Economic Effects of Aging Populations

We are seriously underestimating demographics and wealth effect changes that started after 2020. The pandemic has changed demographics and policymakers have yet to fully understand the implications. When the pandemic hit, a large number of Americans aged 55+ decided to retire due to the health risks. Since then they have been hit with an unprecedented wealth effect. Yes, the wealth effect that Ben Bernanke and Janet Yellen admitted they did not fully understand pre-GFC. Older Americans got the bulk of the wealth created in the last 4 years in the form of: 1. Stimulus from the pandemic spending craze of the government. 2. A fast rise in home values as they own over half of the existing housing stock (aged 55+). 3. FOMO Stocks and 401k jumped which is continuing and baby boomers are the biggest shareholder demographic group. 4. Social Security payments have gone up thanks to inflation adjustments which hit 8.3% in 2023. 5. Savings, which are again concentrated in the hands of older Americans, are now enjoying much higher interest rates than in previous years. Older Americans after 2020 benefitted the most from the mother-of-all wealth effects. They of course decided to retire and stay retired, and now more are joining them every day. At the same time, they are spending. While Millenials are splurging on $10 Starbucks frappuccinos, boomers are buying more real estate (largest buyers by age group), booking cruises, traveling, buying cars (largest new car buyer group), and have become the fastest growing group of online shoppers, The number of Americans turning 65 has hit 11k to 12k a day while children turning 16 has hit a peak. The payroll breakeven pace is now 100k today versus 145k pre-pandemic as Powell stated in 2022. Then you have to take into account the productivity loss of losing someone aged 65 with 40+ years of experience and replacing them with much younger and less experienced workers and that is if companies decide to replace them. The recent 175k payroll, while hailed as a bad number, is actually a strong number after everyone who lost a job during the pandemic aka those aged 16 to 55 are back and at full employment, older Americans retired and didn't come back, and more will join them until the early 20230s. Unemployment is going to have a hard time rising with such demographic pressures. Companies are replacing more expensive older workers with harder to find younger ones, productivity growth with start to lag, and more investments in automation/AI will be needed. All of these will continue to push upward pressure on inflation. But at the same time, they now have consumers that are not rate-sensitive. The wealth effect that got us into trouble before the GFC is misunderstood. This time we don't even understand where the inflation we are trying to fight is coming from and feeding it with higher rates. #bonds #stocks #inflation #economy #wealtheffect #unemployment #demographics #economics #fed #interestrates

The recent report that showed large nursing home cost increases has grabbed plenty of attention. But focusing on this mid-year increase in one sector of care misses the point. First, it’s important to note, as NIC's Beth Mace does, that this may be a one-time price bump for the small percentage of residents who pay either through commercial insurance or privately. We may not see that type of bump again until next January, at the earliest. But a closer reading of the full Bureau of Labor Statistics report reveals something much more significant: The cost of receiving care — wherever an older adult chooses to receive it — is going up significantly. Skilled nursing costs are rising. Assisted living costs are rising. Adult day services costs are rising. Home care costs are rising. The increases are driven by increasing demand, inflation and the severe workforce shortage we’re experiencing across the long-term care industry.  And their effects are significant. Many older adults are going to be totally unprepared to pay for care — especially those in the segment we have called “the Forgotten Middle.” The Forgotten Middle are those older adults who have too many resources to qualify for government support for care, but are increasingly unlikely to be able to pay for the care they need on their own. These are Americans who have thought of themselves as solidly middle class. As documented in Christopher Rowland’s excellent piece in the Washington Post earlier this year (linked in the comments), they feel as though they did the right things to save for their later years, only to discover they can’t afford the care they need. Given the cost increases we’re seeing, the Forgotten Middle is going to get larger and larger. Both the public and private sector will need to come up with solutions to address this challenge. cc: Caroline Pearson, Sarita Mohanty, MD, MPH, MBA, NORC at the University of Chicago, The SCAN Foundation, National Investment Center for Seniors Housing & Care (NIC)

My latest: America's elder care crisis is here -- and we're not ready. "We are all but ignoring a tsunami of neglect. The elder care offerings in the country are scattered, difficult to access and often unaffordable — altogether a practical and moral failure .... As with child care, the assumption is that a close relation — usually female — will step in to provide uncompensated assistance. But all children have a parent or guardian responsible for their care. This is not true for the elderly, who might not have relatives living nearby — or any they are in contact with at all, an increasing likelihood in an age of fragmented families and a falling birthrate ... Yet, though younger generations expect this financial hit, they likely can’t afford it. It’s not simply lost work hours. According to a 2020 AARP study, 78% of unpaid caregivers spend their own funds on a family member or friend, at an average of $7,242 a year. “The pressure of the growing elder care [crisis] stresses almost all families,” Teresa Ghilarducci, one of the authors of the New School report, told me. The damage isn’t just financial. Child care comes with a timeline of sorts: children get older and need less assistance. The end is a triumph: an independent adult. Elder care is, sadly, the opposite. The need gets greater and greater and greater, there is no predictability about it, and it is one emotional gut punch after the other. We expect to help infant children with their toiletry needs. No one can prepare for the day they need to do the same for a parent ... No country comes even close to spending as much on health care as the United States, yet, as The New York Times recently reported, many other wealthy nations spend more of their gross domestic product on seniors’ long-term care needs. Our elder care crisis is, in many ways, a perfect example of what I’ve called America’s can’t-domindset: a passive acceptance by voters of an intolerable situation. But inaction isn’t acceptable. There are 58 million people ages 65 and older in the United States, and they make up 17% of the population. Another 10,000 people join their ranks every day and will continue to do so through the end of the decade. By 2040, 1 in 5 Americans will count as elderly. They — and their families — need better than the failed status quo." #elderlycare #eldercare #medicare #medicaid #financialplanning #aginginplace #babyboomers

We're facing an unprecedented aging crisis in America. By 2030, 73M Americans will need care... Here's the hidden solution: The numbers are staggering: • 70% of 65-year-olds will need long-term care • 151,000 caregiver shortage by 2030 • 800,000 seniors waiting for help Traditional facilities can't keep up: • 55% turning away residents • 48% have lengthy waitlists • 24% closing units due to staff shortages The solution isn't more facilities. It's reimagining care through technology. At Honor/Home Instead, we've built America's largest in-home care network by doing something different: We skipped the insurance companies and government funding. Instead, we focused on creating real value for families. Since 2016, we've pioneered AI-driven care delivery. Our technology matches caregivers with seniors at scale, detects potential issues early, and coordinates complex care schedules in real-time. Think of it like laying plumbing to reach every older adult. Consider an 80-year-old needing to change a light bulb. Getting on a ladder risks a broken hip. Not changing it means a darker house and higher fall risk. This is where our network comes in. We've built a comprehensive support system handling everything from medication management to dementia support, personal care to transportation. Every daily task that preserves dignity and independence. The impact speaks for itself: we now provide over 60 million hours of care annually, serving 50,000+ homes weekly. We've become the largest in-home care network in the Western Hemisphere. While others struggle with outdated systems, we've built a sustainable care model that: • Provides advanced training • Pays predictable wages • Scales with demand • Uses tech to improve outcomes By 2025, up to $265B of care services will shift to homes. We're not just preparing for this future. We're building it. No waitlists. No compromises. Just dignified care when needed.

📊 For the first time in U.S. history, there are more employees providing care for aging parents (23M) than for preschool-aged children (21M). When we launched The Care Gap ( a Mother Honestly company), we knew the conversation around caregiving had to move beyond crèches and parental leave. What we’re staring at now is not just a childcare crisis , it’s an eldercare emergency. And globally, this shift is echoing across societies with rising life expectancies, shrinking family sizes, and health spans that aren’t keeping pace with age. But let’s be honest our workplace structures haven’t caught up. Most elder caregivers are women (59%, providing two-thirds of caregiving in the United States). Many are in their peak earning years. Some are sandwiched between childcare and eldercare. The toll? Lost promotions. Reduced hours. Emotional burnout. Quiet exits. And a staggering $264 billion drain on the U.S. economy every year. And that’s not even counting what it’s costing us in innovation, diversity, and leadership. At The Care Gap, we believe eldercare is not just a personal problem, it’s a workforce and economic issue. We can no longer ask employees to choose between caregiving and career. We must create systems that support both. 🌍 Globally, other countries are already setting the pace: Japan mandates long-term care insurance at 40. The Netherlands has integrated long-term care into public healthcare since 1968. Yet in the U.S. and across many African nations, eldercare remains underfunded, informal, and invisible. If we don’t act now, we’re going to see a mass exit of experienced, mid-career professionals, especially women, who simply can’t carry the load alone. 💼 What can employers do? - Start by recognizing that eldercare is workplace care. - Offer flexible schedules, paid caregiver leave, and care navigation services. - Educate employees on available benefits and normalize asking for support. - Treat eldercare not as an add-on but as a core talent strategy. Companies like Microsoft, AbbVie, and Bank of America are already leading with comprehensive eldercare benefits. But we need more than a few outliers, we need a movement. It’s time we expand our definition of care. Because caregiving doesn’t end when the kids grow up. And the future of work depends on how we show up for caregivers at every life stage. More data and insights here: https://lnkd.in/dejwpAJQ

Latin America has a massive aging crisis coming:  Population over 65 will double in just 29 years  By 2050, 27 million older people will need daily care  There aren't enough caregivers or care services to help them Why is this happening?  People live longer (which is good!)  Smaller families (fewer relatives to support older adults)  Caregiving falls mainly on women, but  more women are now part of the workforce (which is also good!) While some countries (like Argentina and Costa Rica) have taken important steps, public care still reaches just 20% of older adults in need. Bottom line: Millions of older adults will need care, but there is no system in place to provide it. The Inter-American Development Bank asked: "What if we could solve this by helping entrepreneurs start care businesses?" THE 3 MAIN CONCLUSIONS 1. LOCAL GOVERNMENTS SHOULD LEAD.  Cities and municipalities are best positioned Why: Local governments know exactly who in their community needs care and what services exist. They can connect families with caregivers more effectively than other institutions. 2. START SIMPLE, THEN BUILD UP Don't build everything at once. Start with easy wins. Real example:  Step 1: The municipality creates a registry of caregivers that also works as a marketplace for home care services. Families know who the best caregivers are, and caregivers can find better jobs.  Step 2: Connect the registry with free or subsidized training opportunities: Caregivers have more knowledge and learn to provide care with a person-centered approach (they listen to older people and put their will above all else). Step 3: Promote the formalization of the care profession, for example, by supporting the creation of cooperatives of caregivers or establishing a standardized contract for those who provide care. Families find better care, and caregivers find better jobs. 3. MASSIVE BUSINESS OPPORTUNITY.  The care sector will create millions of jobs and become a major economic driver. The opportunities:  Digital platforms connecting families with caregivers  Training centers, teaching people to become professional caregivers  Home care services helping older adults stay in their homes longer  Technology companies are creating apps and devices for older adults If you're an entrepreneur, investor, or looking for a career change, the care economy is about to explode. Get in early. Authors: Celia De Anca, Newton M. Campos, PhD, Concepción Galdon PhD. Eugenia Gutiérrez Robres César Buenadicha, Masato Okumura, Marco Stampini, Carina Lupica, Paula Pelaez, Laura Giraldo Diana Rodriguez Franco, Irene Arias Hofman, CFA, Pablo Ibarraran y M. Caridad Araujo Full report: https://lnkd.in/gkeCgd-D #SilverEconomy #Entrepreneurship #AgingPopulation #LatinAmerica #CareEconomy #Innovation #PublicPolicy

In my last post, I argued that the greatest long-term risk to humanity may not be war, climate, or AI, but simply that we are choosing not to have “enough” children. Some of the consequences are already unfolding before us: aging populations, shrinking workforces, and an urgent expansion of the care economy* driven by the needs of older people. Consumer markets reflect this shift with striking clarity. Japan crossed a symbolic milestone more than a decade ago, when adult diapers began to outsell baby diapers. In South Korea, the trend is similar: by 2022, the supply of adult diapers was nearly double the supply of infant diapers. Italy, and soon Brazil, will face comparable dynamics as longevity rises and fertility declines. This transformation changes the design, technology, and even the social perception of everyday products. For decades, the diaper industry innovated for infants. Today, it is racing to innovate for adults, making products cheaper, thinner, more discreet, and more comfortable, while still advancing sustainability. With life expectancy increasing, people may spend 20–30 years of their later lives managing continence, mobility, and chronic health needs. The demand for better products is not just medical, it is about quality of life, independence, and full participation in society. But the implications go further. This is also about: - Scale: According to the United Nations, by the late 2070s, the global population aged 65 and older is projected to reach 2.2 billion, surpassing the number of children under 18. - Care pressure: Who will provide support when family sizes shrink and fewer working-age adults are available? - Social acceptance: Just as baby diapers became normalized after World War II, adult hygiene products must shed stigma and be recognized as normal tools for healthy aging. The care economy* is no longer a side sector, it is becoming one of the strategic industries of the 21st century. Products like modern adult diapers, home care services, assistive devices, and adapted housing will shape not only business opportunities but also the dignity with which societies age. What do you think: as populations age, are we prepared to value and urgently innovate in the care industry? *Today, when we talk about the care economy, we mean not only services and caregiving work, but also the industries that develop products and solutions to support people across all stages of life (See source in comments)

A 2024 npj Aging study reveals a stark reality: catching Alzheimer's early, at the MCI stage, can dramatically reduce care costs. Wait until full-blown diagnosis, and the annual cost soars to $64,000 per patient, and that's just the beginning. Traditional tools typically diagnose in its later stages. By then, it's deeply entrenched, and the most critical window for intervention is closing fast. Once Alzheimer's takes hold, the financial burden climbs to $64,745 annually, with projections showing these costs will more than triple by 2060. But behind these numbers is a deeper story: formal care averages $28,078 per patient, while informal caregiving, often family members who cut back on work or leave the workforce entirely, adds more than $36,000 in economic impact. These aren't just statistics. They’re families–parents and children–navigating the potentially irreversible decline of their loved ones. We must do better. At Altoida, Inc., we are not aiming to just improve detection, our goal is to lead the charge in fundamentally changing the trajectory of brain health. Our Digital NeuroMarker Platform, powered by multi-modal AI and augmented reality, is designed to detect the earliest changes in cognitive function well before symptoms become clinically obvious. By catching the earliest signs of decline, our aim is to bend the curve of cognitive aging back toward normal, healthy brain function when the impact of intervention is greatest, and the cost and care burden to patients, families and the healthcare system is the lowest. The opportunity is clear: precision diagnostics at the earliest stages of impairment are both a clinical imperative and a powerful lever to bend the cost curve while preserving what matters most: patient outcomes and family well-being. With formal care costs projected to hit $1.4 trillion by 2060, early detection must become a cornerstone of payer strategy. If you’re rethinking how to drive cost savings through earlier intervention, I’d love to hear what strategies you’re prioritizing. #Alzheimers #MCI #DigitalHealth #EarlyDetection #BrainHealth #ENDALZ

This is a warning that can no longer be ignored: public pension systems around the world are under increasing pressure and could become unsustainable in the coming decades. The white paper “Future-Proofing the Longevity Economy: Innovations and Key Trends,” published by the World Economic Forum, presents compelling data. By 2050, the global population aged 65 and older is expected to more than double. This will have a severe impact on pension systems, which are already showing signs of fragility, especially in emerging economies. The report projects that without structural reforms, governments could face deficits of up to 15.9 percent of GDP to maintain retirement benefits. This result is a sensitive, urgent, and complex issue. How can we balance financial sustainability, social fairness, and quality of life in a society that is living longer than ever? Denmark offers a clear illustration of the dilemmas this future presents. The country recently approved raising the minimum retirement age to 70 starting in 2040, the highest in Europe. Since 2006, Denmark has linked its official retirement age to average life expectancy, but the government is now signaling reconsideration for this formula. On one side is the challenge of maintaining public finances. On the other is the impact on individuals, particularly those in physically demanding professions, who ask a critical question: how fair is it to require people to work more years without compromising their dignity and right to an active, healthy, and meaningful later life? Longevity demands a profound transformation in the architecture of social protection systems, public policies, and how we structure work. Models designed for societies where life expectancy was 60 or 65 are no longer viable in a world where people are increasingly living to 90, 100, or beyond. This discussion must move beyond technical debates and become a central social, economic, and political priority.

Very excited to share our new McKinsey Global Institute report on demographic challenges (read here: mck.co/demographics)!   What’s known as an “aging” problem is really a problem of “youth scarcity”—and most of that is because of fertility rates have been declining rapidly. In fact, two-thirds of the global population now live in countries with fertility rates below the replacement rate of 2.1. A demographic shift is washing over the world in “waves” and will profoundly impact economic growth, labor markets, public finances, and consumption.   In the "first wave" of advanced economies and China, the share of working-age population peaked in 2009 and is now declining. These economies house two-thirds of the world’s seniors (65+) but only 20% of its young people (under 15). First wave economies could see growth in GDP per capita dip by 0.5 to 1.0 percent each year through 2050, absent other changes. To counteract that effect, they need higher productivity, more workers or workers working longer hours, and potentially an improvement in the age mix of their populations.    Productivity growth would need to accelerate two to four times, or labor force participation rates to rise by 3 to 20 p.p. or hours worked by 1.5 to 14 hours per week. Working lives will have to extend well beyond the 50s. Migration can help, but relying on migration alone is challenging—migration rates would need to rise 1.6 to 6 times to counteract the aging effect.   If nothing else changes, younger generations will inherit a world of diminished growth. They will also need to support an expanding “senior gap” to sustain the consumption of older people beyond what they earn through work.    The "second wave" of economies, including Brazil and India, have their own challenges. Their demographic dividend is waning and they will age to the level of the first wave within roughly one generation. They must get rich before they get old but two-thirds of them are not on track to achieve high-income status by the time they age.   The world of youth scarcity is not without opportunity. The global landscape of consumers and workers is tilting toward the developing world: by 2100, a third of the world’s population will be in sub-Saharan Africa. By 2050, the over-60s consumer segment will swell, accounting for 25 percent of global consumption, up from 12 percent in 1997.   Overall, though, the current economic calculus will not hold. To adapt, businesses must: 1. Double down on productivity 2. Manage an older workforce creatively  3. Update their footprint to align with shifting global populations 4. Tap into the potential of senior consumers