The Financial Impact of Aging

The financial impact of aging

Prior to the 20th century, seniors who weren’t independently wealthy or had children to help care for them were forced into so-called poorhouses and workhouses. Thanks to Medicare and Social Security programs like those mentioned above, most seniors no longer live under such harsh conditions; but these benefits don’t come free and add strains on society and budgetary pressures.

An aging population also alters the makeup of labor forces, creating challenges for governments and businesses that cater to older individuals – known as demographic transition.

Budgetary pressures mount in countries with declining working-age populations as workers become less relevant compared to consumers, exerting strain on health, education, welfare and infrastructure spending while diminishing economic production through labor inputs.

However, the effects of aging on economic growth vary according to a country’s demographic makeup. If older people remain healthy throughout their later lives, longer life offers them opportunities for enriching activities ranging from further education and discovering long-neglected passions; on the other hand, extra years may bring debilitating diseases or health deterioration which have an economic implication for families and societies that could differ dramatically.

Our model suggests that delaying aging increases aggregate WTP through an exponential process known as the virtuous circle of aggregation. Indeed, our estimates (Table 4) reveal that an increase of one year in LE will increase aggregate WTP by an estimated US$256.7 billion.