• <div class="header-image" style="background-image: url(/live/image/gid/4/2635_V6N3_Header.rev.1522162449.jpg);">​</div><div class="header-background-color"/>

Aging and the U.S. Economy: How a Shrinking Workforce and Aging Related Disorders Slow Economic Growth

August 25, 2017

The U.S. economy is facing the crisis of an aging workforce that has the potential to harm the economy as more people begin to exit the workforce than enter it. By 2030, it’s predicted that 20% of U.S. residents will be aged 65 and older, compared to only 13% in 2010 and 9.8% in 1970. [1] The U.S. fertility rate is also at a historic low, sitting at 62.0 births per 1000 women aged 15 to 44. [2] This combination leads to a slowdown in the replacement rate, and makes it difficult for the U.S. to sustain or increase its economic growth. Additionally, an aging population can have other drags on the economy, especially the costs associated with neurodegenerative disorders and other diseases associated with aging.

An aging population impacts economic growth in a few ways, through a decrease in labor productivity and slower labor force growth. It’s predicted that a 10% increase in the portion of the population over age 60 leads to a decrease in the growth rate of GDP per capita by 5.5%. About one third of that decline arises from a slowed labor force growth, while the other two thirds stems from the decline in labor productivity. [3] With the first year of the baby boomer generation turning 65 in 2011, the decrease in the growth rate is only expected to increase over time, especially as there are fewer children being born to help increase the size of the workforce.

Image: Rates of participation in the labor force by age over time, Source: Pew Research Center.Image: Rates of participation in the labor force by age over time, Source: Pew Research Center.

Additionally, there are other drags on the economy that stem from aging, with one of those being neurodegenerative disorders. Alzheimer’s disease is prevalent in 6% of the U.S. population aged 65 and older, while Parkinson’s disease is prevalent in 5% of the U.S. population aged 80 and older. [5][6] A study done in China simulated that there will be an increase in Alzheimer’s prevalence from 6-28 million people from 2011-2050, and that the elimination of Alzheimer’s would save China $8 trillion dollars over that time frame. [7]
Another factor contributing to an economic slowdown is that of cardiovascular disease. By age 65, a person’s cardiovascular disease risk is 80%, and it’s expected that total cardiovascular costs will reach $1.1 trillion by 2035. [8] 123.2 million Americans are projected to have high blood pressure by 2035, with most of them being over age 65.

However, the budget for FY 2018 does not seem to offer any substantial relief for either of these issues. The National Heart, Lung, and Blood Institute is projected to lose $575 million, an 18.5% drop in funding from FY 2017 to 2018. The National Institute on Aging, which deals with neurodegenerative diseases, is not faring much better, at an 18.4% drop in funding from FY 2017 to 2018. [10] These potential savings are dwarfed by the comparatively miniscule amount of funding that research for these diseases receive, and increased investment is imperative to help discover new treatments and to lower the costs needed to treat these diseases.

Being able to find cures and treatments for these common and expensive diseases is one way to counteract the negative effects of aging on the economy. If people can remain in the workforce longer and be more productive while they’re there, that could potentially slow the decrease in GDP growth as the workforce ages. It would also allow workers to stay in the workforce for longer if they desire. This increased number of people in the workforce, the increased productivity, as well as saving money that is currently being used to treat these diseases would be necessary to counteract the negative effects of aging on the economy.

However, it is much more difficult to find a solution for the lower fertility rate. An essential first step would be to determine why the rate is so much lower now than it has been in the past, and why it continues to decrease from year to year. A workforce cannot sustain itself if it does not have labor to replace those that are leaving the workforce.

As the baby boomer generation continues to reach retirement age and begins leaving the workforce, a solution must be found to replace the retiring workers or to maintain an elevated level of productivity in the workplace. Investment in diseases associated with aging like Parkinson’s, Alzheimer’s, and cardiovascular disease is essential, especially as those diseases continue to cost the economy billions of dollars per year. Additionally, a thorough examination of the reasons for the lower fertility rate is necessary to determine the best course of action for stabilizing the replacement rate, and ultimately providing a long-term solution for one of the biggest issues facing the economy.

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

  [1] Colby, Sandra L., Ortman, Jennifer M. “The Baby Boom Cohort in the United States: 2012 to 2060.” United States Census Bureau. Last modified May 2014. https://www.census.gov/prod/2014pubs/p25-1141.pdf

  [2] Cha, Ariana Eunjung. “The U.S. fertility rate just hit a historic low. Why some demographers are freaking out.” The Washington Post. Last modified June 30, 2017. https://www.washingtonpost.com/news/to-your-health/wp/2017/06/30/the-u-s-fertility-rate-just-hit-a-historic-low-why-some-demographers-are-freaking-out/?utm_term=.1034378dce0f

  [3] Maestas, Nicole., Mullen, Kathleen J., Powell, David. “The Effect of Population Aging on Economic Growth, the Labor Force, and Productivity.” The National Bureau of Economics. Last modified July 2016. http://www.nber.org/papers/w22452

  [4] “Number of older Americans in the workforce is on the rise.” Pew Research Center. Last modified January 7, 2014. http://www.pewresearch.org/fact-tank/2014/01/07/number-of-older-americans-in-the-workforce-is-on-the-rise/

  [5] Takizawa, Claire et al. “Epidemiological and Economic Burden of Alzheimer’s Disease: A Systematic Literature Review of Data across Europe and the United States of America.” Journal of Alzheimer’s Disease. Last modified July 23, 2014. http://proxy.library.upenn.edu:2131/download/journal-of-alzheimers-disease/jad141134?id=journal-of-alzheimers-disease%2Fjad141134

  [6] Kelley, Gordon R. “Parkinson’s Disease Incidence and Prevalence” Remedy’s Health.com Communities. Last modified September 29, 2015. http://www.healthcommunities.com/parkinsons-disease/incidence-prevalence.shtml

  [7] Keogh-Brown, Marcus R. et al. “The Impact of Alzheimer’s Disease on the Chinese Economy.” EBioMedicine. Last modified February 4, 2016. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4776062/

  [8] “Cardiovascular disease costs will exceed $1 trillion by 2035.” RTI International. Last modified February 14, 2017. https://www.sciencedaily.com/releases/2017/02/170214162750.htm

  [9] http://www.freestockphotos.biz/stockphoto/16730

  [10] “HHS FY 2018 Budget in Brief – NIH” U.S. Department of Health and Human Services. Last modified May 23, 2017. https://www.hhs.gov/about/budget/fy2018/budget-in-brief/nih/index.html

PENN WHARTON PPI
RESOURCE SPOTLIGHT:

  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>