RMI 2302 Nyce Module 13

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Economic Overview of aging
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More services for aging population Fewer in workforce to provide these services (the bucket of capabilities) Many fear that aging costs are going to outweigh benefits
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What is the basis of workforce (body vs. mind) of aging?
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Manual Labor – aging population does not help Knowledge based workforce – older workforce has experience/knowledge that is valuable Opportunity for current workers to tap retired workers as resource
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Aging Trends
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Aging population – people 65 and over outnumber those 5 and under Life expectancy is increasing (lifespan?) The number of people 80+ will double in 30 years Median age of Western Europe & Japan 1980 – 34 and 33 2030 – 47 and 52 Italy, Spain, & Japan More than half of all adults will be older than official retirement age More people in their 70’s than 20’s
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Major Challenges of Aging Population
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1. Economic development issues 2. Health and well-being issues 3. Challenge of enabling and supportive environments 4. Not uniform across countries some are seeing an aging population coupled with population decline 5. Noncommunicable diseases become an increasing burden (#1 killer of elderly) 6. Family structures are changing, care options for elderly 7. Shrinking ratio of workers to pensioners (pay-as-you-go systems) -Social insurance systems are less sustainable -Effects on social entitlement programs 8. Social/Political Impacts
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What are the challenges of enabling and supporting elderly?
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-Slower economic growth -Poverty among elderly -Generational equity -Inadequate investment in physical and human capital -Inefficiency in labor markets -Suboptimal consumption profiles
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Economic Development
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With human input declining, need improved efficiency for GDP growth May not be enough, could see declining GDP even with more effective use of capital Worker productivity typically declines with age Less entrepreneurial
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Savings Rates and Investment
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What happens when large % of population are consuming rather than saving? Does capital for investment “dry-up”? Go elsewhere for capital, loss of influence Inflation? Growing risk aversion, shorter investment windows
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Impact will not be uniform
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Where will next wave of workforce be? Where will retirees be? Peter Peterson – “The Floridazation of the developed world” Society find a way to use “gray skills” to alleviate burden on younger generations? Use the “experience of age” US relatively better off than rest of developed world We will drop from 34% to 24% of global GDP Canada, France, Germany, Italy, Japan, UK combined => from 38% to 16%
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Social Programs
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Cost to maintain current programs Addition 7% of GDP needs to go to government budgets Tax hikes or benefit cuts Remember elderly vote, overburden of taxes destroy growth Third option: Take it from everywhere else Defense, education, humanitarian aid, medical etc…
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Social/Political upheaval
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Current “problem” countries are aging => less likely to cause problems in future -Demographics will win “war on terror” New “problem” countries can emerge Only large group of countries to go through “full demographic transition” today’s developed nations -1700-1900’s how did we handle it? Revolutions, civil wars, WWI, WWII Shorter focus of developed countries => reduce will to fight, along with financial capabilities Older people tend to become more conservative -Implications?
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Rate of Change is a problem
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China can become the first country to go through transition without becoming “wealthy” first It took France 114 years, the US 69 years, China 27 years Problem: rising standards of living, urbanization, growing income inequality, environmental degradation, etc… all cost money to manage How long to double the % of population 65 or over from 7 to 14% *China – one child law*
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Demographic Transition
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*A process most developed countries have gone through, they have gone from high death rates and high birth rates to low death rates and low birth rates.* High birth/death rates High birth/low death rates Historically, major growth in wealth to manage the next stage of transition Low birth/low death rates
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Results of Aging Population
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1. Population and GDP of developed nations decrease as a percentage of global totals – loss of influence 2. US however is best positioned of all developed nations to manage trends (less aging of population) 3. US actually will become more influential 4. Some developing countries see youth bulges – leads to instability 5. Will developed nations have the man-power to respond? -If not – less war/conflict
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Global Aging is a Problem
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YES: Based on everything that we just discussed, yes it is a big problem. NO: This answer is based on the fact that it is a bigger problem in other countries China’s 4-2-1 problem Better funded that other countries 1 working age person->Supporting 2 parents ->Supporting 4 grandparents
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Pax Americana Geriatrica
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Peace through America seen this in Roman times, British rule, etc… We have been since WWII, peace through MAD, peace though aging?
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What are the opportunities?
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-Needs for a variety of services Health care, housing, inflation guards, pharmaceuticals Bioengineering, travel, entertainment -Levels of disposable income of elderly -Labor shortages (wage growth)
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Challenges of an aging population
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Economic development issues Health and well-being issues Challenge of enabling and supportive environments
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result of an aging population?
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US will become more influential Population of developed nations will decrease as a percentage of global totals GDP of developed nations will decrease as a percentage of global totals
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In “Is Global Aging a Major Problem?”, Howe and Jackson posit that China could be A. the first country to cross 10% GDP increase in one fiscal year. B. the first country to grow old before it grows rich. C. the first country to successfully implement a national birth control policy. D. the first country to withstand decades of civil unrest. Response Feedback:
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B. the first country to grow old before it grows rich.
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What is the number one killer of elderly? A. murder B. car accidents C. slip and falls D. noncommunicable diseases
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D. noncommunicable diseases
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What problem will China be facing in the future? A .The 4-1-1 Problem B. The 4-2-1 Problem C. 9-1-1 Problem D. 3-2-2 Problem
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B. The 4-2-1 Problem
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If women only have two children, what will our population do by 2150? A. grow to 8.7 billion B. grow to 10.8 billion c. decrease to 4 billion D. decrease to 5.3 billion E. none of the above
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B. grow to 10.8 billion
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Which phase of demographic transition is characterized by high birth and death rates? A. pre-transition B. transition C. post-transition D. ex-transition E. none of the above
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A. pre-transition
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By 2020, how much will the working population be contracting in Europe and Japan? A. It will not change. B. 0.5% to 1.5% C. 5% D. 10%
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B. 0.5% to 1.5%
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With human input declining, what needs to be done to GDP growth? A. improved efficiency B. more taxes C. raise minimum wage D. borrow from other countries
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A. improved efficiency
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Which of the following is a challenge with the aging population? A. poverty B. health C. generational equity D. labor inefficiency E. all of these are challenges
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E. all of these are challenges
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Which of the following is not one of the major challenges of an aging population? A. Challenge of enabling and supporting environments B. Older people making poor decisions C. Health and well-being issues D. Economic development issues
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B. Older people making poor decisions
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The U.S. can expect to become more influential because of the aging population. T/F?
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True

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