The U.S. is getting (relatively) younger

Posted by: Michael Mandel on January 24

I put together these two nice charts before I saw Brandon’s comment about how the median age is irrelevant :). Nevertheless, I think it’s interesting that the U.S. is aging slower than the rest of the world. By 2050, the U.S. is projected to have a median age only slightly above India.

This is the U.S. median age versus the rest of the world. The difference between the U.S. and the rest of the world is 8.5 years in 2000, and only 3.3 years in 2050. (The U.S. is the aqua line in both of these charts.)


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And here is the comparison to China, India, Japan, and Western Europe. Certainly the U.S. future looks a lot different.

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What are the implications of this?

This fact is obviously very important for marketers. But it may also mean that the U.S. will have an easier transition to an older society than any of the other major global players (China, India, Japan, Western Europe).

Or, as Brandon says, it may not mean much at all. I've certainly argued in the past that demographics is trumped by growth.

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Take a look at this chart, which plots two different scenarios for world income per head versus the projected path of the median age. At 1% growth in per capita income, the economy barely keeps up with the aging of the population. At 2% growth, however, the economy gets way ahead, and the impact of aging won't be so bad.

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Reader Comments

Navin

January 24, 2006 12:43 PM

Mike,

You are saying "demographics is trumped by growth".

The question really seems to be how far is demographics abetting growth ?


During next couple of decades, China and India are going to have the luxury of having a low median age and is that going to be of huge advantage to them.

I guess we need a graph showing the economic growth also in the second graph juxtaposed on the median age graph.

Jim

January 24, 2006 03:55 PM

The clear implication for publicly funded retirement and healthcare is staggering. Also, the USA benefitted in the last 10 or 15 years with headcount reductions funded by early retirement buyouts from well funded private pension plans. We don't have that luxury anymore and the rest of the world won't have it going forward. I believe that these buyouts were a benefit to productivity along with IT advances....

David Foster

January 24, 2006 11:00 PM

Low median age in China and India...people are net *consumers* of resources up until they are in their late teens or early 20s...first, they need to be educated; then, they require capital investment to provide the equipment or other resources to put them to work.

At some point, it seems to me that China and India should require massive capital inflows.

Scott Donnelly

January 25, 2006 11:53 AM

Mike,

You bring up a good point, but I think the median age needs to be decomposed more to get a better feeling for the economic impact. What about dependency ratios for the major global players? I think that will give a clearer picture than median age. Also, looking at just the old-age dependency ratio (% of the pop. aged 65+ / % of the pop. 15-64) gives a better idea of the drag the aging could cause.

Brandon

January 25, 2006 12:18 PM

I think this all assumes people will retire and become a drain on the economy. There are two things to consider with that assessment.

First, many older people will be unable to retire and will remain in the workforce in the coming decades. My parents are in their mid-60's now, and thanks to the 2000-2003 Bubble collapse (and some poor planning) will not be retiring any time soon, if ever. The record bonuses being paid out on Wall St. are there because Wall St. continues to suck wealth out of the middle class by playing the opposite side of all their panic trades in this yo-yo market. A large number of older people will not become a "drain" on the economy because they can't afford to stop being productive.

Second, the impact of retirees may not be as severe - compared to the U.S. - in India and China where a much stronger family structure means that 3 and 4 generations of families share housing and the elderly are not left to fend for themselves. Those that leave the workforce due to age are far less of a "drain" partly because their costs are somewhat absorbed by the family unit and partly because their ability to be productive in the home (caring for children, taking care of the house, etc.) allows the younger generations to be even more productive.

Mike Mandel

January 25, 2006 03:58 PM

See the new item with dependency ratio charts.

Eric

January 27, 2006 09:10 PM

It seems that the elderly in American society actually hold wealth disproportionately to their younger counter parts and hiers. They also benefit from a regressive tax system of taking earnings from struggling young workers and giving it to generally well off seniors.

Looked at this, the dependency ratio it a bit outdated.

Charles Burke

February 12, 2006 06:40 PM

The comments seem to all assume a static definition of old. Shoudn't some discussion occur on the basic question? Either we can, as a poeple, stop medical advances or redefine old. In particular, when Social Security started, old was the eldest 5% of the population. Today it is the eldest 12.5%. If the definition isn't changed we will soon have 20% of the population defined as old. Shouldn't consideration be given to defining old as the eldest 1/8 or 12.5% of the population?

Jas

April 12, 2008 08:38 PM

The system that is in place was created by these ppl. they knew one day they will be old and they knew that in order to live they need these systems in place to assure there place in society. so when we are all at there age we will have no Medicare, social security and other systems they have implemented. its a one shot deal and they benefit! we are the ones left to foot the bill!

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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