International Comparisons
A Paradigm Shift: From the Challenges to the Opportunities of Aging Populations
Speech
June 2003
UN Business Council Luncheon
New York, NY
Good afternoon. Thank you, Tom for the introduction. I want to also thank the United Nations Business Council and Paul Underwood for inviting me here today. I would also like to introduce AARP Board member, Clarence Pearson. Clarence has a long and distinguished career in international health issues, and he is a senior advisor to the World Health Organization where his focus is on global aging…glad to have you with us, Clarence.
When I became CEO of AARP two years ago, I set forth three great goals for our Association:
- To be one of the most successful organizations in America for positive social change.
- To help our members have choices, reach their goals and dreams, and make the most of life after 50.
- And to be a leading voice in global aging.
The first two goals were met with great enthusiasm, but the third one raised a few eyebrows. AARP has been involved in international aging issues since its beginning 45 years ago. Our founder, Dr. Ethel Percy Andrus, was a dedicated internationalist.
But, by elevating international aging issues to one of our three goals, many felt I was taking our commitment to a new level. And, I am.
And for good reason. A hundred years ago, the average person in the United States could expect to live to the age of 47. Today, average life expectancy is 30 years longer.
This "longevity bonus" is now occurring in most parts of the world. Indeed, increased life expectancy was one of the great success stories of the 20th century, due to the eradication of childhood diseases and improvements in public health, diet and standards of living.
The older population is now increasing much faster than other age groups in the industrialized countries, making it a larger share of the population.
In the U.S., this trend is accelerating with the baby boomer generation. They will begin turning 65 just 8 years from now, in 2011. But, fertility and immigration—which differ greatly among countries—also factor heavily into this.
Worldwide, the number of people aged 65-84 is projected to grow nearly threefold by the year 2050. And some demographers tell us that, by then, older people will outnumber children for the first time in history. This is the demographic seismic shift that we call Global Aging.
An aging population will affect nearly every sector of public life: our economies, our politics, health care, our infrastructures—such as transportation and housing—our social involvement in virtually every way. So global aging is a priority issue that demands the attention of governments, academe, business, non-profits and the public.
Even though the future is here… or almost here, many policymakers in the U.S. and in some countries are still reluctant to address some of the challenges posed by population aging. But others are enacting changes, including cuts in levels of social spending, health care, pensions and in some cases the special needs of older people.
In the U.S., the aging of the boomers, combined with state and national budget deficits, huge numbers of people without health insurance and other challenges could make for some difficult times ahead.
But, we and others believe that global aging also presents substantial opportunities to the economy and to society. The 50-plus population of the world is both a production power as an employee force and a purchasing power as a consumer force. If we seize the opportunity now, these forces combined can yield economic growth…not the stagnation that some predict.
While there are certainly differences among nations, the reality is that we have much is common. We're all wrestling with the same aging issues in slightly different ways and at different points on the aging curve.
We need to move beyond the doomsday predictions about aging societies and consider the opportunities of aging. And, that's a role we're taking on at AARP. I am not calling for unbridled optimism. I am calling for realism.
- Aging is an opportunity to change they way we think about how generations relate to one another. More older people means more mentors, more caregivers, more volunteers, more giving back to community and country.
- It's an opportunity to unlock the purchasing and creative power of millions of trainable employees and eager consumers. As people age, they continue to create demand for goods and services. This, in turn, creates jobs for people to produce those products and services. In the United States, people aged 50 and older control 75 percent of the nation's disposable income and own 77 percent of all personal financial assets. And they have the time and the health and the motivation to use their purchasing power.
- This is an opportunity to strengthen our workforce and our productive capacity. But we must first find more ways to give those who want to continue working the chance to do so. We'll need these older workers, too. Birthrates are down, fewer young workers are coming into the pipeline, and immigration can't supply all of our workers.
- Utilizing older workers more wisely can ease pressure on public pension and other systems, sustain or grow the tax base, and give older people meaning and purpose.
We believe that these and many other opportunities exist, and that countries have much to teach and learn from one another as we share experiences with aging issues in the workplace, in health care, in pension systems and in other areas.
Our mission at AARP is to improve life for people as they get older—both in the U.S. and abroad—so they can live long, healthy, secure and productive lives. To do this, we are reaching beyond our borders to engage leaders in other countries to address policy challenges…and to help find solutions.
Two weeks ago, several colleagues and I went to the United Kingdom and Germany to discuss how these countries are addressing these issues, and how they view these trends.
We met with parliamentarians, government officials, academics, business and union leaders, NGOs and journalists. Most had responsibility for and/or interest in policy related to older people, as well as other sectors of their societies.
This was not a single experience; we have been back and forth numerous times. But we returned from this trip more convinced than ever that we can contribute to the debate on these questions from our own experience at home…and that we can learn a good deal, as well.
In meeting with top health and pensions officials and aging advocates in these countries, it seems clear that, even though we have much in common, we also have significant differences in how each country is aging and the resulting economic and social implications.
- Each of us—the U.S., the UK and Germany—is an aging society. But the UK and Germany are a bit ahead of the curve, with more retirees per capita than the U.S. Currently the 50-plus population constitutes about 27 percent of the total U.S. population, compared to over 33 percent in the UK, and over 35 percent in Germany. By 2050, those percentages will go up to about 37 percent for the U.S., and 42 percent and 46 percent for the UK and Germany, respectively.
- Each country faces major financial problems, putting pressure on health and pension programs. Germany is the more difficult case, with 11 percent unemployment, apparently no long-term immigration plan to provide workers when the economy recovers, and the added cost of benefits for the East German population, which only started contributing to the pension and health programs after the country's unification in 1990.
- In the UK, statutory retirement is 65 for men and 60 for women, but many are leaving work at 63 and 59, respectively. Germans are leaving the workforce at 60, while the statutory retirement age is 65. In the U.S., many people are leaving work at 62, while our "so called" retirement age is 65 and increasing over the coming years to 67. However, here in the U.S., we appear to have the beginnings of a trend away from very early retirement.
- Each country is contending with obstacles to retraining and retaining older workers. Part of this challenge lies in age discrimination. In the U.S., we have laws that protect older workers from discrimination based solely on age in all aspects of employment, including hiring, dismissal and training. At AARP, we have a team of public interest lawyers to help ensure that these laws are upheld.
However, there are no such laws in the UK or Germany. There are also negative stereotypes and attitudes towards older people in the workplace, that we all need to deal with.
- In our meetings, we found that each country shares concerns about long-term care, in terms of capacity, quality and how to pay for it. Questions about managing chronic disease and end-of-life issues are also common. What are the limits of government assistance in these areas? Again, each country has differing attitudes about the role of government in the lives of its people.
Where do we go from here? Let's first look at the older worker. This was perhaps the single issue that sparked the most discussion.
We need a new consensus on increasing employment opportunities for older people. This should not be about compelling people to keep working beyond retirement age, but of giving those who would like to work the opportunity to do so. It's about having real choices.
We will need these older workers, we all agreed, because as our societies age, there are fewer young people in the workforce. Furthermore, with lower levels of immigration across the UK and Europe—and only modest productivity gains—there is a real labor crunch coming. This is also true in the U.S.
Older people can be productive members of the workforce here and abroad. There has been a dramatic shift in the workplace from back work to brain work that allows older people to remain in the workplace longer, contributing to the tax base and lessening public demands on health care and other social entitlements.
The consensus on the older worker must include a discussion of how companies can eliminate compulsory retirement ages for their employees—something that is illegal in the U.S. and that a new EU mandate could soon prohibit.
But the EU mandate is subject to interpretation by member states, and this will be a major test for Europe's approach to older workers.
We understand that the UK has decided on a strict interpretation of the mandate, prohibiting discrimination based on age per se, thereby protecting younger and older workers and making the system truly performance based.
Germany is still contemplating how they will interpret the mandate. Germany has not had much success in encouraging longer work lives- a policy which is perceived as a tradeoff with younger workers. According to the German health ministry, 40% of German companies do not have workers age 55 and over.
We were asked by several officials in both countries, if AARP would be interested in an exchange of ideas and experience on issues related to the retirement age, perhaps through conferences. We think this is worth following up. And we should include business leaders in the conversation.
This discussion should also involve workplace initiatives, such as phased retirement and flexible working opportunities, and training programs so that employees can increase the skills their employers need. Several European academic experts with whom we spoke emphasized the body of knowledge strongly supporting the ability of older workers to be re-trained, although not necessarily using the same training methods that are used for younger workers. Incidentally, regarding the world of work, both our British and Germans hosts remarked that Americans need to learn how to take more vacations. We enthusiastically agreed.
Another crucial step for all three countries is to establish policies to ensure that public pension and health-care systems do not collapse under the weight of aging populations. Currently, public pension costs constitute 7.2 percent of GDP in the U.S., 10.2 percent in the UK and 12 percent in Germany.
In Europe, public pensions are a significantly higher percentage of income for retirees than in the U.S., where we rely more heavily on corporate pensions and private savings. Germany, where 70% of retirement income comes from public pensions, is taking steps to strengthen corporate pensions. National savings rates remain a major problem for all of us.
Public pension system reform is difficult, but it need not be as draconian as many people fear. According to EU experts, even small, incremental adjustments that several member states have already made to pension reforms—Sweden and Austria, for example—are beginning to bear fruit. If reasonable steps on pensions are taken now, we can build up secure retirement income and change people's expectations of their government and of aging.
It seems that much of the global aging challenge lies in national psyches. There needs to be an honest, broad debate in all developed countries about aging. This debate must challenge public expectations about entitlements as well as assumptions about the role of older people in society. In many cases, a transition from an "entitlement" ethic to an "endowment" ethic is required. I believe that the United States is ahead of the UK and Germany, and perhaps ahead of most European countries in this regard.
For too long, the global aging dialogue has taken place primarily within the narrowest of terms, and these have tended toward the negative.
Policymakers and opinion leaders need to exchange information, best practices and research. Consultation among a broad range of business, labor, media, environmental, educational, health care, civil society and other sectors is crucial in creating societies for all ages.
There is genuine concern among the people we met in the UK and Germany that lack of dialogue and action now will necessitate more drastic reform later. Both countries used the phrase "generational warfare" to describe their fears that the battle over resources will lead to resentment and hostility between young and old. They asked if we saw signs of this in the U.S. We said we do not, although there are some attempts to stir up generational conflict.
We talked about intergenerational strategies to help mitigate this problem, such as national programs through which older people mentor the young and grandparents provide care for children of working parents. We learned that in the UK there is a program where young people, typically college students, live rent-free with older people in exchange for in-home assistance with shopping and cooking.
But something more fundamental must happen in national attitudes for many of these challenges to become opportunities for economic growth and stable families and societies.
There are, however, powerful forces aligned against change or even the thought of change. The trade unions that periodically paralyze France are apparently also daunting in Germany. Business leaders say that government has over-promised for years, and now the chickens are coming home to roost.
We talked about the difficulties that governments in all three countries have in dealing with tough issues, especially if there is the slightest chance of putting off painful decisions. Government officials in the UK acknowledge that a real crisis in the national health program may be unavoidable, and only then will change be possible. Of course, we in America face the same situation.
Either our countries will make decisions about adapting to our aging societies, or these decisions will be made for us by the sheer force of demographics and economics. It's far better to approach these problems cooperatively, with all the issues on the table, earlier rather than later. It becomes a question of whether we will manage change, or whether change will manage us.
We seem more optimistic about the future here in the U.S. If we are, perhaps it is because we are less reliant on government, because baby boomers say they intend to work longer than their parents' generation, because we have less age discrimination—which boomers won't tolerate in any event—and because we have a strong volunteer ethic.
But our low national savings rate in America is an important barometer of our peoples' lack of appreciation and readiness for a future in which they will live longer and need economic security. There clearly is work to do here at home.
All countries face challenges with people living longer and slow-growing or even shrinking numbers of workers…and we don't want to minimize those challenges. But, we also know that demography is not destiny. Aging populations, as mere numbers, do not threaten world stability.
The increased longevity of our population has been called "the true wealth of nations." As employers, workers, governments and others learn to capitalize on this "wealth", they will contribute to world economies and societies through measured and responsible reform.
Aging populations offer opportunities, as well as challenges. And, by elevating AARP's international goal to become a leading voice in global aging, we are increasing our commitment to tackle both.
It has been said that the sweetest victories are those borne of challenges. With increased international cooperation, the challenges that aging poses to the world can be met. Older people can lead longer, healthier, financially secure and more productive lives…to the benefit of economies and societies everywhere.