After World War II, few could have predicted that the ensuing boom in childbirths would have lasting effects on our country for years to come. However, as the aging population continues to rise, due in large part to the baby boomer generation, we at Rapunzl will use our financial fluency tools take a look at its impact on our economy. Introducing this week’s Industry Spotlight: Healthcare with an Aging Population.
So What is it?
The healthcare industry has always been one of the most controversial sectors of our economy, as partisan divide and inefficiency continue to inhibit the implementation of a sustainable system to this day. However, with an aging population, the healthcare industry will only become larger and more important in shaping and supporting our country’s economy over the coming years.
The baby boomer generation, categorized by people born between 1946 and 1964, is the primary reason for this increase in the aging population. Although this population increase has helped support jobs nationwide for the past several decades, as they were the core of the workforce, baby boomers are now entering their retirement ages. With the core of our workers leaving their hard-working jobs for the comforts of retirement, several industries and our economy as a whole are going to be forced to undergo drastic change.
While many baby boomers are entering their prime retirement age in the next several years, they are also living longer than previous generations. According to the Census Bureau, male life expectancy is supposed to grow from 77 years to 82 by 2050 while female life expectancy is supposed to grow from 82 years to 86 in the same period.
This aging population and increasing proportion of retirees will have a transformative effect on industries nationwide such as the healthcare sector, benefit programs, technology, and our economy as a whole. But by how much, you ask?
As our population continues to increase exponentially, we have historically more elderly persons in need of healthcare today than ever before. According to the Bureau of Labor Statistics, by 2026, the group of workers aged 55 years and older is supposed to grow to 24.8%. This is up from 22.4% in 2016 and more than double the 11.9% in 1996.
The increase in the aging population is largely due to the baby boomer population taking over as the oldest group of individuals in our society. According to several reports conducted by AARP and the Pew Research Center, anywhere from 8,000 to 10,000 baby boomers turn the typical retirement age of 65 every day.
With a historic number of people transitioning into retirement, we face a double-edged sword of losing healthcare workers to retirement, while simultaneously facing rising demand for these workers. To put this into numbers, a study by the Alliance for Aging Research estimates that 33,000 geriatricians will be needed by 2030. Currently, we have only 8,800 certified practitioners.
We are supposed to add 12 million total jobs over the next decade, with the healthcare industry accounting for one-third of that number.
According to the Bureau of Labor Statistics, healthcare jobs are supposed to increase by 19% by 2026. Specifically, healthcare support occupations are expected to grow by 23.6% while healthcare practitioner jobs are expected to grow by 15.3%. In a country so focused on creating more jobs, look no further than the healthcare industry which seems poised for an imminent boom in the coming years.
How will this affect our lives?
The aging population is forcing many industries to adapt or fully change in order to combat the increase in demand for healthcare and geriatric services. One major change has come in the form of technological advancements.
With the ratio of doctors to patients tipping heavily towards the latter, there is an increased necessity for more remote doctor-patient care systems. The current generation entering into retirement age will likely be the first to be forced to adapt to more advanced telemedical processes and devices. From 2014 to 2015, home health monitoring systems increased by more than 50%!
But how exactly will our market be affected? Let’s take a deeper look as we strive towards achieving financial fluency.
How will it affect our economy?
The increase in the aging population will have far-reaching impacts on our economy. First and foremost, the government will be forced to increase spending on healthcare and pensions while tax revenue will decrease due to the shrinking workforce. This combination can be cause for concern for any developed country, especially one like ours with rising debt concerns. Currently, US healthcare expenditure is marginally over 20% of GDP while pension spending is hovering around 4%.
Another issue with an aging population is an increase in the dependency ratio. This ratio takes the number of dependents aged 0-14 and 65 and over and divides it by the total population of working-class citizens. As the aging population increases, the dependency ratio will continue to increase as more dependents overwhelm the shrinking population of working-class citizens. In simpler terms, a smaller number of people will be forced to care for a greater number of people.
How can the government combat the aging population?
The government has several options it is currently weighing. The simplest would be to raise the retirement age. The retirement age to enact Social Security has already been increased from 65 to 67 for those born after 1960, however, Trump has already discussed potentially raising it to 70. By linking retirement age to life expectancy, we can directly adapt to the increase in medical services and overall better health of our country without tipping the scales of our GDP too much in favor of pensions.
Trump has also discussed an increase in the importance of the private sector. He has recently discussed this when it comes to the commercial space race, however, we can apply the same logic towards healthcare with an aging population. We can increase the importance of the private sector in providing pensions and other healthcare related services. However, as is the case with any privately-funded business, this can lead to further inequality amongst individuals in need of healthcare.
Let’s Retire this Article
Regardless of our government’s ultimate plan, the truth is obvious: we need to act. The aging population continues to grow with life expectancy reinforcing its societal impact. The dependency ratio continues to tip in favor of the dependents with each passing day. The ratio of healthcare and pension funds to total GDP is increasing at a staggering rate. The baby boomer group is getting older, and our workforce is slowly handing in their working papers for TV remotes and the pleasure of retirement.
The healthcare industry will change drastically in the coming years. Greater technological advancements such as increased telemedical devices are being invented in order to deal with the difference in patients to geriatricians. Benefits programs and the entire structure of Social Security starting with retirement age is being altered in an attempt to combat the aging population. By surrounding yourself with a greater understanding of the markets, you can continue to step closer to financial fluency. The healthcare industry is facing major changes in the coming years, and we at Rapunzl want to make sure we stay up to date in order to invest smarter, together.