RMI2201 CH. 13 (VanBuskirk Online, Troy University)

T/F: there were more younger people than older people in the 1950s

TRUE

T/F: the future demography of the world's population resembles a rectangle where there is not much difference in the size of the population 10 or younger and those 60 and above

TRUE

what are some problems that come with the aging population?

since it represents a higher proportion of the population

- they will require more services

- there will be economic issues and productivity solutions will need to be found as fewer workers will be able to fill jobs vacated by retirements

- smaller workforce available, meeting needs of older population will become more challenging

T/F: the impact of the aging population across nations will be uniform

FALSE: the ratio of retirees to workers will vary greatly across countries; its a result of economic progress

ex. the us economy is post industrial- its service based and many of the jobs are filled by knowledge workers and bc of lower physical demands of the work, they can work longer. there can still be value gained from the expertise and skills of these knowledge workers

who has the "oldest" population?

japan - nearly 33% of its population is above the age of 65

what was the avg life expectancy during the roman empire at birth?

25 years

what was the avg life expectancy by the middle ages?

33 years

what was the avg life expectancy in the early 1900s

55

what is the current average life expectancy in the united states?

76.1 years

T/F: there was a slight decrease in modern avg life expectancy due to the pandemic

FALSE: it was due to an increase in accidental and unintentional deaths, with nearly half coming from drug overdose

what is the reason behind the long life of some in the course of history well beyond average and the increase in life expectancy we see today?

it is a result of a dramatic decrease in childhood death- in the middle ages, one out of every two children died before reaching adulthood. once someone reached adulthood, they could expect to live many more years

how did the mortality rate dropped from 27% down to 4% globally? in the 20th century?

with continued advances in medicine and emphasis on safety (ex. car seats for small children) was remarkable and unprecedented

what is the current mortality rate for children in the united states?

0.77%

define life span

a theoretical assumption of how long one might live- THE MAXIMUM NUMBER OF YEARS A LIVING ORGANISM CAN POSSIBLY LIVE; most researchers put maximum life span between 120 and 150 years

define life expectancy

a calculation based upon historical data analysis on how long a human can live- THINK AVERAGE NUMBER OF YEARS A PERSON IS EXPECTED TO LIVE BASED ON CURRENT CONDITIONS; researchers put average life expectancy around 76 years

As childhood mortality declined, the world's population began to....

grow exponentially

T/F: the exponential population increase/rapid rise is expected to slow and once again plateau/begin to decline

TRUE: this change will not be uniform, as developing countries will see continued population growth while advanced/developed nations will be stagnant or even decline

Why do we expect to see the population plateau

the fertility rate is declining globally- it was 5.0 in 1951 and has fallen to 2.5

define fertility rate

the total number of births per 1000 women of reproductive age

what are the three main factors in declining fertility rate?

1. women's empowerment: increased levels of education and workforce participation

2. lower child mortality: lower mortality reduces the need to insure against the loss of children by having more children

3. expense: increased cost to raise children- educating children is costly and resources are limited

what is pattern seen in developed countries concerning children and population growth?

fewer children later in life leads to a flattening of the global population growth

which population segment is the fastest growing segment globally?

the population segment aged 65 and over: by 2050 one out of every six people will be over 65

what are the world's oldest populations (based on 2050 projected share of population over 65)

1. hong kong - 40.6%

2. south korea - 39.4%

3. japan - 37.5%

4. italy - 37.1%

5. spain - 36.6%

6. taiwan - 35.3%

T/F: as the aging population retires, there are fewer working age people to replace those retiring to help support the people collecting pensions

TRUE: a failure to plan and prepare increases the societal risk in terms of the aging population

The most significant factor in increased life expectancy and population growth is:

a

higher fertility rates

b

reduced childhood mortality

c

Improved safety featured in automobiles

d

Growth of assisted living facilities for the elderly

b

reduced childhood mortality

What are the three major categories of challenges created by an aging population?

1. economic development issues

2. health and well-being issues

3. the challenge of enabling and supportive environments

What does the challenge of health and well being issues include?

disease (both communicable and non-communicable)

caregiving

care coordination

brain health

mobility

what can the challenge of enabling and supportive environments include?

elderly engagement and purpose

daily living (lifestyle)

navigating end of life scenarios

T/F: the pandemic lowered average life expectancy temporarily

TRUE

T/F: medical advances could lead to great leaps in life expectancy (ex. a cure for cancer is found)

TRUE

describe a sandwich family

three generations of a family living together- the meat in the sandwich are the working age of younger children providing housing and care for not only their children but also their parents. the children and the grandparents are the bread.

T/F: sandwich families are very popular today

FALSE: families today are smaller and do not necessarily live in the same geographic region- modern family structures do not lend themselves to adequately caring for the elderly members and may create challenges when aging parents need more assistance as they live longer.

what are 5 of the economic concerns associated with an aging population?

1. aging patterns are not uniform across countries

2. economic growth may slow

3. generational equity may not be balanced

4. suboptimal investment and consumption profiles

5. increasing old-age dependency ratio impact on pay-as-you-go systems (a. social insurance systems are less sustainable and b. effects on social entitlement programs)

how do we help fix the aging patterns not being uniform across coun

an effective and beneficial way to rebalance a populations age distribution is through.....

immigration

why will the united states be better off than the rest of the developed world?

through liberal immigration policy- immigration is an effective and beneficial way to rebalance a populations age distribution

what three elements does an effective immigration policy include?

1. a focus on attracting young immigrants; work visas for foreign students graduating from US universities

2. an emphasis in securing immigrant healthcare workers to address senior population needs

3. a flexible framework that adjusts visas and green cards for shifting needs, gaps, and economic conditions

T/F: as the united states ages, there will be a increase in overall productivity and there will be a shift in GDP rankings

FALSE: there will be a decline, but everything else is TRUE- the US could potentially lose some influence but because other countries will experience the same demographic changes, even to a greater degree, the US will still be a significant player in global economics

T/F: in the chart compiled by Goldman Sachs, the United States is the only country in the top five world economies in the 1980 that will remain in the top 5 2075, less than 100 years of time

TRUE

T/F: China is predicted to pass the US soon in total GDP in the very near future

TRUE- the sheer size of their manufacturing productivity ensures the fact, but given their massive population and a significant aging issue the US will still maintain a sizable advantage in terms of GDP per capita

production occurs when...

technology joins labor and capitol

How do economies remain productive?

they improve technology or increase capital

T/F: as people age, productivity declines

TRUE: even during working years!

- when ppl enter the workforce are not very productive

- as workers their late 20s, early 30s, and into their 40s they are very productive (they possess an excellent combo of youth, energy and experience to maximize their productivity

- as workers age, interests change (they make take more vacays and do other things rather than

- there may be a decline in physical abilities thus productivity can decrease

T/F: entrepreneurial spirit also declines with age

TRUE: a new business owner can fail at 25 or 30 and still have a long time to recover lost investment money prior to retirement- an older person does not have the same time to recover if a business venture fails

T/F: the older the person, the more risk averse they become

TRUE: they have more time to lose with less time to make up a shortfall

why is economic growth slowing a concern?

- as ppl age, productivity declines

- entrepreneurial spirit also declines with age

- other cultures that have a younger population begin to increase productivity relative to other regions of the world: money will flow into these cultures to invest in the growing productivity and increase entrepreneurial activity. labor markets will become inefficient as populations age at diff rates, and replacement workers are fewer and not necessarily located where the work is

The United States is in a better position to managing an aging population due to a liberal immigration policy. Key elements of an effective immigration policy includes:

a

attracting young immigrants by offering work visas for foreign students graduating from U.S. Universities.

b

· securing immigrant healthcare workers to address senior population needs.

c

·creating a flexible framework for shifting needs, gaps, and economic conditions.

d

All of the above are key elements of a successful immigration policy.

d

All of the above are key elements of a successful immigration policy.

define generational equity?

the concept that different generations should be treated in similar ways and should have similar opportunities; this generational equity perspective seems to imply that each generation should provide for itself. often discussed in the context of the share of resources consumed by one generation over another - is it fair if one generation pays more in taxes but gets fewer resources for its contributions than another generation?

T/F: current generations of retirees are receiving significant government resources beyond what has been paid in taxes, and with an aging population we will have fewer workers to provide financial support for the older population, fewer workers will have to cover the social programs, increasing the burden on future generations

TRUE- because of this, the amount of debt accumulated will have to be paid by future generations of workers that face the likelihood that they will pay more in taxes than they will receive in benefits, which is facilitated by PAY AS YOU GO systems for Social Security and Medicare where current workers taxes are used to pay the benefits of current retirees. we

what are the two main reasons why people save?

preparing for future expenses (both planned and unplanned) or for future investment opportunities (gave some money set aside in case the opportunity of a lifetime presents itself)

In 1953, the Social Security Administration was founded in the United States to provide retirement, disability, and survivor benefits to those 65 and older. Why did they pick the age 65?

At the time, that was life expectancy. people assumed you would just work until you died, and at the time, 60% of men 65 and older still participated in the workforce

as life expectancies have continued to increase and the expectation of working until you die has eroded, what has happened to pensions?

employers can no longer afford to offer them on a widespread basis. because of this, most employees rely on a defined contribution plan for retirement savings

define net savers

the worker who puts 10% of salary into a retirement plan such as a 401k or 403b. That money is invested by the fund managers and people with a long time to retirement can be aggressive in choosing where they would like to invest - greater risk with the potential for greater growth; over time the investments tend to shift to less risky investments to reduce the risk of loss

T/F: as society ages, the demand for risker instruments may increase (more long term investors), resulting in an increase in value

FALSE: as society ages, the demand for riskier instruments may decline (fewer long term investors), resulting in declining value. When these workers retire, they shift from being net savers to net spenders. There will be a large group of the population not investing at all, now spending what was saved during working years

T/F: economic decisions made to help manage the financial impact of the pandemic resulted in a period of high inflation, and these inflationary pressures hurt the net savers by reducing the amt of funds available to invest

TRUE: the net spender is also negatively impacted due to the fact that they must use more of the accumulated savings to pay for consumption, which reduces the time it will take to reduce the assets to a value of 0

define suboptimal consumption

the challenge of optimizing spending based on life expectancy- did a person save enough to consume what they need or want throughout their life?

living shorter than we expected and not enjoying the full amount of what we saved even though our beneficiaries get to is NOT optimal

neither is living longer than expected and having to curtail consumption in later years to make money last

describe pay as you go systems

systems that are designed for current workers and employers to contribute to funds that provide for retirement benefits and healthcare for retired persons (and others who may qualify due to specific circumstances, such as the death of a parent or disability)

what are the two major pay as you go systems in the United States?

1. Medicare

2. Social Security

When was the Social Security Act passed and why?

1935 - passed to provide old age benefits to retired workers

When was the Medicare Bill passed and why?

1965 - passed to provide healthcare for retirees

how is medicare and social security funded?

Trust Funds were established to build the reserves to pay for these programs - the funds were supported by contributions of workers and employers through payroll taxes

When is social security costs' going to run out and how much will the costs exceed the funding by? How can the problem be solved

in 2034, costs will exceed funding by $437 billion

potential solutions:

1. benefit reductions to support social security (supported by republicans)

- raises full retirement age (slowly making more ppl ineligible for full benefits longer would improve program finances)

- lowers cost of living adjustments (older retirees tend to spend less and using a different inflation guage would decrease costs)

- and reduces benefits for high earners (benefits could become means tested and high earners would receive reduced benefits)

2. tax increases to support social security (supported more by democrats)

- increase payroll taxes (could close the shortfall but would be highly unpopular with voters, esp low wage earners)

- increase taxable maximum (raising or eliminating the max earnings to be taxed could improve ss finances)

- tax fringe benefits (employer healthcare and other benefits are not subject to taxes - treating this as ordinary income and taxed specifically for social security programs would improve solvency)

whats an issue with reducing benefits for high earners when it comes to trying to solve the depleting social security funds issue?

reducing benefits for high earners is an issue bc high earners have paid more into the system

When is medicare predicted to be out of funds? What are five potential solutions?

as early as 2026, but by 2031.

five solutions:

1. raise the eligibility age (starting medicare later would reduce overall costs but may be unpopular due to the need to retain healthcare coverage longer or even create a gap in coverage)

2. earmark revenue from an existing tax (identifying taxes from other sources and shifting them to be medicare specific ---> shuffling money from one acc to another would impact programs and does nothing to help contain healthcare costs)

3. modify advantage payments (Private insurers participate in Medicare Advantage programs and are paid through other Medicare Parts. Adapting the bidding process could help reduce costs. Participating insurers would likely oppose such changes, and politicians could face significant pressure to avoid this. Payments to physicians could also be reduced, which could cause losses to be passed onto other insurers and younger patients through higher costs for services.)

- negotiate drug prices (medicare can negotiate prices on certain drugs and expanding the list could help control the increasing cost of prescriptions; would not include expensive drugs nor would it have any impact on part a hospital coverage)

- shift to a defined contribution plan (the gov could contribute a set amt and insurers can sign up participants into plans who would pay any difference in premiums. it could create some competition among insurers to offer affordable plans but could also hurt lower income retirees or decrease availability of care for rural beneficiaries)

medicare payroll taxes could also be increased to cover the shortfall (the rate paid by employees and employers can be raised and earnings over a certain level could be taxed at an additional rate)

Solutions to improve and extend Social Security include:I. Raising the full retirement ageII. Reducing Benefits for high earnersIII. Decreasing the maximum taxable income

a

I only

b

II only

c

III only

d

I and II

e

I and III

f

All are correct

d

I and II

examples of opportunities for individuals to find rewarding careers that also benefit society and contribute to economic growth include...

- financial services will need to help the retired managing savings to hedge against inflation and ensure it lasts a lifetime

- there will be a need for additional healthcare services

- there will be a need for different housing concepts that can help with the daily needs of older residents

- additional focus on new pharmaceuticals to help combat aging related ailments (bioengineering fields will grow)

- travel and entertainment industries

- demand for new skills will be high with fewer workers to fill positions vacated by retirees

All of the following are career opportunities created by an aging population EXCEPT:

a

financial planning

b

healthcare

c

childcare

d

bioengineering

c

childcare