Delivered at the Elizabeth L. Rogers, M.D. Visiting Lecture in Geriatric Medicine, Baltimore, Md., Nov. 12, 2009
You are boarding a routine business flight. As you get on the plane you notice the pilot looks perhaps a bit … grandfatherly. In fact, he is only two years away from his FAA-mandated retirement age.
You sit and open a magazine. You know, in advertisements airline flight attendants always look like the champagne they are pouring: fresh and bubbly. But looking around the cabin at the flight crew the words that instead come to mind are mature and no-nonsense. All three flight attendants are in their 50s.
You are belted comfortably, your seat is in the upright position, and you have just felt the wheels lift off the runway from LaGuardia Airport.
Only a couple minutes into your flight there is a loud bang, followed by another loud bang. Flames shoot out from the plane’s two jet engines, and then they both go silent. Less than three minutes later, the pilot makes one terse announcement: prepare for impact.
The next thing you know you’re floating on the Hudson River and the flight crew is quickly and efficiently moving you on to the wings of the aircraft. They know their jobs.
Flight attendant Doreen Welsh is 58. She’s been flying since 1970—almost 40 years experience. Sheila Dail is 57. She’s been flying since 1980, and the other flight attendant, 51-year-old Donna Dent, has been flying since 1982.
As you watch the rescue boats approach, one thought goes through your mind: At moments like this, who needs fresh and bubbly?
The story of Flight 1549 suggests that in our society perhaps we have been too quick to praise youth, too ready to underestimate the value of age, wisdom and experience. One thing is certain: as we look forward to the middle years of the 21st century, we are going to have ample opportunity to discover if our assumptions, our prejudices, and our policies about older people are valid—or if perhaps we have some serious reconsidering to do.
I am so pleased to be here today. And I am honored to be asked to deliver the Elizabeth L. Rogers, MD Visiting Lecture in Geriatric Medicine. Thank you, Chris, for that very kind and generous introduction. Dr. Durso is a graduate of the Carey Business School, having received his MBA degree in 2007. We are exceptionally proud to call him an alumnus of our school.
In years past this lecture has offered insights into how scientists, clinicians and health care administrators might improve the health, well-being, and medical outcomes of aging Americans.
Today, I want to take a somewhat different approach. You may have wondered, ‘What has the dean of the Carey Business School got to say about geriatric medicine?’ The answer is this: about the medical science of geriatrics, very little. But regarding the outcomes related to our ability to enable people everywhere to live longer—a great deal.
This morning I want to turn our focus from the causes of increased life spans to their effects.
Every seven seconds another American turns 65. We are a graying population. And that huge cohort of Americans known as the baby boomers is just entering their senior years. What does this mean to us as a society, as a nation, and as an economic player in a newly globalized world economy? For too long we have been focused on the freshness and bubbly effervescence of youth. What we now need to understand is the capacity, wisdom and experience of older age. What can we expect—and how can we best prepare—for this marked change in our society, when the number of Americans 65 years and older moves from about 12 percent of our population today, to a projected 20 percent in the year 2030?
When we look back at the 20th century, we see an era of unprecedented technological change and progress. It witnessed everything from the invention of radio and television to airplanes, rockets and the atom bomb. But perhaps the single greatest achievement is what happened right here—and in other academic medical centers around the world.
The biomedical revolution of the 20th century profoundly altered our world—more than television or radio, more than jet travel, more than the atomic bomb. Consider this: life expectancy at birth in the United States in 1901 was 49 years. At the end of the century it was 77 years, an increase of greater than 50 percent. Similar gains have been enjoyed throughout the world. Life expectancy in India and The People’s Republic of China was around 40 years at mid-century. At century’s close it had risen to around 63 years.
Vaccines and antibiotics and better understanding of human health, nutrition and disease states have led to these enormous advances.
This may have been not just the crowning achievement of the 20th century, but even perhaps one of the most profound revolutions in recorded human history. And while it was just gathering steam, in 1936, a Columbia University professor by the name of Robert K. Merton published an article in the American Sociological Review titled “The Unintended Consequences of Purposive Social Action.” In this article, Professor Merton postulated that when we take bold and even visionary action, even if everything goes according to plan, sometimes paradoxes and strange outcomes can arise. This was the first formulation of what is now commonly called the law of unintended consequences.
Today, as we unfold the 21st century, this law of unintended consequences has special relevance to the great increase in life spans achieved in the 20th century. One hundred years ago, in the developed world as a whole, about 3 percent of the population was over 65. Today that number is 15 percent. By 2030 it will be 25 percent. Think of it—a quarter of the population aged 65 or older! And many of them will be considerably older. By the year 2050, five percent of the American population—that’s one in 20—will be age 85 or older.
The unintended consequences of this profound demographic shift will be felt around the globe. In particular, I think there are four areas in which it will have enormous importance. First: at the societal or sociological level. Second: in the economic and thus the political sphere. Third, in all matters related to health care, and in particular, how resources within this $2 trillion industry are allocated. And finally, number four, in the realm of education. In the next few minutes I’d like to consider what the demographic changes ahead mean in each of these four areas.
Aging as a Social Issue
Here in the United States, the aging of America coincides with, and amplifies, the diversifying of America. This country has a long tradition of accepting immigrants. I should know. In the second half of the 20th century that immigrant stream came increasingly from non-European countries. In general, immigrant families tend to have higher birth rates. By the turn of the millennium, whites in the U.S. had an average of 1.9 births per woman, compared with 2.0 births among Asian Americans, 2.2 births among blacks, and 3.2 births among Hispanics.
This has a two-fold effect. First, as is often reported, the country is becoming less white. In 1980, Caucasians comprised 82 percent of the American population. But by 2020, they will be just 62 percent of the population—still a majority, but considerably reduced. And the skew of that population will be especially noteworthy. More and more white Americans will also be older Americans. At the same time, more and more of the youngest generation are being born to non-whites. In 2001, for instance, ethnic minorities in the U.S. contributed 42 percent of all births, even though they made up only 31 percent of the population.
It is not my intention here to make any sociological observations or predictions based upon purely racial or ethnic characteristics. But it is worth considering one behavioral tendency in light of this shift in color across generations. Americans tend to segregate by race where they live, and have continued to do so even after segregation laws were abolished. Now older Americans are congregating to a greater degree in certain regions because of weather, or in specific communities like the Erickson retirement communities pioneered here in Maryland. But we must ask: how will this play out? Because of the national demographic shift, those centers will become increasingly more white than the population at large. This, along with wealth and social status differentials, will perhaps make it more difficult for the people in those communities to find common cause with their neighbors and fellow citizens in the larger public sphere. Democracy however, only works when we find the means to work together.
In rural and non-mobile societies, aging is a process that occurs at home, in the embrace of an extended, multi-generational family structure. In some important sense in this situation the older people become honored and important members of the community.
This is not the case for us. Advances in medical care and reduction in disease burden among older Americans means that today’s retirement communities are active and vital places. But they are increasingly forming worlds of their own. There has been little attention paid to the social consequences of older Americans self-segregating in this way.
Are we in fact creating ‘geriatric ghettos’ that are self-contained, self-referential and in some profound way disconnected? Do we stand in danger of losing the shared commitment to the common good?
Certainly there is evidence suggesting that as the population ages, its commitment to the next generations declines. We see it when we enter a debate about shared sacrifice for the nation’s future, but Social Security and Medicare are immediately exempted. We see it when any talk of tax increases to reduce a national debt that could potentially cripple future generations is rejected out-of-hand. And we see it when the news has images of Medicare recipients holding signs protesting against health care reform.
We face a challenge, therefore, as more and more Americans enter their senior years. We must find ways to prevent—as much as possible—a generational disconnect magnified by issues of race, ethnicity, social class, and living arrangements from becoming a generational chasm.
Aging as an Economic Issue
This morning I am speaking largely to the American experience of an aging population. However it is important to remember this occurs in a global context that has profound implications for our economic competitiveness and standards of living. Across the globe, the average age of national populations is advancing as countries rich and poor have fewer children.
In Britain it took 130 years—from 1800 to 1930—for the fertility rate to fall from an average of five children per family to two, the replacement rate of fertility that leads to stable populations. In South Korea, that transition took just 20 years, from 1965 to 1985. In Iran it dropped from seven in 1994 to fewer than two by 2006—and the number for women in Tehran is just 1.5! We are witnessing an unprecedented race to stable population states, and we know that as families get smaller, they get richer too. What this also means is that many emerging economies today have vast resources of young people. In India the average age is 25. In Mexico it is 23. Compare that with Japan or Italy at 42, or the United States at about 36.
Historically, aging populations have meant slower rates of economic growth. A country with an average age of 23 or 25 is in a ‘Goldilocks period’ with few dependent children, few dependent grandparents, and a lot of adults in the middle who are ready and eager and willing to work. As the average age of a country moves into the 40s, an increasingly larger proportion of the population is made up of retirees. The result? The rate of economic growth falls.
These demographic changes have enormous business implications. Where will we get the workers necessary to make our economy function? In the U.S. the workforce grew by almost 30 percent in the 1970s as the baby boomers grew up and more and more women went to work. Through the 1990s and up to the present time the rate was around 12 percent. In the next few decades it will be only two or three percent. What was once a flood of new workers will decline to a trickle.
Prior to our current economic troubles, the Bureau of Labor and Statistics was projecting a shortfall of 10 million workers in the U.S. economy next year. In Western Europe the potential problem is even more severe.
If you try to foresee what cataclysmic challenges confront the business community in the decades ahead there are three that warrant special attention. On a global level, how can we build new models of environmentally sustainable businesses? On the transnational level, how will we incorporate and embrace the enormous emerging economies of India, China and other Asian countries? And on a national level, how will we adapt to older consumers and older workers? Today’s mature adults control more than $7 trillion in the United States, representing 70 percent of the total wealth. As our population ages, more and more spending power will be concentrated in the hands of older and older customers. American companies will have to adjust not only what they are going to sell and the services they will provide, but also the makeup of the workforce that will perform these functions.
This new demographic reality can have surprising repercussions. Three years ago the U.S. Army raised its age limit for enlisting from 35 to 42. The Army recruits about 80,000 soldiers a year, and now about 5 percent of its incoming corps is made from this new category of older soldiers. The aging of America has profound implications for employment trends.
But where this trend is most problematic is in the area of retirement, and the expectation of most Americans that after a lifetime of work they will be able to enjoy a significant period of leisure as a sort of reward. Already this notion is beginning to meet conceptual as well as practical challenges. It is no coincidence that publications like the Harvard Business Review has begun to print articles with headings like “It’s Time to Retire Retirement”.
Our whole retirement system, and the expectations that have grown up around it, is a study in the law of unintended consequences.
When the Social Security system was introduced in 1935 most existing schemes used age 65 as the age of retirement, so the planners made a rough guess that this was a good age for their system too. At that time typical American workers were expected to live and collect benefits for only a year or two beyond the age of 65. Subsequent studies showed that this age produced a manageable system that could easily be made self-sustainable with only modest levels of payroll taxation. In the United States, as in most other countries, we adopted a ‘pay-as-you-go’ formula that depends upon the generation of current workers to pay the expenses of surviving retirees.
What wasn’t anticipated is what happens when the average worker begins living 12 or more years beyond their retirement date, as they do today, with projections of even greater life spans ahead. In the OECD countries an average man in 1960 could expect to spend 46 years in the workforce and a little more than one year in retirement. By 1995, the number of years in the workforce had decreased to 37, while the number of years in retirement had jumped to 12. In Italy by the year 2000, the median retirement age had dropped below age 59, and the typical worker could look forward to a retirement duration of almost 21 years! But who is paying the bills?
On one hand this is a wonderful achievement. But more retirees living longer coupled with the slowing of the growth of the labor pool means that you will have fewer workers available to cover, through their payroll taxes, the costs of retirees. This is a problem in America, but in Europe it is very nearly a crisis, with predictions of only two workers available per retiree by mid-century. And in China, which has a two-decade history of enforcing its one child policy, the possibility exists of one day having less than one worker per retiree. This is where crisis becomes catastrophe. Can these systems even be sustained?
The evidence suggests there is a real danger here, especially when you consider the tax rates imposed to prop them up. Twenty-four countries (two-thirds of which are in Europe) now have payroll tax rates that equal or exceed 20 percent of wages.
Part of the reason for creating retirement systems like Social Security in the first place was to remove workers from the labor force to make room for younger workers just starting out. It was a humanitarian means of backfilling employment. However, this is a blade that cuts both ways.
Just as you can arbitrarily choose a retirement date in order to encourage workers to move out of the labor pool, so too you can—at least in theory—raise that age to move more workers back in. The United States, Britain and other countries have already begun moving in that direction, but of course it is not easy as a political matter to simply announce to people they now have to work more years before retiring.
Here is an area where the business community has an opportunity and an obligation to play an important leadership role. Remember there are very few industries—…other than commercial airline pilots—… that have mandatory retirement ages. The challenge facing American businesses is to develop new and flexible working arrangements for older workers that will allow them to enjoy a comfortable half-way experience between full employment and full retirement. This will both address national labor needs and ease the strain on our payroll-based retirement system.
Aging and Health Care
I think we can all agree that it is in the realm of health care that the aging of America is drawing the most attention.
I don’t need to tell a gathering of the nation’s leading geriatricians that there is an underlying disconnect between our health care system as it currently exists, and the requirements of an efficient and well-managed program. Recent reports have warned of shortages of 24,000 doctors and nearly 1 million nurses in a decade’s time. The number of trained geriatricians in this country is shockingly low—one estimate says there are fewer than 8,000 in practice—and the number of Americans with chronic illness or degenerative conditions such as cancer, cardiovascular disease or arthritis is astonishingly high—in excess of 100 million. These are illnesses that require long-term care management, typically by teams of highly skilled caregivers.
Meanwhile, the supply of voluntary, unpaid caregivers is shrinking as smaller families, with fewer children, and more working women, reduce the number of potential candidates. It is worth noting that in the United States today, twenty percent of women ages 40 to 44 have no biologic children. Who will provide care for them when they reach advanced age? As is sometimes the case, the difficult choices facing us as we age are generally issues we choose not to discuss.
As a society we have become very good at denying our own mortality. There is a saying that Europeans know that death is inevitable; Americans believe that death is optional. I have always found that rather telling.
There was a fascinating column in the New York Times not long ago about a study conducted by the Pew Research Center. The center surveyed about 3,000 adults aged 18 and older and asked them first how old they were, and then how old they felt. They discovered that there is a gap between actual age and what we would call reported age.
Not only that, the gap gets larger the older the person responding to the questions. Most adults over the age of 50 reported feeling 10 years younger than their actual age. But between 65 and 74 a sizable number reported feeling between 10 and 19 years younger, and there was a significant number of 75-year-olds who reported feeling 20 years younger than their real ages.
It is not surprising then that today’s older Americans—and particularly the baby boomer generation—have driven unprecedented demand for vitamins and tonics, cosmetic surgery and knee replacements, and youth-giving therapies of all kinds.
On the Internet a website called RealAge offers a 150-question test covering lifestyle and family history. From that information assigns a ‘biological age’ of how young or old your habits make you. It then makes recommendations of how to get ‘younger’ through better living and non-medical solutions, such as sleeping more or taking multivitamins or daily exercise. To date, this online test has been taken by—are you ready for this?—more than 27 million people. www.realage-dot-com. Don’t worry, I will be happy to repeat that web site address for you at the end of my remarks if you want to make a note.
This is an important metric. It is a telling indication of the deep and abiding interest among older Americans of feeling and looking younger than their actual age.
And it suggests two trends, the first of them fairly obvious. Number one, if you have a drug, device, therapy or procedure that in some way turns back the clock—or even makes the claim to halt or reverse aging without even offering any proof—there is an enormous and ready-made market waiting out there and the potential to make huge sums of money. Consider only Viagra, popularly portrayed as a fountain of sexual youth, which has recorded U.S. sales in excess of $1 billion since it came on market 10 years ago. And that doesn’t even consider its main competitor and market leader Cialis!
But there is a second trend that may be more problematic. How will an aging America choose to spend its limited health care dollars, both for current care and for research into new therapies? Health care professionals are aware that chronic disease is perhaps the primary driver of medical costs and accounts for something on the order of 80 percent of health care expenditures. If—just hypothetically speaking—we could discover a pill to prevent diabetes, the health care savings, and the reduction in human misery and premature death, would be enormous. Now the likelihood of such a pill being discovered is small. But we do know already, starting today, that if we could reverse the epidemic of obesity, particularly childhood obesity, that has engulfed this nation, we could make huge strides in reducing the subsequent incidence of diabetes.
But even in the United States medical resources are finite and limited. How are we to balance the demand for the management and treatment of the growing number of diabetics—particularly among the elderly—with the opportunity to reduce the incidence of this disease at some future date?
I would suggest that the allocation of increasingly scarce health care resources is going to be the greatest national challenge to arise from the demographic shift now underway. There will be a strong temptation to stint on future health goals in order to address the acute medical needs of the present. But I am also an optimist in this regard, because I believe the enormous pressures to make more efficient use of our health care dollars will present unique opportunities for visionary business leaders to create new models and modalities of health care delivery.
Aging, Education, and the Knowledge Base
When Captain Chesley Sullenberger glided his crippled U.S. Airways airplane to a near-miraculous landing on the Hudson River, he did so with more than 40 years and 27,000 hours of flying experience.
Since 2007, Captain Sullenberger has run his own safety consulting business which provides emergency management, safety strategies and performance monitoring to the aviation industry. He is, in other words, a world-class expert in aviation safety, and it is fair to say, the person you would most want to have at the controls of your air flight in that critical situation.
In no small way, Captain Sullenberger is emblematic of how older Americans by their many years of experience and education represent an irreplaceable national resource of skills and wisdom.
This, of course, is a particular provenance of our universities, the institutions uniquely designed to define, protect and transmit our civilization’s store of knowledge. Our system of higher education will need to play a leading role in finding and educating those million nurses, 24,000 doctors, and all the other workers in health care and beyond that will be needed in coming years.
Some colleges and universities are already beginning to look at the pool of older Americans who skipped college the first time around, as perfect candidates to fill these needs. In Kentucky, the state university system wants to double the number of adults in the workforce holding college degrees in the next 12 years. To do so they have identified more than 10,000 state residents with some college credits completed, and are wooing them back to complete their degrees in an effort called Project Graduate. In Ohio there are an estimated 450,000 citizens with some credits but no degrees who are being targeted under a plan called Complete to Compete.
Currently in the U.S. about three percent of all part-time and full-time undergraduate students are age 50 or older. Looking forward, our colleges and universities—and yes, our schools of business—must help prepare for the profound changes that will accompany an older, grayer America.
In one sense, we have already arrived at an inflection point, which has been amplified by a slowdown in voluntary retirements because of the recession and losses in the value of retirement portfolio assets. Dropping retirement rates can lead to a core productivity problem as more and more people hold on to their jobs for longer and longer. These more expensive workers have the effect of raising costs and potentially putting companies at an economic disadvantage. And in seniority-based systems where the last hired is first fired—for instance union jobs—a deep and prolonged downturn can have the effect of removing younger and newer workers permanently, as they are forced eventually to find other lines of work.
Meanwhile, when a bad economy forces workers to stay long after they would like to retire, you build a pent-up demand for retirement. W hen the economy recovers and stock portfolios rebound, you are suddenly faced with a capacity problem when retirees leave in great numbers, taking all their knowledge and experience with them.
This is the so-called ‘knowledge transfer’ challenge. Although it has been much discussed in recent years, its solution remains more of an aspiration than a successful practice. Few companies have put mechanisms in place to make knowledge transfer happen. A 2003 survey by the Society for Human Resource Management suggested there is little planning underway to prepare for the effects of the coming wave of retirements. More than 70 percent of companies responding had no benefits or programs available to retain key older workers; nearly 60 percent did not directly recruit mature workers.
In America we face a special challenge. Throughout the 20th century, the United States led the world in one very important statistic. We were the nation with the highest percentage of young people aged 18 to 22 enrolled in college. This is no longer the case.
Other countries are doing better at providing their young people the education they need to thrive in the knowledge economy. We often talk about how expensive elite schools like Johns Hopkins have become. This is what grabs the headlines. But it is the non-elite schools that educate the vast majority of our college students that really need our attention. In the mid-twentieth century we sent tens of thousands to college on the GI Bill. Then later as part of the Great Society we provided Pell Grants to give college opportunities to many thousands who could not otherwise afford it. And at the same time, there were many no-cost or extremely low-cost opportunities to get a college education, such as the City College system in New York, and the California state university system. This represented an investment in our future, and it gave us a huge competitive advantage. But we have retreated from these programs, and abandoned some outright.
Here again, and in the starkest terms, we see a potential conflict of the generations arise. With limited financial resources, do we focus on making sure American seniors have secure and stable retirements? Or, do we maintain our historic investment in the world’s best and most open system of higher education?
The problem is compounded by the skew in fertility rates mentioned earlier. A greater percentage of children are being born to families further down the economic ladder.
Consider that in the context of this stark reality: a child born to a family in America with a household income of $90,000 or more has a one-in-four chance of going to college. If the family income is $35,000 or less, that chance drops to just one-in-forty.
While American businesses must be re-examining how they can best use the skills and abilities of an aging workforce, they must also have their eyes to the future. They must be forging partnerships with colleges and universities to help prepare the future generation of business leaders. Some elite institutions have begun offering free education to the children of families making minimum wage or below. Here at Johns Hopkins, we have the Baltimore Scholars program that offers a free Hopkins undergraduate education to any qualified student who graduates from the city school system. This is a start, but much much more will be needed.
From a business perspective, we face an urgent and critical need to address the aging of America strategically. We must begin by asking, what skills do we need? What skills are we in danger of losing? And how can we find innovative new approaches to retain—and when necessary replace—these skills, recognizing that the steady and significant growth in the labor force we have come to expect may no longer be available? Business mind-sets must change, marketing strategies must change, HR policies must change, and change is never easy. But at the core, this demographic shift—and in many industries it is going to be felt more like an earthquake—is a wonderful opportunity to re-engineer, re-imagine and rejuvenate how business done in America.
Let me conclude by thanking you for indulging me in this exploration of at least some of the societal and business implications of the global demographic transformation we are witnessing. For those of us involved in business, either academically or in practice, this is a tremendously exciting and challenging time to be grappling with these issues.
To sum up, in 2006, almost 500 million people worldwide were 65 and older. By the year 2030—just two decades from now—that total is projected to increase to 1 billion, or one out of every eight people on earth. Midway through the coming decade-and for the first time ever—people over 65 will outnumber children under the age of 5. This is a tidal wave of change, and it will have dramatic effects on social entitlement programs, labor supply, trade and savings around the globe. Socially and economically, medically and educationally, these changes present unique challenges. Many of these issues are new, and we are still coming to terms with their solutions.
For my part, I am convinced above all of one thing: it is by insuring the future of our young people that we can best provide for those who grow old.
A strange way to end a lecture dedicated to geriatric medicine you may think. But this makes perfect sense, because remember, we were all young once. Our challenge is to gain the wisdom and experience of a Captain Sullenberger, but never lose the excitement, the enthusiasm, and the optimism of our youth. As a nation we are growing older. The challenge is, how young can we remain? And yes, for those who are curious, I did pay a visit to that little quiz you can find at www-dot-realage-dot-com. My score? 25.
This is an audience that has probably thought more than any others about the aging of America. I hope I have been able to provide some fresh insight. Thank you for giving me this opportunity to offer my perspective. Now I would be delighted to take your questions and comments as we continue this discussion.