Working Paper: NBER ID: w13476
Authors: John B. Shoven
Abstract: The current practice of measuring age as years-since-birth, both in common practice and in the law, rather than alternative measures reflecting a person's stage in the lifecycle distorts important behavior such as retirement, saving, and the discussion of dependency ratios. Two alternative measures of age are explored: mortality risk and remaining life expectancy. With these alternative measures, the huge wave of elderly forecast for the first half of this century doesn't look like a huge wave at all. By conventional 65+ standards, the fraction of the population that is elderly will grow by about 66 percent. However, the fraction of the population that is above a mortality rate that corresponds to 65+ today will grow by only 20 percent. Needless to say, the aging of the society is a lot less dramatic with the alternative mortality-based age measures. In a separate application of age measurement, I examine the consequences of stabilizing labor force participation by age with alternative age definitions. If labor force participation were to remain as it is today with respect to remaining life expectancy (i.e. if the length of retirement stayed where it is today) rather than labor force participation remaining fixed by conventionally-defined age, then there would be 9.6 percent more total labor supply by 2050 in the U.S. This additional labor supply could help finance entitlement programs amongst other things. GDP would be between seven and ten percent higher by 2050 if retirement lengths stabilize. Several policies are examined that would encourage longer work careers.
Keywords: age measurement; labor force participation; GDP; mortality risk; remaining life expectancy
JEL Codes: J10; J11; J14; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conventional measure of age (years since birth) (C41) | behaviors related to retirement and saving (D14) |
| behaviors related to retirement and saving (D14) | assessments of dependency ratios (J19) |
| using mortality risk and remaining life expectancy (J17) | accurate representation of aging in society (J14) |
| conventional measure of age (C43) | projected growth of the elderly population by 2050 (J11) |
| mortality risk as an age measure (C41) | projected growth of the elderly population by 2050 (J11) |
| labor force participation stabilized according to remaining life expectancy (J26) | total labor supply (J22) |
| total labor supply (J22) | GDP (E20) |