EDITORIAL

The Longevity Economy

T here are primary forces of opposition controlling the economies of the developed and developing world, parts not necessarily limited by the usual territorial boundaries. For example, there are viable economic communities in cyberspace.

Lining up on the stagnant side are the politicians and bureaucrats who continue to commandeer wealth from both old-model businesses and, more and more, new-model businesses, which are defined by innovativeness. On the vibrant side are innovators who push forward with solutions to the world’s problems, who dynamically create wealth, and who are largely unstopped at this moment in time. But they are harassed and progressively besieged. There lies the dilemma!

Will It Be the Darkside or Lightside?

Consequently, the principal question for the 21st century is whether the battle between the takers and the makers will be a stalemate (unlikely) or a victory of dark over light or the other way around.

Without innovation, life today would be very different. Gone would be the advances and advantages we have come to depend on, many just having appeared in the last few years. And others, projected to arrive at a quicker pace, months in the making rather than years—gone too! Solutions to our needs and problems drive the economy. Hail innovation!

Will Boomers Boom Again?

Entering into the fray, hopefully on the side of the makers, is America’s aging population—driven by longer lives, reduced birth rates, and the aging of 100 million Baby Boomers (50+). How can we evaluate the opportunities of a society with as many old as young?

In our aging society, the prospects are unprecedented: Longer lives have created a vast pool of experience, capability, and wealth that can become a driving force for 21st century economic growth. Indeed, the transformative power of the Boomer generation now entering retirement should come as no surprise. Baby Boomers, born roughly in the two decades following World War II, have reinvented every phase of life they have entered, often by design and sometimes through sheer force of numbers (30% of the populous) and economic clout (controlling as much as 70% of disposable income) and knowledge access (making up more than 30% of the United States’ 200 million+ internet users).

The Prospects of Longevity

Longevity is not simply a matter of tacking on a few extra years at the end of our lives. Longevity is a transformation that starts much earlier, becoming more apparent in late middle age. Life is more vigorous and active than it was for past generations. It is interesting to note that although there were only incremental increases in lifespan during the industrial revolution, the case can be made that this phenomenon was a driving force for the economy back then.

Today, a vital issue with America’s aging population is the question of how to release the energies in a society with as many old as young. This is essentially a question of economics, the power of the workforce.

The universal question is how to square 21st century aging populations with misaligned 20th century policies made by politicians and bureaucrats. Investing giant BlackRock recently addressed this challenge in a white paper and related panel discussion in New York.1 BlackRock, which manages trillions in assets and serves 89% of the largest U.S. retirement plans, brings a compelling set of new ideas to the table.

Reaping the Longevity Dividend

“Societies that adapt to this changing demographic can reap a sizeable longevity dividend and will have a competitive advantage over those that do not,” says Margaret Chan, Director-General of the World Health Organization, prefacing the BlackRock Report. This is a surprising remark, considering the source.

One recent U.S. survey found that only 20% of people around traditional retirement age want to retire completely. Of course, that doesn’t mean these people want to work the way they always have. Many want flexible work arrangements or to start new careers and even new businesses.

A New Prosperity Engine

Through the BlackRock report, we are reminded that the expectation of continued economic activity by the aged is universally an encouraging development. Beyond realizable personal, financial, and health benefits to be gained through continuing to work or the initiation of new endeavors, older workers are a tremendous resource to employers. With their knowledge and experience, they represent substantial human capital potential that can become part of a new prosperity engine.

In economic terms, human capital is the current value of future earnings. When producers create the conditions that make it easier for older workers to continue to be productive, that act increases their human capital. In a sense, it creates the potential for more future money for the individual to earn.

Regarding the possible negative consequence of this on younger workers, “[H]igher employment of older individuals is actually positively correlated with higher employment of the young, i.e., countries with a high prevalence of early retirement have, in general, higher unemployment rates and lower employment of the young.”2

Whatever your stage of life (and most of you are 50+), rising life expectancy is a principal driver of economic growth, not just a benefit of increased wealth. Moreover, because of this, we have even more reasons to make the most of life and certainly to foresee a very interesting and exciting future.

References

  1. Unlocking the Longevity Dividend: How Longer Lives are Changing Retirement, Investing and the Economy. June 17, 2015. https://www.blackrock.com/investing/insights/unlocking-the-longevity-dividend. Accessed June 30, 2015.
  2. Börsch-Supan A. Myths, scientific evidence and economic policy in an aging world. J Econ Aging. 2013;1-2:3-15.

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