The next three decades will be the first time in history where senior citizens make up a significant percentage of the human population. This is a true success story, a triumph for humanity in our collective quest to live longer and more active lives well into our silver years. On the other hand, this tsunami of senior citizens also presents some very serious challenges to our society and to our economy.
But before we explore the specifics, let’s define those generations about to enter old age.
Civics: The silent generation
Born before 1945, Civics are now the smallest living generation in America and the world, numbering about 12.5 million and 124 million respectively (2016). Their generation were the ones who fought in our World Wars, lived through the Great Depression, and established the prototypical white picket fence, suburban, nuclear family lifestyle. They also enjoyed an era of lifelong employment, cheap real estate, and (today) a fully paid pension system.
Baby Boomers: Big spenders for life
Born between 1946 and 1964, Boomers were once the largest generation in America and the world, today numbering about 76.4 million and 1.6 billion respectively. Children of the Civics, the Boomers grew up in traditional two-parent households and graduated into secure employment. They also grew up during an era of substantial social change, from desegregation and women's liberation to countercultural influences like rock-n-roll and recreational drugs. The Boomers generated a massive amount of personal wealth, wealth they spend lavishly compared to the generations before and after them.
With these introductions out of the way, now let's face facts: By the 2020s, the youngest Civics will enter their 90s while the youngest Boomers will enter their 70s. Together, this represents a significant portion of the world population, about one-fourth and shrinking, that will enter their late senior years.
To put this into perspective, we can look to Japan. As of 2016, one in four Japanese is already 65 or older. That's roughly 1.6 working-age Japanese per senior citizen. By 2050, that number will drop to just one working-age Japanese per senior citizen. For modern nations whose population depends on a social security system, this dependency ratio is dangerously low. And what Japan is facing today, all nations (outside of Africa and parts of Asia) will experience within a few short decades.
The economic time bomb of demographics
As hinted at above, the concern most governments have when it comes to their greying population is how they will continue to fund the Ponzi scheme called Social Security. A greying population impacts old age pension programs negatively both when they experience an influx of new recipients (happening today) and when those recipients pull claims from the system for longer stretches of time (an ongoing issue that depends on medical advancements within our senior healthcare system).
Normally, neither of these two factors would be an issue, but today’s demographics is creating a perfect storm.
First, most Western nations fund their pension plans through a pay-as-you-go model (i.e. Ponzi scheme) that only works when new funding is funneled into the system through a booming economy and new tax revenue from a growing citizen base. Unfortunately, as we enter a world with fewer jobs (explained in our Future of Work series) and with the population shrinking much of the developed world (explained in the previous chapter), this pay-as-you-go model will begin running out of fuel, potentially collapsing under its own weight.
This state of affairs isn't a secret either. The viability of our pension plans is a recurring talking point during each new election cycle. This creates an incentive for seniors to retire early to start collecting pension cheques while the system remains fully funded—thereby speeding up the date when these programs do go bust.
Funding our pension programs aside, there is a range of other challenges rapidly graying populations pose. These include:
- A shrinking workforce may cause salary inflation in those sectors that are slow to adopt computer and machine automation;
- Increased taxes on younger generations to fund pension benefits, potentially creating a disincentive for younger generations to work;
- Larger size of government through ramped up healthcare and pension spending;
- A slowing economy, as the wealthiest generations (Civics and Boomers), start spending more conservatively to fund their lengthening retirement years;
- Reduced investment into the greater economy as private pension funds draw away from funding private equity and venture capital deals in order to fund the pension withdrawals of their members; and
- Prolonged stretches of inflation should smaller nations be forced to print money to cover their crumbling pension programs.
Government action against the demographic tide
Given all these negative scenarios, governments around the world are already researching and experimenting with a variety of tactics to delay or avoid the worst of this demographic bomb.
Retirement age. The first step many governments will employ is simply increasing the retirement age. This will delay a wave of pension claims by a few years, making it more manageable. Alternatively, smaller nations may opt to scrap the retirement age altogether to give senior citizens more control over when they choose to retire and how long they stay in the workforce. This approach will become increasingly popular as the average human lifespan begins pushing over 150 years, as discussed in the next chapter.
Rehiring seniors. This brings us to the second point wherein governments will actively encourage the private sector to rehire senior citizens into their workforce (likely accomplished through grants and tax incentives). This strategy is already finding a great deal of success in Japan, where some employers there hire back their retired full-time employees as part-timers (albeit at lower wages). The added source of income lessens seniors' need for government assistance.
Private pensions. In the short term, the government will also increase incentives or pass laws that encourage greater private sector contributions to pension and healthcare costs.
Tax revenue. Increasing taxes, in the near term, to cover the old age pension is an inevitability. This is a burden younger generations will have to bear, but one that will be softened by a shrinking cost of living (explained in our Future of Work series).
Basic Income. The Universal Basic Income (UBI, again, explained in detail in our Future of Work series) is an income granted to all citizens individually and unconditionally, i.e. without a means test or work requirement. It’s the government giving you free money every month, like the old age pension but for everyone.
Reengineering the economic system to incorporate a fully funded UBI will give senior citizens confidence in their income and therefore encourage them to spend in a similar fashion to their working years, instead of hoarding their money to protect themselves against future economic downturns. This will ensure a large part of the population continues to contribute to the consumption-based economy.
Reengineering elderly care
At a more holistic level, governments will also seek to reduce our aging population's overall societal costs in two ways: first, by re-engineering elderly care to enhance senior citizens' independence and then by improving seniors' physical health.
Starting with the first point, most governments around the world simply aren’t equipped to handle a large influx of senior citizens needing long-term and personalized care. Most nations lack the necessary nursing manpower, as well as the available nursing home space.
That’s why governments are supporting initiatives that help decentralize senior care and allow seniors to age in the environments where they are most comfortable: their homes.
Senior housing is evolving to include options such as independent living, co-housing, home care and memory care, options that will gradually replace the traditional, increasingly expensive, one-size-fits-all nursing home. Similarly, families from certain cultures and nations are increasingly adopting a multigenerational housing accommodation, where seniors move into the homes of their children or grandchildren (or vice-versa).
Luckily, new technologies will facilitate this home care transition in a variety of ways.
Wearables. Health monitoring wearables and implants will begin being actively prescribed to seniors by their doctors. These devices will constantly monitor the biological (and eventually the psychological) state of their senior wearers, sharing that data with their younger family members and remote medical supervisors. This will ensure they can proactively address any noticeable drop in optimum health.
AI powered smart homes. While the abovementioned wearables will share senior health data with family and health practitioners, these devices will also start sharing that data with the homes seniors live in. These Smart Homes will be powered by a cloud-based artificial intelligence system that monitors seniors as they navigate their homes. For seniors, this could look like doors opening and lights activating automatically as they enter rooms; an automated kitchen that prepares healthy meals; a voice-activated, web-enabled personal assistant; and even an automated phone call to paramedics should the senior have an accident in the home.
Exoskeletons. Similar to canes and senior scooters, tomorrow’s next big mobility aid will be soft exosuits. Not to be confused with exoskeletons designed to give infantry and construction laborers superhuman strength, these exosuits are electronic garments worn over or beneath clothing to support the movement of seniors to help them lead more active, daily lives (see example one and two).
Worldwide, healthcare drains an ever growing percentage of government budgets. And according to the OECD, seniors account for at least 40-50 per cent of healthcare spending, three to five times more than non-seniors. Worse, by 2030, experts with the Nuffield Trust project a 32 per cent increase in seniors suffering from a moderate or severe disability, with an added 32 to 50 per cent increase in seniors suffering from chronic conditions like heart disease, arthritis, diabetes, stroke, and dementia.
Fortunately, medical science is making huge breakthroughs in our ability to lead more active lives well into our senior years. Explored further in the following chapter, these innovations include drugs and gene therapies that keep our bones dense, our muscles strong, and our minds sharp.
Likewise, medical science is also allowing us to live longer. In developed countries, our average life expectancy has already increased from ~35 in 1820 to 80 in 2003—this will only continue to grow. While it may be too late for most Boomers and Civics, Millennials and the generations that follow them could very well see the day when 100 becomes the new 40. Put another way, those born after 2000 may never grow old the same way their parents, grandparents and ancestors did.
And that brings us to the topic of our next chapter: What if we didn’t have to grow old at all? What will it mean when medical science allows humans to grow old without aging? How will our society adjust?