The Truth About Aging Boomers'
Effect on Our Economy

By John B. Shoven, Foreign Policy. Posted March 12, 2008. www.alternet.org


If you forget to die and live too long what do you do for money?

There is a looming catastrophe stalking the developed world. It promises to devastate the global economy, overwhelm hospitals, and decimate armed forces. What is the calamity that promises such misfortune? Not a killer virus, deadly terrorist attack, or natural disaster. It's the aging of the world's baby boomers, the coming tidal wave of senior citizens who will live longer, consume more, and produce less, seriously challenging societies' ability to care for their graying ranks.

At least that's how the dire warnings generally sound. Alarming forecasts bombard us about an impending demographic crisis in the United States, Europe, Japan, and even China that will reshape the way we live and work. In just two decades, we're told, there will be more Americans who are older than 65 than younger than 15. By 2040, at least 45 percent of the populations of Spain and Italy will be 60 years or older. That same year, China will have 400 million elderly citizens. And in Japan, which is aging faster than any other country, more than 40 percent of the population will be elderly by the middle of this century. The fiscal burden of supporting this rapidly expanding segment of the global population not only threatens to bankrupt national healthcare systems and shrink armies as countries' median ages run past military age, but also revolutionize electoral politics, with political clashes no longer governed by right versus left, but young versus old.

If it sounds distressing, it shouldn't. The gloomy projections are deeply flawed. The reason lies in the misleading way in which we measure age. Typically, a person's age has been determined by the number of years since his or her birth. We are so accustomed to measuring age this way that most of us have never given it a second thought. Thanks to the medical revolutions of the past century, however, life expectancies have been radically prolonged. Since 1960, the average Chinese person's life span has increased by 36 years. Over roughly 40 years, South Koreans have seen their lifetimes extended by an average of 24 years, Mexicans by 17 years, and the French by nearly a decade. Given these drastic changes, our conception of what qualifies as "old" has itself become old-fashioned.

Measuring age by years since birth is just as foolish as using the dollar as a timeless unit of value. For instance, no serious economist would compare per capita spending in the United States in 1960 (when it averaged $1,835) with 2006 (when the average American spent about $31,200) and conclude that spending has increased 17-fold. A 1960 dollar and a 2006 dollar are simply different units of value. Instead, we adjust for inflation. The result: Average per capita spending approximately tripled between 1960 and 2006, when both figures are measured in constant purchasing power. In other words, the results are not nearly as drastic when the proper figures are compared.

Just as with the dollar, it is time to introduce inflation-adjusted ages as a superior method for measuring age. The best replacement gauge is mortality risk, or the chance a person has of dying within the next year. The higher the mortality risk, the "older" a person is. It's a measurement that reflects a much more accurate picture of a person's health, likely productivity, and remaining life expectancy.

Back to Top