Commentary CONTINUED
Immigration helps keep America’s average age from rising
as fast as it otherwise would in the face of declining fertility.
It can help us avoid a future in which elderly Americans
are a permanently impoverished underclass.
Economics often is called “the dismal
science,” and this is particularly true of
macroeconomics. The macroeconomics
of population aging is especially daunting. Yes, there is a demographic window
in which national prosperity is almost
guaranteed as the shackles of too many
children per family are cast off. The United States enjoyed this window in the past
century, creating an infrastructure of astonishing value and effectiveness.
Now, as our population ages while its
longevity increases and parents replace
children as the source of economic stress
for the working population, we are grappling with the closing of that window. In
Japan, the number of people older than
age 65 already exceeds the number of
children younger than age 18.
“In terms of their proportion of the
total population,” according to Japan’s
Ministry of Internal Affairs and Commu-
nications, “the elderly have surpassed
the younger age group since 1997.”
One acute aspect of this change is
that the elderly are dependent for much
longer than children. In the United
States, we are being encouraged to work
longer as our longevity increases—but
this also has a demographic downside. In
a Jan. 27, 2011, New York Times article on
the growing number of Japanese youth
who are choosing to leave the country
to avoid a “roadblock” of older workers
clinging to their jobs for fear of poverty,
reporter Martin Fackler states, “There
are corporations that hire all too many
young people for low-paying, dead-end
jobs—in effect, forcing them to shoulder
the costs of preserving cushier jobs for
older employees.”
Blessing or Curse?
Many actuaries devote their careers to
fostering savings for the post-retirement
period, and on a microeconomic level, this
can be achieved. But macroeconomics is
like thermodynamics: You just can’t win.
The demographic dividend theoretically can be invested in increasing
the productivity of workers, so a
smaller percent of the population can
produce enough goods and services
to sustain the rest. There’s no doubt
that the American worker of today is
far more productive than the worker
of 50 years ago. Computers, software,
satellite communications, the Internet, robotics—all have combined to
enable workers to produce far more
than in the past. But this increased
productivity hasn’t been shared with
the workers. Instead, the benefits of
enhanced productivity generally have
accrued to the wealthiest 1 percent or
2 percent of the population. Real wages
of the American worker haven’t gone
up in two decades. In addition, what increasingly will be needed in the future
is medical services, often in the form of
personal assistance to the elderly. This
isn’t an area in which productivity easily can be raised.
In the never-never land of macroeconomics, every step forward is a step
backward. Savings produce inflation.
Few Americans know that in southern
China, the most prosperous part of that
country, the minimum wage has been increasing at 18 percent per year. Inflation
is especially hard on the elderly.
What has saved America—so far—
from the fate of Japan (and, increasingly,
Europe) is our tolerance of immigration.
As a people, we are remarkably accepting
of newcomers, disruptive as they may be
to social patterns and mores. Immigration
helps keep America’s average age from
rising as fast as it otherwise would in the
face of declining fertility. It can help us
avoid a future in which elderly Americans
are a permanently impoverished under-
class. Given the current fiscal state of our
country and the debates about cutting So-
cial Security and Medicare, this isn’t an
unrealistic possibility.
JAMES A. KENNEY, a fellow of the
Society of Actuaries and an enrolled
actuary, is a member of the editorial
board of the Enrolled Actuaries Report
and a consultant with Kenney Consulting
LLC in berkeley, Calif.
This article is solely the opinion of its author.
It does not express the official policy of the
American Academy of Actuaries; nor does it
necessarily reflect the opinions of the Academy’s
individual officers, members, or staff.
Resources
Fackler, Martin, “In Japan, Young Face
Generational Roadblocks,” New York
Times, Jan. 27, 2011. http://www.nytimes.
com/2011/01/28/world/asia/ 28generation.html
SOA International Living to 100 and Beyond
International Symposium. http://livingto100.
soa.org
