Tony Roth is CIO for Wilmington Trust Investment Advisors, Inc, the investment advisory arm of Wilmington Trust and M&T Bank.
The anticipated increase in the proportion of the American population aged 65 and older—from 58 million in 2022 to a projected 82 million by 2050—calls attention to the economic implications of increased longevity.
Yes, this trend will bring significant challenges to continued economic growth. Fortunately, I believe the U.S. is uniquely positioned to overcome these challenges and capitalize on the economic opportunities related to longevity.
Strength In Aging
A key to any discussion of the increasing age of our population should also include the reality of our declining birth rate and how these two forces are reshaping the age distribution of U.S. workers.
As a larger portion of the workforce extends into later stages of life, it becomes important to consider the potential implications for the labor market and broader economy.
One piece of good news is that older workers will continue to be significant drivers of economic dynamism in the U.S. far into the future. Despite today’s headlines about younger people wanting to retire early and jumping onto trends like the Financial Independence Retire Early (FIRE) movement, the reality is that they’ll continue to work.
The prospect of a tighter labor market (exacerbated by our low birth rate) and ongoing questions about our social safety nets will encourage people to work longer. As of 2024, 42% of the total global expenditure is attributed to older adults, and as this age group continues to increase in population and wealth, their impact on total spending is expected to continually grow. The enduring economic significance of older workers in the U.S. remains promising, as this demographic is expected to continue positively contributing to ongoing workforce dynamics and societal changes.
America’s Unique Dynamics
The nature of how our workforce is aging offers distinct advantages, notably influencing the dependency ratio.
Traditionally, as the dependency ratio rises—indicating a higher number of nonworkers who are dependent on workers—the more challenges an economy faces. On a global scale, countries like Japan and several northern European nations exemplify the problems associated with elevated dependency ratios, including reduced productivity growth and labor shortages.
Contrary to these trends, the U.S. benefits from a general need for workers to stay in the workplace longer. Unlike in other countries, the phenomenon of an aging workforce could be a positive catalyst for the U.S. economy because workers who earn longer contribute more to the economy than those who rely on the next generation of workers to subsidize their standard of living. Workers have additional years to bolster the economy overall, which benefits their own financial and mental well-being. This also benefits younger workers, by giving them more mentorship and training opportunities, which can spur innovation.
Empowering Older Workers
Adaptability and flexibility are key success factors for a labor market that supports older workers in the context of an aging society.
As noted in Wilmington Trust’s 2024 Capital Markets Forecast Report, the U.S. stands out as a leading nation in labor flexibility, reflecting the ease with which workers can switch jobs and firms can restructure their workforces as needed. The U.S. labor force and the companies that drive it have long demonstrated their history and remarkable ability to thrive in changing conditions.
One example occurred after World War II. Before the war ended, some American economists warned of a post-war economic collapse as tens of millions of service members were ushered out and began looking for jobs. But the U.S. economy flexed and adapted, creating jobs and ushering in three decades of significant growth. I predict a similar outcome in this century as our workforce ages.
When acknowledging the challenges associated with an aging workforce, it’s critical to consider how advancements in technology, particularly AI, can help to reshape this narrative.
Despite the notion that AI might potentially cause job displacements, the adaptability and flexibility of the U.S. labor force help to mitigate the potential negative impacts of AI. When utilized effectively, AI can serve as a tool to enhance productivity by streamlining routine tasks and complementing the skills of the human workforce. There are clear opportunities for AI to benefit the older workforce by enabling them to upskill, adapt to changing job requirements and make meaningful contributions to their jobs and the overall economy.
Navigating And Embracing Longer Careers
The evolving dynamics in the workforce, influenced by the idea that individuals will work longer, present opportunities for all participants in the labor market to adapt.
For individuals, there are clear benefits that result from early and lifelong investments in health, relationships and finances—often referred to as longevity literacy, which involves finding ways to invest in oneself for a fulfilling future.
As life expectancies increase, it becomes critical to prioritize nurturing mental and physical well-being. Reshaping one’s mindset early on in life to prepare for living longer with vitality is critical. Viewing each additional year as an asset rather than a burden is essential to success.
As our nation prepares for a significant demographic shift, the trajectory of an aging population offers both challenges and unprecedented opportunities. The impending surge in the older population brings to light the many economic implications of longevity, which the U.S. stands uniquely positioned to navigate.
By embracing these changing dynamics, the U.S. can best ensure a future where longevity catalyzes economic growth and prosperity.
This article is for general information only and is not intended as an offer or solicitation for the sale of any financial product, service or other professional advice. Wilmington Trust does not provide tax, legal or accounting advice. Professional advice always requires consideration of individual circumstances. Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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