Opportunities and Challenges by wpr1947


									                 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.

        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%


Reagan received overall. Old-age issues were not on the ballot. Candidates were on the

        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 middle-
agers. 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

        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


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


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


tax policies that redistribute wealth to reduce this gap. I think that is an interesting

        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 so-
called „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


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


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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