As described in my previous column, “The Burdens of Aging, Especially on the Young,” demographic pressure will tend to squeeze this economy and its financial markets in coming decades. If left unaddressed, a relative overhang of dependent retirees and a shortage of working-age people will strain public and private pensions and slow the pace of economic growth. Though this prospect has brought out considerable doom saying on the economy’s long-term prospects, a new book, Thirty Tomorrows, points out several means by which people, firms, and government can offset the ill effects of such demographic trends. This column concentrates on the domestic remedies: a more effective use of older workers and greater participation by women in the paid labor force.
The benefit from the former is obvious. If more people work beyond the traditional retirement age of 65, the economy will not only supplement the relative lack of working-age people, but also slow the flow of new people into dependent retirement. As far as women are concerned, there is more potential than meets the eye. Though second wave feminism encouraged may women to either stay in the workforce or return to it, women’s participation in paid work remains considerably lower than men’s of comparable age. Apart from cyclical ebbs and flows, the Labor Department estimates some 81 percent of working-age men either have jobs or actively seek work and 90 percent of men in the prime age bracket, 25-54. The comparable figures for women are 69 percent and 76 percent.
Some of this increased participation, from either elders or women, should occur naturally, as the relative shortage of skilled labor increases wages and makes paid work more attractive. Elders might also stay in the workforce without additional encouragement because their pension arrangements are inadequate. There are signs that this is already occurring. Participation by men and women over 65 has increased from 15 percent of their part of the population in the 1980s to 21.5 percent more recently. But by making workplace practices more flexible, the economy can encourage still more work from either group. The changes needed by older workers will, of course, differ from those needed by women, but both will occur as the demographic pressure intensifies in coming years.
A truncated work week will appeal most to older workers. They have neither the physical stamina to continue full time in same occupations nor have they the desire to work with the intensity of younger workers, who retain the dreams of advancement that older workers have either achieved or have long abandoned. This sort of modification might seem straightforward enough for all but the most hidebound managements, but it has a difficult side. It would require an end to the seniority approach to pay. This well-entrenched system of giving the highest wage or salary at each level to the worker with the longest tenure has dominated corporate and government life for longer than any can remember. Management, organized labor, and other interest groups will resist any efforts to change it. But the shift is essential, if older workers are to stay on the job and still step back from full-time arrangements. Some firms have made strides in this area. The changes will surely become more widespread in both business and government as the demographic pressure mounts.
Where women are concerned, the crucial issue is childcare. Though modern societies have long ceased viewing child care as the sole preserve of mothers, the reality is that women still shoulder the bulk of these obligations which, no doubt, is why women’s participation rate is not already higher. More flexible work schedules that allow the main care giver in each family to juggle work and family obligations better will help. It would seem then that business and government will ultimately offer more affordable and reliable child care. Washington has already acknowledged a need to make such changes in its labor regulations, though to date it has done nothing. Tax incentives for child care are likely. Some companies will lure workers with on-site child care, especially effective in places where large numbers of workers gather. Such arrangements will recommend themselves as a cheaper way to secure talent than through straightforward wage hikes, still more so if the provision of child care carries a tax break. Matters may go so far that localities allow parents to enroll children in schools near their place of work instead of near their home and some firms may consider opening their own charter schools.
Combined, these measures have the potential to relieve some, but not all, of the demographic burden. If the rate of women’s participation were to rise half way to the men’s and the average retirement age were to rise from 65 to 70, the change would improve the relative worker shortage in 2030 some 40 percent, considerable relief though still short of a complete answer. To answer the demographic need completely, the nation will need to turn to immigration and the effective use of globalization. The next two numbers in this series will take up these remedies in turn.