Age is how long until you die, not how long since you were born

Posted by: Peter Coy on October 31

John Shoven.jpg
Guest blog by Peter Coy

Stanford economist John Shoven (pictured) has just written an optimistic piece about how increasing rates of labor-force participation at older ages could increase GDP and help finance entitlement programs. In spirit, it’s a lot like a cover story I wrote for BusinessWeek on June 27, 2005, called “Old. Smart. Productive. Surprise! The graying of the workforce is better news than you think.”

Shoven’s National Bureau of Economic Research working paper takes the position that you’re only as old as you feel. Instead of defining age as years since birth, he defines it as years remaining until death (or mortality risk, which is the same general idea). Measuring age this way changes everything. By the conventional measure, in which 65 is the gateway to “elderly,” the fraction of the U.S. population that’s elderly will grow about 66% between now and 2050. But using Census Bureau projections for mortality improvement, Shoven says “the fraction of the population that is above a mortality rate that corresponds to 65+ today will grow by only about 20 percent.” The trick, then, if people are living longer, healthier lives, is to keep them in the workforce longer.

That’s essentially the approach I took in my 2005 cover story. In a back-of-the-envelope calculation, I figured that a combination of increased productivity of older Americans and higher labor-force participation could add 9% to gross domestic product by 2045, on top of what it otherwise would have been. That was based on the assumption that better health and technology would reduce the productivity gap between older workers and their younger counterparts.

Where I came up with an increase in GDP of about 9% by 2045, Shoven estimates an increase of between 7% and 10% by 2050. That’s strikingly similar considering how iffy these things are.

In a policy section, Shoven examines various ideas for encouraging work at older ages, such as changing the Social Security benefits formula so it uses 40 or more years’ pay instead of just 35 as now. Concludes Shoven: “It is time to consider a new way to measure age.” I agree.

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Reader Comments

Lord

October 31, 2007 07:21 PM

Is the only value of life work? Is life so devoid of meaning that only work is worthwhile? Instead of trying to make people work longer, why not simply expand their options and allow them to decide what is best for themselves. If they can't afford to retire, they can continue to work, and if they can they can go ahead and do so. Looking over the SS assumptions, they seem unbelievably pessimist to me. We may have a problem, but we may not. It is far too early yet to say.

Kevin

November 2, 2007 10:31 AM

Yeah, obviously it will add to production if some block of people are working as opposed to not working. I don't even need an envelope to figure that one out.

But wouldn't it be nice if entitlements were funded by real investment gains in real trust funds containing real financial assets? Wouldn't it be nice if one could suggest beginning to reform social security and Medicare, without getting nailed to a tree?

Joe Cushing

November 3, 2007 05:48 PM

Employers need to make it easier to work fewer hours per year. People who are 50+ and able to retire don't want to work 2000 hours or 2500 hours. A lot more of them would enter the work force if they could have more time off to go RVing. It doesn't have to be paid time off either. Let them work hard when the weather is cold and take vacations in the summer.

superf88

November 3, 2007 09:44 PM

Live longer, work longer? Well, hello, 50 year mortgage! So, I *can* afford a house!

Joe Cushing

November 5, 2007 08:42 AM

Glad to have you well again.

Tom Coss

November 6, 2007 11:19 PM

I'll assume that most people agree that economies who burry their intellectual capital at the age of 80 are better than those who do so in their 40's. Physicians, engineers, teachers, even experienced carpenters add value of education and experience that promotes efficiency even as their physical capabilities are diminished.

As healthcare struggles to measure its outputs, here is perhaps one example. In this case the future retiree will be different than those in the past. They will perhaps work fewer hours, but be more focused upon productivity rather than promotion. These individuals will work to make a difference not just a name. Traditional pecuneary drivers will yield to others, and we will be richer as a result.

Consider, then, a mature, experienced and effective labor force that simply wants to contribute and be productive. They won't tolerate petty meetings or condescending platitudes. They won't be interested in personal recognition or award trips to Hawaii, they simply want to contribute. Just think of a labor force who's self esteem is in their grand children and not in their title. For managers and executives who have lots of power, you have to ask yourself, what if no body cared?

I'm excited by the future labor force that quality healthcare is providing.

By the way, your welcome

Thomas A. Coss, RN

Lord

November 8, 2007 12:58 PM

The other problem with this is just because one can work doesn't mean anyone will be willing to hire you. As change accelerates, we may well face earlier obsolescence. Work is hardly based on sound bodies anymore after all. Even if capable of doing the work, there is little evidence of less age discrimination and it may in fact increase as age is associated with expense in peoples minds.

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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