, will be adequate. There will also be dramatic impacts of digitalization in the work force that may even reduce the demand for numbers of individuals. This is not to say that we will not have important deficits in specific skills, such as in the healthcare arena. Although we don‟t need to keep older people in the work force for their numbers, we do need to keep them in the work force to maintain their productivity and their self esteem and their engagement. And it turns out that we‟ve learned a few interesting things about retirement. Retirement is changing. It used to be a cliff kind of experience where people would simply fall off the work force. They would be working full time and then nothing. That cliff has changed to something of a process and many people have bridge jobs to retirement that are part time. There are very severe restrictions on how much they can earn and still get their early retirement Social Security benefits and obviously those impediments are archaic and need to be modified or removed. Another fact that we‟ve learned about retirement is that it is a huge success. People love it. So once they do retire they want to keep doing it. It is difficult to get people who have retired to come back to the work force. So what we need is a strategy which keeps them in the work force in some meaningfully-changed worksite, in some

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5 meaningfully-changed job and some way that they‟ve been educated so they can participate effectively. Other than the workplace, the second area that we can increase roles has to do with civic engagement or civic ventures. There is a panoply of organizations in which older persons volunteer. There are organizations where retired CEO‟s of for-profit companies help starting CEO‟s at for-profit companies. There are other organizations where retired CEO‟s of not-for-profit companies help the new CEO‟s of not-for-profit companies. Retirees who were Peace Corps volunteers when they were young are coming back to the Peace Corps. When you read about things of this kind you get the sense that every older person in America is volunteering. On the other hand, preliminary analysis from the America’s Changing Lives study shows that the average number of hours that old people in America volunteer is 33 per year. Not per month, not per week, but per year! So we have a disconnect between the existence of numerous individual volunteer programs for older persons and the apparent lack of traction that volunteering has for the elderly across the country. I believe we need to develop the intellectual scaffolding for the meaning of volunteer activities, at all ages, not just for the elderly, and careful analysis of the factors that will permit these programs to be sustained and propagated throughout society. The third theme that I would mention -- diversity and inequalities -- has two distinct parts. Earlier we‟ve touched on the dramatic changes in the racial and ethnic make up of various generations of an aging society, the implications of which are largely unknown. The inequalities issue is really very interesting because of the widening gaps between the haves and have-nots with respect to wealth, education, disability and health status and other characteristics. Obviously such gaps have important implications for how an aging society is really going to function or dysfunction. The currently available projections for the U.S. population from the Census Bureau and Social Security do not fractionate the population by measures of socioeconomic status – an analysis that is important to undertake. In addition, as we approach the issues of an aging society, it would be valuable to have population projections that model the effects of a variety of scenarios such as slowing the aging process, eliminating a specific age-related disease such as Alzheimer‟s, etc. On the inequalities issue there is debate whether it is the absolute level of somebody‟s resources that matters or is it the difference between them and others? Almost everyone agrees that the lowest socioeconomic stratum in the United States has been improving substantially over the last 30 or 40 years. More in that group have housing and better access to healthcare. And if their position is above subsistence level, isn‟t that really our goal? On the other hand, other people say that it is the gap that matters. They claim that the fact that more people are developing great wealth is driving the middle class to spend too much, not save enough, buy houses they don‟t really need, often with subprime mortgages, etc. They hypothesize that this gap, and the behaviors and attitudes it engenders, tears at the fabric of our society. That this is just not healthy for Americans to have this going on in our society, and that what we need to do is have

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6 tax policies that redistribute wealth to reduce this gap. I think that is an interesting question. In addition to these three key themes -- intergenerational issues, roles and responsibilities of the elderly in different generations, and these issues of diversity and inequalities -- I think there are a number of cross-cutting issues that are worth important consideration .One of these has to do with the life course. If you think about the life course, we chop it up in America into distinct, separate segments. The first portion, after early childhood development, is generally dedicated to education. Unfortunately, this is generally not very productive for many people and doesn‟t prepare them to participate effectively in society and a lot of other things. But this is what you do from early childhood until your late teens or into your twenties. Then the next block of time, which spans several decades, is work. Generally there is too much of this. For many individuals work takes up all their available time and energy and there is not sufficient capacity to deal with family responsibilities, obtain further education and training, or even for volunteering and other forms of civic engagement or leisure. Then we have the leisure block of years that is tagged on at the end. This approach to the life course is dysfunctional for a large segment of our population. The current structure of the life course presents two important and related challenges. The first is the need to reorganize the allocation of various efforts in a more functional pattern over time that is consistent with the realities of modern life. This would include the allocation of more time for education and training throughout mid-life. We know the benefits of lifelong learning from a personal point of view and there are also important considerations regarding the workforce. If individuals are to keep up with technological advances and maintain a capacity to enhance their productivity and contribute to society, they will require opportunities for training throughout their life. In addition, there are many reasons, which we discussed earlier, to keep individuals in the workforce for a longer period of time. This will require devoting the phase after current retirement to participate in a more flexible workforce as well as to have leisure and also, hopefully, other activities such as education and civic engagement. An additional important consideration relates to the distribution of the added years of active or disability-free life expectancy that we are currently gaining, the socalled „Longevity Dividend.‟ Are we just going to tag these years on to the end of the life course, to the current „leisure‟ period? Or are we going to reengineer the life course so it is more functional and enhances the likelihood of developing a productive and equitable aging society? One of the major challenges facing us as we move forward is to understand the types of strategies and policies that need to be put in place to re-engineer the lifecourse. The second-cross cutting issue relates to technology. And this also has two pieces. One is medical technology and what if we are going to be able to cure Alzheimer‟s, developed smart prosthetics, etc. This is exciting and pretty clear to think about. The other piece relates to non-medical technologies. A scholar at the National Research Council estimates that 60% of the jobs in the United States are going to be importantly

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7 influenced by digitalization by 2030. Now if this estimate is only half right this would be dramatic. What are the implications for an aging society of this digitalization? There is currently a digital divide in our society. Older individuals and those in the lowest socioeconomic group are much less likely to have access to, and use, the Internet or computers. There will likely be a major change in this due to the cohort effect as the highly-wired baby boom generation grows old, but it is possible that they will not maintain their technological capacities or engagement. Another unsettled and very interesting question is whether digitalization of our society is going to be an enabler for the elderly. Will it permit them, despite perhaps some physical disabilities, to continue to participate actively in the work force and in society? Or will it be an impediment, a restriction, a threshold they cannot get over, so that they are disproportionately squeezed out of the work force because of the integration of technology? The final background issue that I would like to mention has to do with the issue of international comparisons. We are not the first country to age. Much of Western Europe has aged well ahead of us. Many of those countries aged faster than we did because they had a baby bust not a baby boom after World War II ,so that the proportion of the population that is older became much greater than the proportion that was younger. There have been many programs and experiences in these various aging societies that can provide us with empirical information and help us gauge the possible effects of certain policies that we may adopt regarding pension reform, the workplace, education and the like. I think that looking over the fence at our neighbors abroad could in fact be very, very informative in a selective way. But we have to be careful not to get misled as there are many important differences between our societies and what works in one place certainly may fail in another. It is very important for us to understand that the policy changes that we put in place to prepare ourselves for the future America are not all going to occur in Washington, D.C. They‟re going to occur at the state and local levels where I‟d like to see us have a generation of experiments, like what we are having in healthcare. What we are seeing in the healthcare arena now is many different states undertaking many different approaches to trying to cover the uninsured, to reduce health care costs, and improve quality of care. I believe that some of these local efforts will importantly inform some national initiatives. I think we have the same opportunity with respect to some of the issues I‟ve discussed regarding an aging society. Efforts at the state and local levels, including churches and community groups, volunteer groups, etc., can inform broader national initiatives. Let me conclude with a reminder that while the prospect of an aging society certainly presents a number of important and seemingly overwhelming challenges, it also presents wonderful opportunities. If we act quickly to formulate effective changes in various elements of our society, including re-engineering of many of our core institutions, we have the potential of not merely mitigating the adverse effects of the factors we‟ve

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8 discussed here but of also enhancing the likelihood of the emergence of a truly equitable and productive aging society in the United States.

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