Economic Perspective: Is There An Age Demographic Sweet Spot?
“Today’s program asks if there is a demographic sweet spot. Mike, there is a saying that demography is destiny, meaning that the age composition of the population determines much of what occurs in a country. Is there an optimal age composition, and, if so, how close is the U.S. to it?”
“Well, in terms of economic growth demographers tend to break the population into three groups: very young people, very old people and then people in the middle who tend to be working, say ages 25 to 60.”
“And the sweet spot in a country occurs when you have a higher percent of people who are working and lower percentages on the two ends, yound and old, because the young and old tend to not work as much. Obviously, the young don’t work at all, and they tend to require more help from the government. For example, young people are being educated so a lot of them have money to spend on education. Older people are obviously getting retirement in many cases, public retirement as well as health care, et cetera.”
“So that sweet spot occurs when you have a country that has a very high percentage of folks in the so-called working-age class. Now as we look around the world, what’s happening around the world is we’re moving away from that. Countries are, in particular, aging, and so we’re seeing that the percentage of people at the higher age groups is rising. So that’s taking away from the percentage of people in the mid-age groups who are working.”
“Now if you look at the U.S. in particular, our sweet spot occurred from roughly the 1960s to the 2000s. That’s when the percentage of folks in the working group did rise, and now we’re seeing it in fact go down as the older folks tend to increase.”
“So we are in the same situation as most countries in the world, but if you look at our percentages we’re not as lopsided if you will in terms of the older population as many countries. Countries like China, where the older folks are increasing very, very quickly. So bottom line here is our demographic sweet spot has passed, but so too has the demographic sweet spot of many countries, and ours still seems to be better than many of our competitors.”
Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook, and public policy.