The Graying of America Essay Example

dream of equal opportunity for all of its citizens.

Zeitz [2005] described the following: The boomers—a generation born into national wealth and power, raised on the promise of their limitless potential and self-worth, reared on television and advertising, enthralled by the wonders of modern science and medicine—are, for all their differences, a most potent emblem of the long American Century. Even today they remain characteristically unfulfilled. Looking for “more, more, more”—for that “satisfaction” that seems forever to elude them—they will, as they have since 1946, stretch the limits of America’s possibilities and its resources.In 2046 we’ll still be appraising their work. Zeitz [2005] also stated: As a generation the boomers have always seemed to want it all: cheap energy, consumer plenty, low taxes, loads of government entitlements, ageless beauty, and an ever-rising standard of living. They inherited a nation flush with resources and will bequeath their children a country mired in debt.

It would appear that even though the baby boomers have created the American culture at every stage in the life cycle, they have also produced several challenges for the younger generations to manage. In less than a century, the United States will move from being ‘forever young’ to being ‘forever old,’ and the largest part of the change will happen in the next thirty years as the baby boomers retire [Burns & Kotlikoff, 2004]. ” This creates another dilemma. One can only imagine now the types of complications that will arise as soon as the large cohorts of boomers begin to retire. “Human demography, driven by simple changes in life expectancy and childbearing, is about to trump the power of economic growth [Burns &

Kotlikoff, 2004]. Life expectancy at birth is about seventy-six years, and life expectancy at age sixty-five is seventeen years and seems to be accelerating, which means the nation is headed towards a very crowded world with limited resources [Burns & Kotlifkoff, 2004].

Also according to Burns and Kotlifkoff [2004], birthrates have plummeted so the number of children coming of age and joining the workforce will not be as large as the older population causing all of the forces to be in overdrive mode.These factors combined with the current economic hardships are unquestionably going to have a negative impact on America’s population. According to Borowski, Crown, and Schulz [1991], this outlook is based on a variety of facts and assumptions: Dramatically lower fertility rates over the last two to three decades will lead to sharp reductions in numbers of future labor-force entrants, especially in comparison with the numbers of labor-force entrants associated with the postwar baby boom.As the baby boom population begins to retire early in the twenty-first century, the ratio of aged people to workers will rise dramatically. This may signal the advent of financial strains on the slowly growing labor force that must produce the output necessary to support the burgeoning elderly population. The financial strains imposed on the labor force by rapidly aging population will be exacerbated by early retirement trends, slow economic growth, steadily rising life expectancy, and spiraling medical costs, especially to care for growing numbers of the very old .

. Unless fertility or immigration increases sharply, it is reasonable to assume that the future demographic profile of aging nations will be determined by current fertility and mortality rates and

existing cohorts of the population. The government is almost out of time in trying to develop a consistent plan to meet the demands of this rapidly aging population. It should now be apparent that once the baby boomers hit retirement, the economy is going to suffer.

One way is through the loss of skilled labor which will affect several employers.Many professions are already facing shortages in the workplace. Once the baby boomers leave the office, businesses will have increasing expenses trying to train or find the right workers to meet the demands of the company. Another way the economy will suffer is through the increase need for health care and elder care. As the baby boomers get older, their need for these types of expenditures will increase as well.

Consequently, this increases the national health care spending too.Another problem is that governmental entities will start to lose tax revenues that the baby boomers provided so considerably. There will also be an increase in the federal budget deficit. The government will be spending more while receiving less revenue from the baby boomers. Younger generations can expect tax increases to help cover Social Security and Medicare. Even after all of these problems, there is still the burden that the baby boomers are going to leave for the current generation and the ones to follow.

This will then lead to lower average of living standards for the baby boomers, and the major assets of the baby boomers will begin to decrease in value since more people will be trying to sell their assets than people willing to buy them. Retailers will also be affected negatively by this movement. Retailers

can expect to lose revenue since the baby boomers will probably not spend as much, and marketers will have a difficult time searching for more sources or creating new ideas to attract the younger generations. Although there have een efforts at correcting the problem with the graying of America, governmental reform is necessary to avoid the storm of chaos that awaits everyone in the future. CURRENT DISCUSSION OF PROBLEMS Loss of Skilled Labor Affecting Many Employers Perhaps the greatest problem facing our nation as the baby boom generation approaches retirement age is a decrease in the workforce.

Many professions are currently facing shortages in the labor market. Examples of such industries include education, health care, accounting, as well as technology.Baby boomers are already active in these markets, so as they near retirement age, these already distressed industries will have an even greater crisis meeting the demands required of them. The shortages these industries will face can be a result of changes in market conditions. One such industry is the accounting profession.

After the accounting scandals earlier in the decade at such companies as Enron, World Com, and Tyco, demand for Auditing and Attestation services provided by accounting firms has been on the rise. Public companies face increased reporting regulations required by the Sarbanes-Oxley Act passed by Congress in 2002.As a result, many accounting firms face an imposing dilemma trying to find skilled individuals to supply the labor necessary to meet the increased demand as well as to replace the void created by retiring individuals in this field. Deloitte & Touche, one of the Big Four accounting firms, “estimates it will need to hire as many

as 50,000 employees in the next five years [Gerdes, 2007]. ” The health care industry is currently facing labor shortages; however, the resulting retirement of baby boomers is only going to make the problem more difficult.As the baby boomers retire, this segment of the population is going to be putting enormous pressure on the health care industry to provide medical services to this demographic.

Because this industry is already facing staffing issues with the retirement of health care professionals such as doctors, nurses, technicians, and so forth, the pressure to replace retiring personnel and find skilled labor to meet both current demands and future needs of the maturing baby boomer generation will be enormous and will only continue to get worse.Increase Need for Health Care As mentioned in the previous section, the retirement of the baby boomer generation is going to put rigorous demands on the health care industry. National health care spending, which hit nearly $1. 8 trillion in 2004, will increase as a percentage of GDP by 22 percent over the next 10 years [Silvy, Kalwarski, & Gandel, 2005]. Figure 1: Population and Health Care Spending by Age YearMillions of Americans 65 and Over AgeHealth Care Spending 200035. 1Under 252% 201040.

225-3510% 202054. 636-4418% 203071. 545-5421% 5-6418% 65+31% The preceding table taken from the article “Playing the baby boomer trends,” which appeared in Money Magazine on March 25, 2005, not only highlights the rise in health care spending by age, but also demonstrates how the 65 and older cohort is projected to steadily increase in population between the years 2000 and 2035. The health care industry must find a way to accommodate the

influx of baby boomers reaching elderly age and the related increase in expenditures for medical services and medications. Increase Need for Long Term CareAnother issue facing the aging of the baby boomer generation is how to provide long term care for them. According to Knickman and Snell [2002]: The Congressional Budget Office (CBO) estimates that expenditures on long-term care totaled more than $120 billion in 2000, with 59 percent of all expenses covered by the public sector (Congressional Budget Office 1999).

Out-of-pocket expenses account for almost all of the balance, with private insurance covering just 1 percent of long-term care costs. Conservative CBO estimates suggest total long-term care expenditures will increase at a rate f 2. 6 percent per year above inflation over the next thirty years, to $154 billion in 2010, $195 billion in 2020, and a staggering $270 billion in 2030. The numbers are slightly different if one assumes that long-term care insurance does not become more common, but the stark upward trend remains. As pointed out by this article, in 2010 when the first boomers begin to retire, long term care expenditures will be around $154 billion. In 2030 when the youngest baby boomers begin to retire, that amount is going to grow to $270 billion.

This is going to put enormous pressure on the government to find a way to help pay for this massive outlay or else the baby boomers will be forced to wipe out their savings. Even worse, the boomers may have to obliterate the savings of their children in order to cover out of pocket expenses for long term care. Loss of Tax Revenues on Governments As the

baby boomers approach retirement age, another problem facing governments will be the loss of tax revenue. Not only will this problem affect the national government, but it will also affect state and local governments as well.The baby boomer cohort has represented the largest population cohort for many years which means during their adult years while they were working, they were the biggest source of revenue for governmental entities.

As they begin to retire, taxable income they receive from pensions and social security will be at a much lower rate than their earnings from employment. In addition, with less disposable income, this will amount to less sales tax paid from a reduction in spending. But, perhaps one of the biggest hardships will be on local governments that are exempting or even freezing rates that elder citizens pay in property taxes.For instance, in Amarillo, TX, voters there voted to freeze property taxes for the elder as well as disabled citizens.

According to Jim Childers, Chief Appraiser at the Potter-Randall Appraisal District, had this tax freeze been implemented in 1999, between 2000 and 2004 the city of Amarillo would have lost $3. 37 million, Potter County would have lost $2. 72 million, Randall County would have lost $2. 66 million, and Amarillo College would have lost $1. 23 million [Chapman, 2006]. These figures do not account for individuals in the 45 to 64 age group which in 1999 represented 44 percent of the population in the area.

Increase in the Federal Budget Deficit Although revenues collected by the federal government from the baby boomers will be declining, governmental spending will be heading in the opposite direction. As a result,

the federal deficit is going to continue to grow rapidly. Today, as the oldest baby boomers prepare for retirement, federal, state, and local governments debts total $53 trillion, Social Security has $12. 7 trillion in obligations to current workers and retirees, and Medicare has $30 trillion in liabilities to beneficiaries [Cauchon & Waggoner, 2004].With the government currently spending billions on the war in Iraq, catastrophic consequences face this nation once the war is over. The bill comes due to take care of the baby boomers who have been paying their taxes their entire lives and making the mandatory contributions to the Social Security Fund with the expectation that the government will take care of them once they retire.

Tax Increases to Cover Social Security and Medicare Although many people perceive the taxes taken out of their paychecks for Social Security and Medicare as a type of savings for retirement, the people’s perception is far from the truth.Social Security and Medicare operate as a pay as you go system. What this means is that money paid into the system by today’s workers is paying for the benefits of today’s elderly. Up to this point, this system has worked as planned due to the fact that there have been more people in the workforce than retired beneficiaries. In 1950, there were 16 workers for every beneficiary, in 1996 there were only 3.

3, and by 2030 there will be fewer than two [Tanner 1996]. With the decline in the gap between workers and retirees, the Social Security system is heading toward possible bankruptcy.In order to keep it solvent, the government is likely to raise taxes thus passing

the burden onto younger generations, or cut benefits paid to beneficiaries at a time when they need it most to cover such escalating expenses as health care costs. Burden for Younger Generations and the Ones That Will Follow In addition to higher taxes paid by younger generations as the baby boomer generation ages, an increased burden will be placed on them to assist in care giving activities. Because many elderly individuals lack the resources to care for themselves, the load of caring for them falls on their children.

This care can include ither staying at home or hiring caretakers to help with their parent’s needs, transportation back and forth to doctor visits and providing financial assistance to pay for health care and medications. According to a story that ran on the CBS Evening News on November 19, 2007, “An estimated 34 million Americans care for loved ones age 50 and over [Hughes, 2007]. ” One of the biggest challenges facing younger generations is balancing their schedules to not only care for their own families, but also their aging parents. According to a health care study cited in the story, caretakers “spent on average 35 hours a week caring for their loved ones.And more than half of them said they did not work.

A third said they had quit their jobs or reduced their work hours [Hughes, 2007]. ” Because many households today rely on income from both spouses, the opportunity cost of one spouse staying home to care for elder relatives is going to place a huge financial strain on many households. On top of that, the additional expense of having to move parents in,

along with supplementing the costs of their health care and medication costs will cause many younger households to not only change their spending and saving habits, but perhaps force them to dig into their own retirement savings.Because many Generation X and Generation Y cohorts will be depleting their own retirement savings to care for their parents, the burden will be passed on to their children to provide care once they become elderly, continuing a viscous cycle of relying on the younger generation to care for the older generation. Lower Standard of Living for Baby Boomers Another problem facing baby boomers as they approach retirement is a possible lower standard of living.

For the ones fortunate enough to receive Social Security benefits, unless they have a retirement fund or savings to help supplement the income they get from the government, more than likely their monthly income will be less than before they retired. Not only will they have less disposable income but they also face a higher life expectancy which will force them to preserve their resources for later in life. According to a study done by Douglas Bernheim, he found that baby boomers generally are saving too little to maintain pre-retirement consumption [Radner, 1998]. Decreasing Value of Baby Boomer AssetsDuring the course of their lifetime, many baby boomers have accumulated assets which they planned to hold as investments to supplement their retirement income.

Boomers can be in for a rude awakening when they try to dispose these investments. According to Wharton School professor Jeremy J. Siegel, The value of their accumulated assets – not just their stocks but also their bonds, their homes, and even the

government bonds that back up their Social Security and Medicare – could plunge by up to 50% over the boomer generation’s remaining life span [Bernstein, 2006].Mr. Siegel explains that the value of these investments will decline because there will be more people trying to unload their investments than individuals wanting to purchase these assets. If these investment assets lose their value as Mr.

Siegel expects, this will be one more factor leading to a lower standard of living for the baby boomer generation who acquired these assets to help support them after retirement. Major Impact on Stock Market Baby boomers’ nest eggs will not be the only casualty from the declining value of their assets.As mentioned before, the value of their investments is certain to decline due to basic supply and demand economic factors. Economists today argue whether this asset meltdown will occur. One forecaster though, Harry S. Dent, predicts “a 12- to 14-year bear market starting around 2010 [Rosenberg, 2006].

” If this slowdown were to occur, economic growth would decline across all sectors of the economy. As a result of the slowdown, the economy is likely to head into a severe recession or even more likely into a possible depression. TABLE 1 PROBLEMSUMMARY 1.Loss of Skilled Labor Affecting Many EmployersMany professions are currently facing shortages in the workplace such as education, health care, accounting, and technology. Those positions require the proper education and skills to operate efficiently and effectively, and those positions are mostly held by the baby boomers. As the boomers retire, many employers are going to be faced with many challenges to replace them.

2. Increase Need for Health CareThere is

going to be rigorous demands on the government and health care industry for spending and accommodations. . Increase Need for Long Term CareThere will be enormous pressure on the government to help pay for these types of expenditures. 4.

Loss of Tax Revenues on GovernmentsThe boomers have provided the biggest source of income for governments at all levels. After retirement, those revenues will decline sharply. 5. Increase of the Federal Budget Deficit Revenues will be declining, but spending will be rising. 6. Tax Increases to Cover Social Security and Medicare There will be fewer workers to help cover the costs of Social Security and Medicare.

When the great number of boomers retires, everyone should expect for major tax increases to cover these expenses. 7. Burden for Current Generation and the Ones That Will FollowMany elders lack the resources to care for themselves thus leaving the burden of having to care for them on their children. 8.

Lower Average of Living Standards With a higher life expectancy for the boomers, they will be forced to preserve their resources for later in life especially if they did not save enough. 9.Decreasing Value of Major Assets for Boomers The value of the assets will decline because there will be more people trying to sell their investments than individuals wanting to purchase them. 10.

Major Impact on Stock MarketWith the boomers trying to sell their investments, there will be more sellers than buyers, which will then deflate the value of the stock. SOLUTION Our country faces great challenges as the baby boomer generation approaches the retirement age. As some of the problems presented in this paper reflect, not only will

the burden be felt by the baby boomers, but also it is going to affect every person in this country.As a country, we must start planning now to reduce the ripple effects these challenges are destined to cause to this nation. One solution to help alleviate the pressure caused by the baby boomer exodus from the workforce is for the government to offer incentives to younger Americans to go to school and receive an education. By educating the youth, these individuals will be able to replace the baby boomers retiring from jobs that are highly skilled such as lawyers, health care workers, business professionals, engineers, etc.

Not only will these individuals be filling the void left behind, but also since these jobs have higher salaries, their taxable income base will rise resulting in higher taxes being paid by these individuals without raising their tax rates. As many of the younger Americans ascend up to higher skilled employment, a void will be left for lower skilled workers. By overhauling federal immigration laws, the government can capitalize on the enormous number of illegal immigrants entering this country. It is estimated that there are close to 20 million illegal immigrants in the United States.Most of these immigrants come to this country and work in low skilled jobs due to lack of education or training. Because these immigrants are undocumented, many work for cash.

By working for cash, they do not have to produce employment documents such as a Social Security card. Employers benefit not only because of cheap labor, but also because they avoid paying taxes on their wages. By implementing a worker visa program, the government would be

able to collect tax revenue not only from the illegal worker, which is already working in this country, but also the employer trying to avoid the tax obligation.Although this is a very controversial solution, people in this country are going to have to think out of the box unless they are willing to pay higher taxes to cover the ever increasing federal deficit. A third solution to help ease the pain associated with the graying of America is to raise the retirement age.

Because of the advances in medical technology, Americans are living a longer life which also allows the body to sustain more productivity as it ages. With the baby boomers staying in the workforce later in life, every solution mentioned in this report would benefit.An argument could be made that this solution is only delaying the inevitable; however, as the following age-sex pyramids, Figures 2 and 3, created by the U. S. Census Bureau show, as the baby boomers get older, the population will level off creating more stability between the elder population and the younger workforce [“National Population Projections,” 2000]. There is not a single easy solution to resolve the problems associated with the graying of America.

The three solutions presented here can serve as a foundation for changes necessary today to prevent chaos in the future.CONCLUSION In conclusion, if no real efforts are going to be made at correcting the many problems with the graying of America, then everyone should expect much disarray in the future. Once the baby boomers hit retirement, the economy is going to suffer negatively. There is no escaping the fact that America will always have its

challenges; however, change is undeniably needed right now with this movement.

Excessive costs and turmoil can be avoided if the government develops a consistent plan to fund and manage the different entitlements for the elderly.Time is running out, and with all the expenses the government faces currently, this movement will only make the situation worse and add more fuel to the fire. Everyone is going to be affected by this aging population. A domino effect is created because one problem will certainly lead to the next.

Businesses will suffer because of the loss of so many skilled workers. Retailers will be affected by the less spending the baby boomers will be doing since their resources will be limited, and with higher a life expectancy, the boomers will need to conserve their income.There will be an increase in the need for both health care and long term care for the elderly thus increasing national spending. The government is also going to experience a loss in tax revenues from the baby boomers’ retirement. Unfortunately, this is going to increase the federal budget deficit since the government will be spending more to cover the expenses than it will be receiving in revenues.

To help cover these costs, the first thing the government will likely do is increase taxes. Even the boomers themselves will be affected unconstructively.They can expect lower living standards and a decrease in value of their assets. Even after all of these problems, there is still the burden that the baby boomers are going to leave behind for the current generation and the ones to follow. Change is imperative to prevent this nightmare.

Even if none

of the solutions presented here are implemented, one thing is for certain. To keep America from reaching the bankruptcy catastrophe, the government unquestionably needs to enhance its Social Security and Medicare policies. REFERENCES Bernstein, A. (2006, June 5).

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