This Issue Brief examines
factors affecting the population's age distribution and
composition, such as mortality rates, fertility rates,
and immigration. In addition, it examines factors
affecting labor force composition, such as immigration,
increased labor force participation of women, and
retirement trends, and discusses the potential impact of
these changes on publicly financed programs: Medicare,
Medicaid, Social Security, and federal employee
retirement systems. The discussion also highlights the
implications of these population and labor force changes
on employers, employees, and retirees.
The elderly population—now 31.8
million, representing 12.6 percent of the population—is
projected to experience tremendous growth between 2010
and 2030, when the baby boom generation reaches age 65,
rising from 39.7 million, or 13.3 percent of the
population, to 69.8 million, or 20.2 percent of the
population. Growth in the elderly population has
implications for retirement and health care systems.
Population projections suggest that
the traditionally pyramid-shaped work force, with a
proportionately greater number of younger workers than
older workers, will be replaced with a more even age
distribution. Consequently, significant and continued
modifications to benefit packages, such as changes in
compensation structures in which earnings automatically
rise with age, are likely to occur.
Women's labor force participation
began to accelerate in the mid-1950s, rising to 75
percent among women aged 25-44 in 1991, although there is
some indication that this growth may be flattening. With
women comprising a greater part of the labor force,
employers will be encouraged to develop and implement
programs to better accommodate their needs.
Increased life expectancy, a
decreased percentage of entry level workers, changes in
Social Security's normal retirement age from age 65 to
age 67, and employer plans to raise the normal age of
retirement or provide incentives to delay retirement,
could raise the average age of retirement. However, other
factors, such as poor health, other sources of retirement
income, and individual preferences for retirement, could
still dominate the retirement decision.
The combination of increased
average life expectancy guaranteeing more years of
retirement to finance and rising dependency ratios
increases the future cost of Social Security financing.
Medicare financing is also an important policy issue
because the program is projected to experience financial
difficulties in the short term, resulting from explosive
health care costs. In addition, Medicaid expenditures are
consuming increasing amount of shrinking state budget
resources--a large portion of which is used to finance
nursing home care for a growing elderly population.
