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Senior citizens in the U.S. are having an outsize impact on the labor force and the economy, as columnist Greg Ip notes in his latest column. He takes a look at those 65 years and older, a cohort that he argues is sitting pretty. There’s never been a better time to be old, he writes.
This comes at a time when the young (and perhaps not-so-young) in the workforce must contend with the rise of AI, and what impact that is having on the jobs market. That’s not so much a concern for the elderly, who are mostly retired. But what of the impact on companies?
Greg notes that the elderly are an increasingly important group due to their wealth accumulation. As he puts it: “What makes the wealth of today’s retirees truly formidable is their numbers. Since the first baby boomers qualified for Social Security in 2008, the share of the U.S. population 65 and over has risen from 13% to 18%.”
And here’s a key stat: The average net worth of a person aged 65 to 74 was $1.8 million in 2022, up 178% from the same age group in 1989, adjusted for inflation.
The WSJ Leadership Institute reached out to Greg to expand a bit more on what impact these demographic trends could have for corporate America. Here are edited excerpts of his answers:
The graying of America has such huge implications for the U.S. economy and the greater workforce. What were the biggest demographic trends that struck you and made you want to write about seniors?
Greg Ip: In a previous column, I noted how more of the economy's output was going toward capital instead of labor. When I looked at who owns that capital, I was surprised to see how much of it was in the hands of the elderly. Once I dug in, it made perfect sense. First, the baby boomers started investing and buying homes at the start of an epic run in asset prices. Second, we know wealth peaks around retirement. Third, there are way more people of retirement age, relative to the total population, than ever before. Put those things together, and you realize just how much of our wealth and the nation's capital stock is in the hands of older generations.
What do you see as the greatest repercussions for companies managing through these demographic trends?
Greg Ip: There are two main repercussions. First, a growing share of what we as a society consume will be determined by people over 65. That means we'll be producing relatively less of the things that younger households buy, like minivans, houses and college degrees, and more of the things the elderly consume, like health care and travel. Second, you need to meet these demands with a work force that's getting older and, before long, smaller, due to aging, and lower immigration.
What effects on government policies, especially on taxes and spending, might you see as a result of this?
Greg Ip: The cost of elderly entitlements is consuming ever more of the federal budget and national income. That means two things. First, taxes are probably going to have to go up, with a particular focus on the wealthy. You're already seeing interest in taxing billionaire wealth in California. With Republicans in control of Congress, taxes aren't about to go up broadly. But should Democrats regain control of the House of Representatives in the midterm elections this year, that might spark more interest in taxing the wealthy and corporations or at least curbing their deductions. We might also have harder conversations about how much we spend on the elderly. There is no appetite in Washington for raising retirement ages or cutting benefits for the elderly.
But you can expect to see more trimming around the edges, such as the Trump administration's recent freeze to Medicare Advantage reimbursement rates, which hit the stocks of insurers offering those plans. On the other side, Trump Accounts, intended to help children get started on the stock market ladder, might offer new opportunities for financial products.
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