The impact of the aging “Baby Boomer” cohort is really starting to be felt throughout Society. Those of us in this category are used to being the center of attention in advertising and many other instances including things like always having brand new schools as communities attempted to keep up with the demand for classrooms. The September 2023 issue of the AARP Bulletin (which is not on my normal reading list) has an article discussing some ways that these aging folks are disrupting the economy. Most of the topics discussed in the article “How We Are Changing America – An aging population is shaking up our country, why it is happening and what it means” are obvious and well known. However, I think the authors may have overlooked some important implications concerning impacts on the workplace and on financial services. I want to spend a little time considering these topics.
The Workplace
The article points out that the number of workers over 65 and over 75 has increased by 117 percent in the past 20 years. That is hardly surprising as it undoubtedly reflects the surge in these populations as the Baby Boomers age. The article points out that many are transitioning from full-time to part-time workers. The article hints that this is a great trend. I suppose it might be great for the readers of AARP because it means there is a growing market for their services.
I am concerned about what this means for the new, younger, workers. That puts them into direct competition with the new group of highly qualified, but inexpensive, older workers. Retired older workers can afford to fill part time positions in a MUCH less expensive way that younger people. Many of the older workers have adequate savings and retirement programs for their needs, but they would like a “little extra” for their more frivolous desires, or as a means of staying active and social. They aren’t necessarily working to make money, many are working “for fun.” Because of this they don’t require full time work, can afford a low wage compared with what their qualifications and experience would normally demand, and don’t require benefits such as health care insurance, sick leave or vacations. Of course they are in demand, they are CHEAP!
The down side of this is that it is also eliminating good paying jobs that come with benefits for those who really do need the money – our younger children and grandchildren. We (the older set) need to stay out of the labor market, thereby opening up good paying opportunities for those who need them. It is NOT a great thing that the market is being flooded with highly effective, highly skilled, inexpensive older “retired” people.
If I am correct about the impacts upon younger workers, we (Society) need to find solutions to solving the older generation’s actual needs. It seems to me that this might be a wonderful place for the government to step in by creating work programs tailored to Society’s needs that are not otherwise being filled. These new jobs must be in addition to the “normal” employment opportunities, and can often be filled by volunteers instead of paid employees. The government already has many opportunities for volunteer work, but not enough to meet the growing needs. We are currently at the leading edge of a tsunami of folks hitting “retirement age” and beyond. We need to be planning and preparing for them just as we did when they began flooding the elementary schools. We need to find ways that give them the potential for small “additional” incomes, for making use of their vast experience and expertise, that give them meaningful and useful jobs that help keep them vital and healthy – all while ensuring that the younger generations can thrive and develop the skills and expertise necessary to keep the country going far into the future.
As usual, I don’t offer a grand scheme for solving this problem – that is a much larger bit than I can take at this time. However, I can point out that it is something that needs to be addressed – and addressed NOW, not sometime in the dim and distant future. We need to be redirecting resources and efforts into this kind of problem – which just happens to fit into the position that I took in my previous blog whereby commercial profits are limited, being redirected (returned) back to Society if oligarchy is to be avoided. As a country and an economy there are sufficient resources to accomplish this sort of job creation activity, but only if the trickle-up aspects of the economy are moderated. (By “trickle-up” I am referring to the flow of money up the wealthy, making the rich richer and the poor poorer.)
Financial Services
Currently Americans hold over $18 trillion in IRA’s and 401(k) retirement plans. The Baby Boomers hold a large share of this wealth, and are intending to use it to supplement their income during their “retirement” years. A common goal is to spend these savings down to zero by the time they die. Either they don’t expect to leave large inheritances to their children, or they have taken care of that concern through property or other means. Their IRA and 401(k) reserves and intended to be spend down to as close to nothing as possible.
Right now the banks and investment companies are busy creating new ways to gain access to these retirement funds because they are a significant source of income. These institutions are in the business of borrowing money in order to lend money, they need the cash in the IRA’s and 401(k) to finance the lending that is the basis of their profits. This is all well and good as long as there are sufficient funds in these accounts. However, as the older folks age and spend down their investments, the lending institutions are likely to start feeling the pinch created by having insufficient funding to support their needs – resulting in pressures to increase the rates that they give, meaning an increase in the cost of loans, meaning a slowing economy and inflation. Perhaps we are already seeing the impact of this. If not, it seems clear that it is coming soon.
Once again, I have no simple solution to this potential problem other than to recognize it and attempt to plan wisely for the future financial volatility. The drying up of a significant portion of the available funds needed to make loans is bound to cause problems for financial institutions and therefore the economy as a whole. I am sure that the FEDS and others are considering this problem – I hope they find the correct solutions. I think the solution will require getting the trickle-up phenomena under control. The escalating concentration of wealth to a very small number of individuals appears to be a significant contributor to many of the looming financial and social problems facing us today, which are likely to get worse in the future if left the concentration of wealth is left unchecked.