Description

The United States is in the midst of a major demographic shift. In the coming decades, people aged 65 and over will make up an increasingly large percentage of the population: The ratio of people aged 65+ to people aged 20-64 will rise by 80%. This shift is happening for two reasons: people are living longer, and many couples are choosing to have fewer children and to have those children somewhat later in life. The resulting demographic shift will present the nation with economic challenges, both to absorb the costs and to leverage the benefits of an aging population.

Aging and the Macroeconomy: Long-Term Implications of an Older Population presents the fundamental factors driving the aging of the U.S. population, as well as its societal implications and likely long-term macroeconomic effects in a global context. The report finds that, while population aging does not pose an insurmountable challenge to the nation, it is imperative that sensible policies are implemented soon to allow companies and households to respond. It offers four practical approaches for preparing resources to support the future consumption of households and for adapting to the new economic landscape.

Contents

• THE NATIONAL ACADEMIES
• COMMITTEE ON THE LONG-RUN MACROECONOMIC EFFECTS OF THE AGING U.S. POPULATION
• BOARD ON MATHEMATICAL SCIENCES AND THEIR APPLICATIONS
• COMMITTEE ON POPULATION
• Foreword
• Preface
• Summary
• 1. Introduction
  • CHARGE TO THE COMMITTEE
  • ORGANIZATION OF THE REPORT
• 2. Overview
  • INTRODUCTION
  • DEMOGRAPHIC CHANGE
  • THE CHANGING ECONOMIC LANDSCAPE
  • ECONOMIC PROSPECTS IN THE COMING YEARS
  • ADAPTING TO THE CHANGING DEMOGRAPHIC AND ECONOMIC ENVIRONMENT
  • SUMMARY
• 3. Demographic Trends
  • LIFE EXPECTANCY AND THE INDIVIDUAL LIFE CYCLE
  • POPULATION AGING
  • WHY POPULATION AGING MATTERS: AGE PATTERNS OF CONSUMPTION AND LABOR INCOME
  • INDICATORS OF POPULATION AGING AND ITS ECONOMIC IMPACT
  • GLOBAL PATTERNS OF AGING
  • UNCERTAINTY IN POPULATION PROJECTIONS
• 4. Health and Disability in the Working-Age and Elderly Populations
  • DISABILITY
  • EDUCATION AND INCOME
  • TRENDS IN DISABILITY
  • LOOKING FORWARD
• 5. Labor Force Participation and Retirement
  • TRENDS IN LABOR FORCE SIZE, PARTICIPATION, AND PROJECTIONS
  • TRENDS IN JOBS AND CHANGING HUMAN CAPITAL NEEDS
  • TRENDS IN EMPLOYMENT BY HEALTH
  • FACILITATING LONGER WORKING LIVES
  • MACRO IMPLICATIONS OF LONGER WORKING LIVES
• 6. Aging, Productivity, and Innovation
  • BACKGROUND
  • RESEARCH ON THE IMPACTS OF AGING AT THE INDIVIDUAL LEVEL
  • AGING AND THE ECONOMICS OF INNOVATION AND INVENTION
  • PRODUCTIVITY AND THE AGE STRUCTURE OF THE POPULATION
  • Earnings and the Changing Distribution of the Workforce
  • IMPLICATIONS
• 7. Saving and Retirement Security
  • DEFINING RETIREMENT WEALTH AND SAVING
  • ARE SAVING RATES SUFFICIENT IN VIEW OF POPULATION AGING?
  • EXPLANATIONS FOR SAVING INADEQUACY
  • CORRECTING RETIREMENT SAVING AND WEALTH SHORTFALLS
  • IMPLICATIONS
  • ATTACHMENT 7-1 MEASUREMENT ISSUES: NATIONAL INCOME AND PRODUCT ACCOUNTS SAVING AND INVESTMENT
• 8. Capital Markets and Rates of Return
  • HOW DEMOGRAPHIC CHANGE AFFECTS EXPECTED RATES OF RETURN: A FRAMEWORK
  • RISK AND RETURN
  • FINANCIAL MARKET INTEGRATION AND CROSS-BORDER FINANCIAL FLOWS
  • “HUMAN CAPITAL DEEPENING”: HOW MUCH OFFSET TO LABOR FORCE DECLINE?
  • HOUSING ASSETS
  • CONCLUSIONS
  • ATTACHMENT 8-1 PHYSICAL RETURNS, ASSET PRICES, AND THE TERM STRUCTURE OF FINANCIAL RETURNS
• 9. The Outlook for Fiscal Policy
  • INTRODUCTION
  • FEDERAL GOVERNMENT
  • STATE AND LOCAL GOVERNMENT
  • PUTTING THE PIECES TOGETHER: THE LONG-TERM BUDGET OUTLOOK
  • MACROECONOMIC IMPLICATIONS OF RESPONSES TO DEMOGRAPHIC CHANGE
  • CONCLUSIONS
• 10. Research Recommendations
  • DEMOGRAPHIC AND HEALTH MEASURES AND PROJECTIONS
  • WORK CAPACITY AND INCENTIVES FOR A LONGER WORKING LIFE
  • CHANGES IN CONSUMPTION AND SAVING
  • MODELING AND DATA
• References
• Appendixes
  • Appendix A Population and Related Projections Made by the Committee
  • Appendix B Biographical Sketches of Committee Members

This study was supported by Contract Grant No. TOS10-C-004 between the National Academy of Sciences and the Department of the Treasury. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project.

Suggested citation:

National Research Council. (2012). Aging and the Macroeconomy. Long-Term Implications of an Older Population. Committee on the Long-Run Macroeconomic Effects of the Aging U.S. Population. Board on Mathematical Sciences and their Applications, Division on Engineering and Physical Sciences, and Committee on Population, Division of Behavioral and Social Sciences and Education. Washington, D.C.: The National Academies Press.

NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the panel responsible for the report were chosen for their special competences and with regard for appropriate balance.