WHO WILL PAY? : Two Views on How--or Whether--America Can Afford a Rapidly Aging Population

About 25,000 senior citizens will arrive in Anaheim this week for the biennial convention of the 22-million - member American Assn. of Retired Persons, which has started to lobby aggressively for expanded pension and employment opportunities for the nation’s elderly. This tougher stance has made the AARP a target for the year-old Americans for Generational Equity, a much smaller group that believes future generations will be impoverished by elderly benefit programs once the baby-boom generation starts to retire. Today’s birthrate of 1.85 births per thousand, which demographers characterize as a “baby bust,” is about half that of 1957, the baby boom’s peak year.

James E. Birren

James E. Birren, 68, has headed the Andrus Gerontology Center at USC since the center’s inception in 1965 and is the co-editor of five books on gerontology. He will retire next month to conduct research at USC on policy issues of an aging population. Q: By the year 2000, the United States is expected to have 59 million people between the ages of 50 and 74. This segment of the population will swell to 88 million, 16% of the total population, by 2025. How will that shift affect our economy and life style? A: When people hear these figures for the first time they say, “Oh, my goodness, how can America afford all those old people?” But I don’t see any problem. We have the experience of countries like West Germany, France and Sweden, where 16% of the population already is over age 65. If these industrialized nations can experience a demographic shift without unfavorable economic consequences, why should it be different for us? Q: But many studies indicate that the elderly already have problems meeting expenses, specifically for health care. If the elderly population increases, isn’t it logical to assume that existing problems will also grow? A: Well, I approach this by using the idea of two faces of aging. The optimistic side is that we have more highly educated, healthy and affluent older people who are looking for personal growth and new experience. The downside is that 15% of the elderly are below the poverty level. It’s easy to drop from one group to the other. If one spouse contracts a disease such as Alzheimer’s, the family can go bankrupt meeting medical costs not covered by Medicare. Q: Questions are being raised about the long-term viability of Social Security. Do you see problems on the horizon? A: As far as I’m concerned, the system is solvent and there is no reason why it shouldn’t remain so. Social Security taxes were never intended to finance the entire (retirement-benefits) system. The greatest danger is allowing the Social Security tax to go into the general revenue fund. Q: Many younger Americans fear that Social Security will be bankrupt by the time they retire. Is it fair for Social Security to underwrite the retirement of a group of people of whom only 15% are poor? A: It’s difficult for me to discuss this issue dispassionately, since I was a young boy in the Great Depression. Back then there were no pensions, Social Security or unemployment insurance. I remember uncles who were wiped out and never employed again. These images don’t enter the thinking of the young today. They assume that somehow there will be a floor under society. The question is how to provide that floor. One way to provide security is by saving, but our credit-card society stresses consumption. It’s only logical for Americans to save more, but I can’t think of how they’re going to do it in a consumer-oriented society. Q: Capital is flowing from a generation that can barely afford to buy homes to one that enjoys beach condos and Winnebagos. Is this fair? A: What age group makes the best consumer? It seems to me the older generation represents a collection of good consumers, because they buy things not only for themselves but for their young. For me, not all purchasers are equal in terms of their value to society. Q: Isn’t it bad economics to impoverish the productive segment of society for the sake of people who no longer contribute to the economy? A: Who is productive in society? When I retire, I’ll be regarded as unproductive, while a young man working in a cancer-causing cigarette factory remains a valued element of the economy. We think that anything that’s exchanged for dollars is productive. I no longer believe that. Q: Concern over the budget deficit is causing some legislators to focus on the cost of federal programs rather than their benefit. How will the Gramm-Rudman balanced-budget law affect the security of America’s senior citizens? A: I think some people would like to provoke an argument between the baby-boom generation and the old. So far as I knew a few years ago, when questions like these were asked in surveys, young people were pro-Social Security and didn’t mind contributing to it. When you cut a budget, it’s easy to tell the young, “Do you realize you’re paying for this older generation?” It can be just a ploy to justify reduction in services. The older generation wants its children to have a rising standard of living. But when it comes to Social Security, there’s a shiver that goes right through us because my generation and older people remember what it was like before. And I don’t think the young sense that same shiver. Q: So you don’t believe we’re in for a period of generational conflict? A: I’ve seen some papers that discuss generational transfers of money. But none have been able to assess emotional relationships, such as the value of a story told to a grandchild. I believe that the grandchild who doesn’t hear such stories grows up shortchanged. There’s a lot that goes into generational relationships that is not monetized and represents a passage of concern from the old to the young. If you judge generations by their values, politics and religious beliefs, the young are very much like their parents. Q: If generational conflict is a non-issue, why is the AARP so active in lobbying for greater tax and pension benefits? A: The AARP exists because the concerns of older people were not being attended to. Because of AARP, politicians now are sensitive to the needs of the old, particularly on Medicare and Social Security. Will there come a time when the AARP will disappear? Perhaps, but not until our viewpoints are represented through the usual channels. Perhaps what you’re saying is that now that the elderly have found their voice, maybe that voice is too strong. Q: I wouldn’t say that, but it does seem that more young professionals in this country need financial help from their parents than vice versa. Do you agree? A: That’s the result of inflation. I was lucky. The house I bought 20 years ago is worth more than I could afford today. Old people’s housing values may have benefited from inflation, but they didn’t cause it. Q: How, then, can we ensure the continuation of Social Security while reducing the financial burden on the nation’s youth? A: Employment. Who gets the jobs? The young or the old? The policy of most corporations is to encourage older employees to retire earlier. The average age of retirement is somewhere between 62 and 62 1/2 years. You can’t take a person’s job and then cut benefits when that person still has a quarter-century to live. Q: If, as some polls indicate, 70% of retired Americans want to work after retirement, why not move the average retirement age back to 70? A: The Equal Employment Opportunity Commission is looking into this. I do think we have to spread out our retirement benefits more. It may be that we’ll have to delay the bulk of the benefits until age 70 and add the idea that the longer you work, the more you accumulate benefits. Maybe after 50 years of service you might retire at 100% of your pre-retirement wage. Our standards of what is old has to be modified. Q: In a recent report, Congress’ Joint Economic Committee said there is “no question that the elderly as a group have fared better economically than other groups in the last decade and a half.” A: I agree that the elderly gained more in recent years than other age groups. I agree they are relatively better off. But realizing where they started from, perhaps they had more to gain.