Aging Boomers May Bring Fiscal Blessings Instead

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Just what are those population dynamics? Bluestone and Melnick's economic model predicts weak employment growth of about 1% a year from 2008 through 2018. The comparable figures were 1.9% per year from 1988 to 1998, and 0.9% annually from 1998 to 2008. The scholars predict that 14.6 million additional nonfarm payroll jobs will be created by 2018—15.3 million if you include farmers and self-employed family members at work in family enterprises. Most jobs created will be in the economy's knowledge- and skill-intensive sectors, especially health care, education, social services, and state and local government.

A gray revolution in HR policies?

The baby bust generation that followed the boomers is too small to fill those jobs. Using official projections of population growth and current labor force participation rates, and assuming there will be no major changes to immigration, anywhere from 5 million (using the nonfarm payroll measure) to 5.7 million jobs (using the broader calculation) could go begging.

It's hard to imagine that employers will let from 30% to 40% of these additional jobs go begging over the next decade. Human resources departments will face growing pressure to retain older workers and welcome gray-haired hires. As when employers adjusted to adapt to women workers, companies in all kinds of industries will face demands to overhaul the workplace to make it friendlier to aging employees. For instance, workers may enjoy benefit package choices that better reflect their age; perhaps leave will be added for the birth of a grandchild, and eldercare policies could become as common as those for childcare are now.

Management may also devise multiple career paths. Incomes and promotions may still drive younger workers, speculates MIT's Coughlin. Older employees might place greater value on flexibility and work they find meaningful. Government will also face ongoing demands to remove disincentives to working longer that are built into the health-care and retirement systems.

Labor market projection isn't an exact science. A lot of unexpected events will happen between now and 2018. Nevertheless, the underlying demographic trend is compelling. Survey after survey has shown that a majority of boomers say they want to work in their elder years. They're going to get their wish. Experienced workers will continue to use their knowledge and expertise to boost their employer's competitiveness and productivity. They'll pay taxes on their income for much longer than the Silent Generation that preceded them, making the government debt tab easier to meet.

Demographics may not be destiny, but it exerts a powerful influence on the economy. For the U.S., to paraphrase Harry Hopkins, the old age thing could become a good curve.

Farrell is contributing economics editor for BusinessWeek. You can also hear him on American Public Media's nationally syndicated finance program, Marketplace Money, as well as on public radio's business program Marketplace. His Sound Money column appears on BusinessWeek.com.

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