Help Me Understand the Economic Effect of Increasing Lifespan

April 24, 2018 10:50 AM

It would be silly to blame decreasing employment opportunities and increasing income inequality on the older generation sticking around (and working) longer. But it would be silly to see no connection at all. Why is this something no one seems to discuss?

Half a century ago, 70-year olds were seriously old, and living to 80 was a major achievement. Now many live well into their 90's.

Simultaneously, employment opportunities have sharply reduced for college grads and income inequality has soared. There are complex reasons for both, but it's reasonable to hypothesize some connection with increasing lifespan. The generation atop the pyramid is retiring later (if at all) and passing on their assets nearly a full generation later than previously. That can't help but create serious economic disruption.

Am I wrong to see a connection? Or am I wrong that no one's researching it? Or am I wrong to even ask, since it potentially raises dark, troubling issues? (if so, I'm not sure politely ignoring such a foundational economic challenge is smart....and if we're truly homing in on a cure for cancer, the issue will only compound).

posted by Quisp Lover to Society & Culture (15 answers total)

People are looking at it - academically and less so.
posted by saeculorum at 10:57 AM on April 24, 2018 [1 favorite]

I think the increased pool of elderly creates jobs as well - in healthcare, in leisure and hospitality, and in other areas. Are they a net drain on society economically? It's hard to guesstimate without running the numbers.
posted by TestamentToGrace at 11:04 AM on April 24, 2018 [7 favorites]

Well, Jeff Bezos has a net worth of $300 billion dollars, which is equal to the annual federal operational budget of the government of Canada. If you could extend Jeff Bezos' life by just ten years, you would theoretically be funneling $30B -- about the annual budget of the province of Manitoba -- into the economy each year.

I think we can all agree that the "Manitoba effect" alone is a great economic argument for augmenting and increasing lifespan.
posted by JamesBay at 11:07 AM on April 24, 2018

I'm an economist who also studied ethics and on both fronts, this is being studied and debated relentlessly. You should look into the field of health care economics and ethics because the debate over end-of-life care in particular includes both philosophical discussions as well as a deep trove of economic research on the value and costs of life.

Particularly interesting is a subsect of the field who are looking at the assumptions that were popular 10 years ago - that huge cohorts of people would be retiring en masse and thus opening up tons of jobs for the next generation. The reality is - not only are people living longer, but their capacity to work into their 60's and even 70's is much, much higher than it used to be...particularly as legislation on accessibility has improved. People also like to work more than I think was anticipated, particularly if they're at the highest wages of their lives (pensioners in particular get a benefit from hanging on longer as your benefits often take into account your top 5 years of earning.) So that tide of retirements is much lower and longer than initial expected.

Of particular focus these days - what is going to happen when a huge cohort of the population is no longer paying significant tax and is also hitting the stage of their life where their health and social costs skyrocket. Whole conferences on this stuff.

The generation atop the pyramid is retiring later (if at all) and passing on their assets nearly a full generation later than previously. That can't help but create serious economic disruption.

This is a huge topic in housing economics - a huge portion of the population has most of their assets in the form of a house. At some point, those people will be trying to offload that house to either move into a more accessible home or to use the equity to pay for necessities. It has been postulated that, outside of immigration, there just isn't enough demand (both due to # of family units emerging, and capacity to buy based on mortgage rules, student loans, and the like) to meet the supply that is coming and thus 10-15 years from now, it may be a really friendly time to be buying a home and some of those "assets" that people are relying on may erode significantly.
posted by notorious medium at 11:24 AM on April 24, 2018 [25 favorites]

One relevant term is what economists call "lump of labor fallacy". "The lump of labour fallacy is the contention that the amount of work available in an economy is fixed. But, most economists argue this belief there is a fixed number of jobs (or fixed number of hours) is usually incorrect." There's no reason to expect that people working longer will have a significant effect on the ability of younger people to find work.

In fact, most economists are concerned about the reverse: people living longer but not working longer. The major problem problem with aging is the growth in the aged dependency ratio. Total economic productivity (GDP) depends primarily on the number of workers. Total consumption depends mostly on the total number of people. If the ratio of workers to people is low, average consumption will be low. Or from another perspective: If people spend 40 years in retirement, the people who work are going to have to divert a lot of their productivity to those retirees.

In terms of inequality, it gets more complicated, but I think there are many more important factors: I believe that within cohort inequality is growing at very similar rates to across cohort. That is, among people in their 20s, some are founding startups and others are working at minimum wage service jobs. Yes, older people have lower poverty rates than younger people, but that's because average wages increase with age and we support the elderly with government programs, not with the age distribution of the population.

This isn't to dismiss the large effects of aging in specific firms, or regions, or areas like housing. Aging is an entire subfield of economics.
posted by Mr.Know-it-some at 11:37 AM on April 24, 2018 [5 favorites]

Half a century ago, 70-year olds were seriously old, and living to 80 was a major achievement. Now many live well into their 90's.

I don't find this to be correct. I mean, I had plenty of relatives that were 80+ years old when I was a kid. (not quite half a century ago). Historically, Thomas Jefferson & Ben Franklin lived into their 80s, John Adams to his 90s. It wasn't that uncommon.
posted by The_Vegetables at 12:20 PM on April 24, 2018 [2 favorites]

Response by poster: Thanks for the great replies, everyone.

The_Vegetables, the (inevitable) presence of individual exceptions doesn't invalidate citation of broader trends.
posted by Quisp Lover at 12:29 PM on April 24, 2018 [2 favorites]

Whatever the data says, the belief is strong among my generation (Generation "X") that Baby Boomers' refusal to retire has limited advancement opportunities for people of our age-- at least at traditional larger companies with more than 20 employees. While I have definitely observed this in my own life, I feel like the economic expansion driven by the internet/dot com boom probably offset a lot of this, and overall these factors drove a lot of Gen X'ers into starting their own businesses, which will have a long term more beneficial effect on the US economy. I would be interested to hear what people from other countries feel.
posted by seasparrow at 12:38 PM on April 24, 2018 [1 favorite]

The_Vegetables might be disputing this part: Half a century ago ... living to 80 was a major achievement. Even at 1900 death rates, people had about a 12 percent chance of living until 80.

(Technical notes: approximate average of l(x) for men and women; these is the period table for 1900, which use the rates experienced at various age in that year. Much of the mortality was infant; conditional on reaching age 1, the odds are about 14 percent. Someone aged 80 a "half century" ago would be born in 1888, so would experience the period mortality rates for 1888 through 1968, so this is actually a slight understatement of the cohort probability of life expectancy of those people.)
posted by Mr.Know-it-some at 1:17 PM on April 24, 2018 [1 favorite]

I see it discussed specifically as the increased costs of Social Security, Medicare and pension plans, where the costs are greater as people live longer, and because the population of young people is not increasing the way it used to as people have smaller families or no kids at all. It comes up occasionally in politics because old people are perceived as a big voting block. You're right that it's a big demographic change, but I think it's like global climate change - ignore it until you absolutely can't, then try hard to keep ignoring it.
posted by theora55 at 1:20 PM on April 24, 2018

I also know a number of middle-aged women who've had to leave the workforce earlier than planned to provide unpaid elder care. I'm sure that's not without its effects on the economy.
posted by The Underpants Monster at 1:25 PM on April 24, 2018 [6 favorites]

This table shows life expectancy at various ages from 1850 onward. If you look at the figure for age 60 then a white male in 1939 had a life expectancy of about 15 years, meaning to age 75. This number has gone up significantly but it does demonstrate that aging and life expectancy are different.
Regarding late retirement by choice, I wonder if this isn't mainly a factor in high status, high paying jobs. For most people working after retirement age would mainly be something only done out of necessity and and not generally in those types of work.
posted by Botanizer at 1:43 PM on April 24, 2018

David Foot has been beating the demographic doomsday drum for decades. He has some interesting observations.
posted by saucysault at 5:41 PM on April 24, 2018

Re baby boomers’ “refusal to retire.” Many of us would love to retire. We work for the same reason other generations do. We can’t afford not to. I know boomers who continue to work only for the health insurance. I have great health insurance from my employer and am on ridiculously expensive cancer drugs ($20,000 a month) my oncologist says I’ll need to take for the rest of my life. I am terrified of retiring. It might quite literally be the death of me. The idea of selfish boomers refusing to step aside out of greed is a myth. It’s another way our culture sets people who are all hurting against each other rather than dealing with systemic problems (like insane prescription drug costs). Poverty in the elderly demographic is real and heartbreaking.
posted by FencingGal at 5:51 PM on April 24, 2018 [10 favorites]

The generation atop the pyramid is retiring later (if at all) and passing on their assets nearly a full generation later than previously.

There are two fallacies here.

First, the current generation isn't retiring all that much later. According to the Social Security Administration the average retirement age is 63 years which is just a couple of years later than a couple of decades ago.

Second, the current generation isn't "passing on their assets a full generation later." The increase in life expectancy of adults at age 65 has been very slow. It has been a steady 1 year per decade for more than a century. This means that the current generation is only living about two years longer than the previous generation. This idea that people are suddenly living dramatically longer now is just a myth.
posted by JackFlash at 10:06 PM on April 24, 2018 [4 favorites]