In 1935, Harry Hopkins, head of the Federal Emergency Relief Administration, took a call at his home from U.S. Treasury Secretary Henry Morganthau Jr. Both were on the New Deal committee whose work led to the creation of Social Security. At one point their conversation focused on the demographics of aging.
Hopkins: "Well, there are going to be twice as many old people 30 years from now, Henry, than there are now."
Morganthau: "Well, I've gotten a very good analysis of this thing…I'm simply going to point out the danger spots…I'm not trying to say what they should do—I want to show them the bad curves…."
Hopkins: "That old age thing is a bad curve."
Today, an ever-higher number of countries are moving into the "bad curve." The roughly 76 million U.S. Baby boomers born between 1946 and 1964 are entering their retirement years. Japan and Old Europe are even older. Concerns over rising rocking-chair ratios are highest in the developed nations, but not exclusively. China is going through a gray revolution, too: The Middle Kingdom's 60-and-older folks are projected to account for 30% of its population by 2050. When it comes to the demographics of aging, "the inflection point is right now," says Scott Berg, manager of T. Rowe Price's Global Large-Cap mutual fund.
Little wonder that the bad curve of aging is making investors nervous. Governments took on enormous debts to shore up their economies during the Great Recession. Investors fear that developed nations have added to their fiscal burden just as enormous entitlement spending obligations for older citizens are about to kick in. Greece, in other words, is the proverbial canary in the fiscal coal mine. "Over the next few years you'll start to see the demographic impact and all of a sudden people will wake up," says Scott Mather, managing director and head of global portfolio management at Pimco, the mutual fund behemoth. "It will be a big change-driver."
At least for the U.S. economy, the dire forecasts may be overstated. The ranks of boomers expecting to kick back and retire soon are shrinking fast. A lifetime of poor savings habits—coupled with the devastating impact on retirement portfolios of two bear markets in eight years—have convinced many boomers that they'll have to put in more time at the office. This should reduce the demands on Social Security and Medicare. "People will work longer in general since it's the best way to get out their financial predicament," says David Court, a director at McKinsey & Co. Adds Joseph F. Coughlin, director of the Massachusetts Institute of Technology's AgeLab: "In the near future, the 'new kid down the hall' may, in fact, be someone's grandmother in the next stage of her multi-act life."
The jobs might well be there for the 55-plus worker, hard as it is to believe with the U.S. unemployment rate at 9.7% and the government's broadest measure of combined unemployment-and-underemployment at 16.8%. That's the conclusion of a recent set of studies by Barry Bluestone, Dean of the Public School of Public Policy and Urban Affairs at Northeastern University, and Mark Melnick, deputy director for research at the Boston Redevelopment Authority. (The research was underwritten by the MetLife Foundation and Civic Ventures, a nonprofit think tank that focuses on second and third careers.) "Using history as our guide, we believe that the economy will recover," the scholars conclude. "When it does, given the population dynamics of the very near future, it's clear that older adults will need to participate in the work force in numbers considerably larger than they do now, or the nation will be unable to fill millions of jobs between now and 2018."
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