People are living longer. Can you give us a sense of the scale of the changes that is bringing?
Hodin: The scale of the transformation is huge. It’s as large a mega trend as any that exists today and, I believe, at the same scale as any major historical, sociological or economic change we’ve ever seen. It’s on the scale of the shift from agrarian to industrial society or the women’s movement. It’s historic and profoundly disruptive.
Market Realist – Americans are living longer
The graying of the US population is largely because of three demographic factors at play: birth rate, death rate, and life expectancy. The birth rate, which represents the number of live births per 1,000 of a population, has been steadily on the decline over the past four decades. This can be seen in the above graph. The fertility rate has also been falling.
The death rate has held steady, while the life expectancy rate has increased to an all-time high of 78.8 years, according to the World Bank. Americans are living longer but reproducing more slowly. This is leading to an increasing elderly population. This is not just a one-time adjustment but rather a demographic trend that’s here to stay.
Living longer is a globally pervasive trend
The magnitude of the life expectancy trend is indeed massive. It’s not limited to any particular country. It’s globally pervasive. The above graph illustrates how the developed world (EFA) is aging rapidly. For every 100 people aged 15–64 years, there are 45 above 65 years old in Japan. This estimate is 35 in Italy (EWI), 33 in Germany (DXG), 30 in France (EWQ), 28 in the United Kingdom (EWU), and 23 in the United States (SPY). Emerging markets (VWO) currently look better, although the pace is likely to catch up in the next couple of decades.
In the next part of the series, we’ll study the impact living longer is likely to have on labor productivity and the workforce in the future.