The above is the title of a new report by the Center for Strategic & International Studies, by Richard Jackson and Neil Howe, with assistance from Rebecca Strauss and Keisuke Nakashima. It is a powerful statement that instantly tells us to stop analyzing U.S. workforce and retirement issues in a vacuum, ignoring the rest of the world. It is very clear today that our activities are inextricably linked to the global economy. Understanding what the global developments are for aging and workforce issues is an imperative step in developing workforce policy for the U.S.

 With all of the headlines about the U.S. losing out to Europe today, it is hard to imagine that the situation will soon turn radically in the opposite direction. However, the demographics foretell a radically changing situation. Europe is headed for major problems as their population ages and declines far more than that of the U.S.. The report includes a chilling quote from historian Niall Ferguson, who  notes that there will be “the greatest sustained reduction in European population since the Black Death of the fourteenth century.”

Japan has even greater problems.   Their population is aging rapidly, and by 2050 will have a median age of 56.

With all of the current problems in America, it is hard to imagine that the U.S. is in much better shape than the rest of the ‘developed world.’ However, with the U.S. total fertility rate at replacement level (just under 2.1, a level that keeps the population from declining), this country will increase from 34 percent of the developed world’s population to 43 percent by 2050. The report details similar progress for the U.S. in GDP, relative to the rest of the developed world.

The stability of the U.S. population is clear in the fact that this country was the 3rd ranked country in the world in 1950, is in the same position today, and will also be third in 2050. Japan and the countries of Europe are dropping down the list. As an example, one of the most problematical is Italy, which was the 10th largest country in the world in 1950, dropped to 23rd in 2005, and will be 39th in 2050.

Very scary statistics for the developed world. The situation is scarier when the ‘youth bulges’ of troubled areas like Africa and the Middle East are considered. The report addresses the likelihood of great unrest in those areas, with major implications for neighboring developed countries.

The U.S. has to address a new, radically changed world where our population is far more aged than before. That must involve workers staying on the job until later ages.

That is not happening rapidly enough. Companies are worried about dealing with older workers, so most of them procrastinate about taking action. Older workers are hesitant to consider a new paradigm regarding work at older ages.  Government agencies jaw about the problem but don’t do enough (maybe the evidence that the Pension Protection Act is proving to be very effective will prompt government to take more action).

The U.S. has a major opportunity to lead the developed world, and to make contributions to the developing world. Developing the older workforce must become a top public policy priority. Soon.

The CSIS summary of findings can be found at this (link). To purchase the full book use this (link).

The Boston College Center for Retirement Research (link) (along with a partner  RRC at the U. of Michigan) is an outstanding source for great, in-depth studies of retirement issues. The Director of BCCRR, Alicia Munnell, frequently testifies before congress and is quoted in leading publications. She and Steven Sass have a just-published book on ‘Working Longer’ published by the Brookings Institution Press (link). 

This book should be on the bookshelf of anyone involved in the issues of working later in life and/or retirement. The 52 pages of notes and references at the end of the book alone represent a great resource for understanding the dynamics of those issues.

Many politicians and commentators talk about worries that Social Security will disappear in the future. Many politicians say that they are going to “save Social Security.” What they seldom address is the fact that Social Security has already been significantly eroded. Munnell and Sass do a great service by quantifying the fact that “the full retirement age is being increased from 65 to 67,”…” Medicare part B premiums are slated to increase sharply,” and “SS benefits will be taxed more….as the benefits are not indexed to inflation.” The net of these changes will “reduce the net replacement rate for the average worker who claims at age 65 from 39 percent (of pre-retirement income) in 2002 to 30 percent in 2030.” To compensate for just these factors “workers will need to extend their work lives by about four years.”

A very important part of the book addresses the even more difficult time that women will have.

The only issue that I have with the book is that there are many references to problems that employers and workers have with working later in life. However, they do not give enough focus to the Towers-Perrin study (link) that delineated the fact that older workers do not cost more. Their higher health costs are offset by less job switching, less absenteeism, etc. As Bill Novelli, CEO of AARP and the sponsor of this study, told me, “This is the seminal study regarding the value of older workers.”

The older workers could be even more valuable if, as Munnell and Sass point out, “Most older workers have sufficient mental agility to learn and adapt if given the necessary training, but few get trained and many fail to learn and adapt on their own.”

This is a major contribution. Read it!