Is Growing Old a Societal Blessing or Curse?

I have been absorbed for the past several days by two simultaneous court cases in which I am an expert witness (I have been involved in more than 200 of these over the years, drawing upon my demographic and statistical background), and so today I have the very pleasant task of sorting through blog post ideas that several of you have sent me. Since I recently turned yet another year older, I'm going to go first with the suggestion from Justin Stoler, who pointed to a story in Bloomberg called "The Old Are Eating the Young," written by Satyajit Das--a 60-year old Australian of Indian descent. The basic point is a familiar one if you have read my book and follow this blog--the older population is currently increasing at a faster rate than the younger population in virtually all richer countries, and the burden of paying for a dependent older population will fall on that younger population and it's going to be a bigger burden per person than in the past.

This growing burden on future generations can be measured. Rising dependency ratios -- or the number of retirees per employed worker -- provide one useful metric. In 1970, in the U.S., there were 5.3 workers for every retired person. By 2010 this had fallen to 4.5, and it’s expected to decline to 2.6 by 2050. In Germany, the number of workers per retiree will decrease to 1.6 in 2050, down from 4.1 in 1970. In Japan, the oldest society to have ever existed, the ratio will decrease to 1.2 in 2050, from 8.5 in 1970. Even as spending commitments grow, in other words, there will be fewer and fewer productive adults around to fund them.

But you know how to cope with this--work long and save. That latter point is really important, as the Bloomberg article points out. Global economies are based on consumption, not on saving.

A significant proportion of recent economic growth has relied on borrowed money -- today standing at a dizzying 325 percent of global gross domestic product. Debt allows society to accelerate consumption, as borrowings are used to purchase something today against the promise of future repayment. Unfunded entitlements to social services, health care and pensions increase those liabilities. The bill for these commitments will soon become unsustainable, as demographic changes make it more difficult to meet.

Somehow we have to get past the idea that it is OK to borrow money to buy "stuff" when we're not really sure how we're going to pay that money back. Naturally we all want a high standard of living, but my old-fashioned (and tested) idea is that you can't afford it, don't buy it. Work hard, save, and then buy it when you can afford it. Try it, it works! 

The point here is that the old are not actually eating the young. If everyone of all ages worked and saved instead of borrowing against the future, the economy would adjust accordingly.