Upcoming Demographic Shift

Wednesday, April 15, 2009

From 2010 to 2050 the U.S. Census Bureau projects that people ages 65 and older as a percentage of the total U.S. population will rise from 13% to 20% while working age persons, between 18 and 64, will decline from 63% to 57% of the population. This will be a major demographic shift with many consequences. This upcoming shift will result in a much older population and a decreased size of the workforce.

The implications of this shift are rather staggering given our current government policy. Social Security and Medicare will become incredible burdens on the U.S. economy. By 2050 one out of every five Americans will be in their retirement years resulting in approximately three working age persons for every retiree. One wonders how we will manage to pay off our current spending in future generations without massive tax increases or spending cuts given a shrinking workforce. It seems clear that this country will be in dire need of young immigrants to maintain its economic dominance in the world.

The United States' gross domestic product has become increasingly dependent on consumer spending over the last several decades now representing 70% of U.S. GDP. The 76 million baby boomers will be leaving their peak spending years and entering retirement over the next couple decades. The U.S. economy is likely to slow
dramatically as the country increases its savings rates and spends less. This will, in turn, decrease the tax base lowering government revenues.

The United States remains the top country for innovation and competitiveness in the world as judged at the World Economic Forum last year. Yet, demographic trends are nearly impossible to reverse and aging populations typically signal the decline of an economy. Time will tell.


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