by Lisa Thompson
It's been 20 to 30 years in the making. And it finally began this January when the first baby boomers turned 65 and became eligible for retirement benefits. As more and more retire, Minnesota and the rest of the nation will face dramatic workforce changes. A recent report on issues surrounding an aging population (1.5MB, .pdf) from the Minnesota State Demographic Center paints a grim picture of what lies ahead.
Where We're Heading
Over the next decade, the population that is 65 or older will rise sharply in Minnesota and the United States as a whole. In Minnesota, the 65 and older population will actually equal the K-12 student population. Amazingly, there will be as many retirees in this decade as there were for the previous four decades combined. During the 2020s, this number will increase sharply as the bulk of the baby boomers retire. The retirement wave won’t subside until the 2030s.
And we're not alone in this. The populations of Europe and Japan are older than the United States’ and are already experiencing the issues that come with this demographic shift. In the next 10 years, China will face the same challenge as their labor force ages and declines.
What This Means
Mass retirements by a large segment of the population will have a broad ripple effect. Labor market growth will slow. That in turn will slow economic growth which, in turn, will decrease tax revenues. There will be fewer new jobs created as employers focus on filling the jobs left by retirees.
These vacancies do have a positive side. For younger workers still in or entering the labor force, this has the potential to create job opportunities—if they have the right skill sets. But the populations of Generation X and Y are smaller than the Baby Boomer generation. This means there will not be enough workers to replace those retiring. In Minnesota, this is compounded by the fact that the number of high school graduates (and future workers) peaked in 2009. The number of graduates is not expected to increase again until the end of the decade and then only slightly.
Education and training will be critical for young workers, who will have to be increasingly productive to fill the gap left by retiring workers. But education funding will also face an uphill battle. Public dollars will shift toward health care and other services needed for an aging population. College and universities will not be immune to this change in budget priorities either. Plus, public support for investments in education will decrease as the population ages and moves to living on a fixed income.
What Can Be Done
The sad truth is that not much has been done to date, even though we could see this day coming decades ago. That makes addressing the issue more challenging, since we no longer have the luxury of time. Still, the State Demographic Center's report indicated that are things that can be done:
- Those still in the workforce must become more productive. This means working more efficiently and effectively. To help workers do this, the workplace must fully embrace this as well.
- Government and business must find better ways to do things. Increased worker productivity won't be enough. Innovation is key to adapting quickly.
- Government and business may need to restructure their workforce and rely on technology more heavily.
- Business must invest in their human capital (workers). This is vital since we will probably see a decreased investment in overall education and training in the coming decades (see above).
- Business will need to attract more workers to the state. This will likely mean foreign workers, since all states (and many developed countries) will be facing the same problem AND competing for the same workers. If businesses are unable to do this, they may relocate to countries where the labor market conditions are more favorable.
The state of Minnesota and the country (and indeed much of the developed world) will be facing unprecedented demographic shifts in the coming decades. And the repercussions are wide reaching. Everyone will be affected in the long run. The question is: Can we put aside our competing agendas to work together to face the coming challenges head on?
Watch Tom Gillaspy, Minnesota State Demographer, discuss Minnesota's aging population on YouTube.