Every day for the next 15 years, 10,000 baby boomers will turn 65 years old, moving from taxpayers to retirees. Meanwhile, half of America’s workforce is expected to consist of millennials by the year 2036.
These are just two of many population trends that will bring a host of challenges to the U.S. economy.
“Demographic change is a drama in slow motion,” said Paul Taylor, a leading expert in demographic, social and generational trends, during the 2015 Big “I” Legislative Conference. “It unfolds tick by tock, it unfolds incrementally, but it transforms societies in fundamental ways.”
When Taylor addressed the Big “I” Diversity Task Force and other guests in a special conference session titled “Our Changing Demographics: The Business Case for Diversity and Inclusion,” he noted two ongoing demographic shifts that are drastically transforming 21st-century America: It’s en route to becoming a majority non-white country, and a “record share” of Americans are going grey.
“Either of these changes would be the dominant demographic story of its era, but the fact that they’re happening simultaneously has created a generation gap,” Taylor said. “We are at a moment in our history where young and old don’t look, think, vote or form families alike—and this has the potential to put stress on our families, workplaces, pocketbooks and our whole sense of social cohesion.”
A Seismic Shift
The United States is the leader in a group of aging populations—and it’s accelerating at a faster rate than any other leading economy in the world. According to Taylor, more Americans will be more than 85 years old than those under five years old by 2060.
“We are getting older, the rest of the world’s leading economies are getting older and we will all face challenges around making sure we can sustain an economy that’s top-heavy at the older end,” Taylor said. “Where are the boomers now? Crossing the threshold from an economically productive year to retirement.”
Taylor, former Pew Research Center executive vice president, said this shift puts enormous pressure and stress on the most successful domestic programs created in America: Social Security and Medicare. Because Social Security is essentially a pay-as-you-go program—“today’s taxpayers put money into the system to support retirees”—the ratio of taxpayers to retirees is a crucial statistic to watch.
That ratio has decreased from 5.1 workers per beneficiary in 1960 to 2 workers for each beneficiary in 2013, according to Taylor. That’s nationwide cause for alarm, and millennials are already taking note: 51% believe that they will receive no Social Security benefits when they retire and another 39% forecast receiving benefits at reduced levels.
“Societies that get older need the energies of young people to support old people at some point, either through their social insurance system or other mechanisms,” Taylor said. “We and every other advanced economy in the world face really challenging arithmetic on that.”
And America’s racial shift has run parallel to the incremental evolution—creating even more political, social and cultural consequences. Taylor attributed the shifting racial composition to the nation’s modern immigration wave. In the late 19th century, 90% of immigration was from Europe—setting the foundation for a primarily Caucasian population. Fast forward to today, when half of modern immigrants are from Latin America and 30% from Asia.
“This wave of immigrants is doing what all waves of immigrants have done: replenishing our economy,” Taylor said, citing a 2012 U.S. Bureau of Labor Statistics projection that Hispanics will account for 74% of the labor force growth in 2010-2020 and a Pew Research Center projection that immigrants and their children will account for 90% of labor force growth in 2010-2050. “This is making the boundaries of race literally more porous and permeable.”
The Game Changers
Although he touched on each generation in his presentation, Taylor focused predominantly on the one projected to comprise 81% of the population in 2036: millennials.
“Millennials are setting the tone around diversity and cultural norms,” Taylor said. More than any other generation, millennials say interracial marriages (50%) and gay couples raising children (35%) are a good thing for society. They’re also leading growth in public support for same-sex marriages. Taylor put it simply: “Young adults are bringing a different set of expectations.”
One of those expectations is social trust. And in an industry like insurance, “trust is the grease that keeps the gears from grinding,” Taylor said. But millennials are also challenging trust as a core value. Only 19% agree most people can be trusted—a significantly lower percentage than Gen Xers (31%) and Boomers (40%) and the lowest the Pew Research Center has ever measured.
Taylor offered a few reasons for the low trust level: a massive amount of nano-second interactions on social media; Columbine, Sept. 11 and school shootings that created a protective set of parenting norms; and belonging to a transitional generation to a majority non-white population.
The good news? Millennials are optimistic about their financial future: 53% say that although they don’t earn or have enough money to lead the kind of life they want, they will in the future. But it’s up to the American economy—and insurance industry—to help that hope become reality.
“We have always understood that part of our responsibility as citizens is to make things better for the next generation,” Taylor said. “Right now we’ve lost some of that mojo. I would hope we could take some of the younger generation’s goodwill, apply it to our public policy and give this generation of young adults who are our future economy, who will have to pay the taxes to support us in retirement, who will have to buy our homes one day—let’s give them the same opportunity to thrive.”
Morgan Smith is IA assistant editor.
