The aging population creates numerous challenges and sparks anxieties concerning the pace of future economic development, the operation and economic reliability of health care and the pension systems, and the security of the elderly. The ageing of the populace in the USA will place substantial added financial burden on public programs. A lot will depend on the economy and the political will to manage health care costs and pay for these programs.The ageing of the populace will certainly have an enormous influence on the organization and delivery of the health care and social programs, and the financial prosperity depends largely on the size and quality of the labor force, on public policymakers and the business community as they have to acknowledge the coming acceleration of populace aging.

Demographic Transition Theory

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Whether some scientists believe people are headed for the environmental catastrophe, or you believe that humans will at all times adapt to the altering circumstances, there are obvious patterns, which may be observed in population development. Societies grow up along an expected continuum as they evolve from the unindustrialized to postindustrial. Thus, the demographic transition theory suggests future populace growth will increase along an expected four-stage model.

In the initial stage, birth, death, and infant death levels are high whilst life expectancy is too short. An instance of this is 1800s America. As nations start to industrialize, they encounter the second stage, where the rates of birth are higher whilst the infant death and the death levels fall. Life expectancy also augments. Afghanistan is now experiencing this period. The third stage takes place when the social order is methodically industrialized: birthrates lessen, whilst life expectancy continues to augment. Death rates drop. Mexico’s populace is at this stage nowadays. In the later stage, people observe the postindustrial period of a society. Birth and death rates are low, individuals are far healthier and live longer, and the society enters the phase of populace stability. The general populace can even turn down (Malthus, 1965). The USA and Sweden are considered to be at this stage now.

Health Care Issue

The ageing of the populace will definitely have a huge influence on the organization and delivery of the health care. Of particular significance will be the transition from acute to chronic diseases and the likely increasing shortage of health care employees, particularly nurses and paraprofessionals. The growing older populace will demand the increased concentration on chronic illnesses, for instance, Alzheimer’s Disease and heart illnesses rather than acute illnesses.

First of all, the style of medicine will have to modify from one-time interventions, which correct a single problem to the continuing management of multiple illnesses; doctors and patients will be forced to have continuing ties created to assist the patients in passing through the course of disease rather than curing them. Second, with chronic disease frequently comes disability, meaning that long-lasting care services will become much more significant resources of care. Third, novel methods will have to be discovered to integrate medical and long-lasting care services, an accomplishment that will be hard in the USA due to the fragmentation of financing and delivery systems.

Retirement Income

The retirement profits are financed via the mix of public and private pensions, welfare payments and savings. Nearly 44% of households counting a person over the age of 65 have private pensions; 5% of older humans obtain means-tested welfare payments. Publicly-financed pensions are mainly funded via the program, known as Social Security, which is a universal income support program for the elderly and is the major resource of profits for the retired. Additionally, the Disability Insurance program offers the income support to humans with disabilities with a significant work history. Social Security and the Disability Insurance programs are mainly financed by the payroll taxes charged on wages of young working people.

Economic Importance

As the populace grows up, public expenditures are projected to increase as a per cent of GDP. The projections by Wiener, Illston and Hanley (1994) for long-lasting care expenditures reflect that Medicare, Social Security, and the Medicaid funding for long-lasting care will increase from 6% of GDP in 2000 to 13% in 2050. Health and continuing care programs are projected to augment from 2% of GDP in 2000 to 6% of GDP in 2050. In addition to the harshly greater amount of the beneficiaries, the boost in GDP for health and long-lasting care is the function of three aspects. First of all, the demographic pressures rise spending for Medicare program more than in other society’s administration-sponsored health care programs as the American program only covers the elderly and some humans with disabilities. Between 2000 and 2050, the part of the US populace, which will get the health care via Medicare will augment by about 50%.

Second, senior humans have higher typical expenditures than younger individuals do. For instance, in 1995, per capita health expenditures for a person aged 65 were 4.6 times higher than those of people under age 65, a ratio that has been constantly increasing since at least 1966. Third, Medicare and long-lasting care expenditures as a proportion of GDP is forecasted to augment more than Social Security due to the supposition that average health care costs per capita will augment significantly faster than per capita GDP. The Medicare costs projections depend heavily on this supposition, which is extremely uncertain and has fluctuated wildly.

Financial Issues

Recently, much attention has been provided to the potential impact of aging populace on the asset prices. Specially, there have been concerns that asset costs will drop as older people sell off the assets. Some analysts forecast the benefit meltdowns in the housing markets due to reduced demand from aging participants of the post-war baby boom generation.Luckily, this prediction has proven too pessimistic; mitigating factors, for instance, the potential for policy change suggest rather moderate influence on asset prices.

Population aging also has implications for dissimilar types of pension approaches. Publicly funded pay-as-you-go (PAYG) systems encounter serious challenges as the amount of beneficiaries will augment whilst the number of contributors will turn down. Completely funded systems are not necessarily panacea as they need a long time till they can deliver significant pensions; for baby boomers who have not saved anything so far, it is merely too late to accumulate enough funds. Furthermore, the voluntary funded pension methods suffer from procrastination whilst the mandatory funded systems create governance troubles. A union of both systems is, therefore, the risk-minimizing resolution. Some nations, for instance, Germany and Sweden have successfully resolved the pension problems by effectively shifting the defined benefit systems into a form of defined contribution systems, where pensions depend on the ratio of workers to retirees, augmented by compensating funded system. Additionally, the modifications in the constitutional retirement age are in progress in most developed nations though they are frequently highly challenged and escorted by popular protests.

Size and Quality of the Labor Force

The financial prosperity depends largely on the size and quality of the labor force. As humans pass through their 60s and beyond, the likelihood of engaging in the work force tends to decline. The international work force participation level (LFPR) has been reducing and is forecasted to reduce further by 2050, and a large part of this change can be attributed to the aging population. However, due to the falling fertility degrees, the work force as a fraction of the entire populace has been augmenting and is forecasted to carry on augmenting through 2050. Therefore, one of the most broadly cited fears concerning the aging population is that there will be a devastating increase in aged dependency unless the work force participation of the older people drastically augments notwithstanding very abrupt increases in particular nations such as Japan.

Factors Influencing the Economic Burden

Numerous aspects counting altering disability levels and the size of the economy and attempts at privatization can influence how much of an economic burden these programs impose in the future.

Disability rates

Some researchers have discovered the conformation of reducing disability levels that might moderate the increase in the usage of acute and long-lasting care services. For instance, Manton and Gu (2001) discovered that on the age-adjusted foundation, the proportion of the elderly populace, which was disabled, reduced from 26% in 1982 to 19% in 1999. Other researchers also found confirmation of the decline in disability. This disability rate turn down might partly clarify the decrease in US nursing home use rates among 1985 and 1995. These discoveries are compatible with researches in other nations. Conversely, other researchers have not discovered this reduction in disability or have noticed that it relates mainly to less severe rates of disability.

If these disability declines carry on, they could, theoretically, have a huge influence on usage of acute and long-term care services. Patients with substantial disabilities have three times the standard Medicare expenses of beneficiaries without considerable disabilities. Singer and Manton calculate that a constant reduction in disability could protect the long-lasting care fiscal stability of Social Security and Medicare. Still, even under the most optimistic forecasts concerning the reductions in disability levels, there is likely to be a substantial boost in demand for acute and long-lasting care services due to huge increases in the absolute figures of the oldest old.


Conservatives and moderates are persuaded that privatization of Social Security, Medicare and long-lasting care is necessary to address the future loads of ageing populace. For the Social Security, the major proposal has been to redirect some of the payroll tax to private accounts, which could be utilized to purchase bonds and stocks. However, the recent recession in the stock market has made this suggestion less attractive.

Size of the economy

While most public policy researchers have concentrated on public expenditures for the elderly, less attention has been provided to the size of the economy. The Social Security actuaries project the American economy will increase from $10 trillion (1012) in 2000 to $111 trillion in 2050 in dollars. The economic burden of public programs for the elderly will partially depend on how fast the economy increases. For instance, in projecting long-lasting care spendings, Wiener, Illston and Hanley (1994) calculated that public long-lasting care expenditures as a percent of GDP could triple to 2048 if the American economy were to increase by merely 2% yearly adjusting for inflation, but hardly augment at all if genuine economic increase were 4% annually.

There are additionally some aspects, which could amplify the number of employees, counting immigration and increased labor force participation, which would provide employees to pay taxes to support the older populace. The USA has at all times had a large number of migrants. However, even with added immigration, it is doubtful that it would happen at the rates required to considerably counteract the influence of populace ageing. Augmented immigration, obviously, increases the figure of complex issues concerning integrating a novel populace into the US society and also questions of how willing this fresh foreign-born populace will be to pay taxes to sustain the ageing native Americans.

The other aspect, which could enhance the economy is that a higher percent of the populace could enter the workforce. As employees become scarcer, work force participation levels can increase as many companies compete for employees. Work force participation for women has risen considerably over the last three decades but is still below that of males. In 1998, the work force participation of males age 45–54 was 89% while it was only 76% for females.

As women live longer than men, health, social and economic challenges that encounter the elderly are most often challenges experienced by ladies. One of six old females is a member of a minority group, for instance Hispanic or African American. By 2030, one in four elder US citizens, irrespective of sex will be a member of any minority group. Higher work force participation levels for women, nevertheless, can deprive older humans of informal care raising the demand for paid long-lasting care services. The elderly themselves also can be a large resource of additional employees. In a recent research, almost a third part of ‘baby boomers’ demonstrated the desire to work at least part-time during the retirement years.

Significance of Political Decision Making

The ageing of the society will almost certainly impose added fiscal burdens on the public sector in the nation, in particular, for health and long-lasting care. Nevertheless, health care expenses and their level of growth depend only partially on the demographic forces; they depend far more on the political decision-making. The USA spends more on medical care as a share of GDP than any other nation, partially due to the fact that it offers more high technology services but mostly because American insurance funds pay higher prices than are paid elsewhere. These higher costs presuppose that every additional older human being needs larger expenditure, but that is not the direct consequence of an ageing society; it is the result of the political system, which evolves high health care costs.

In fact, the empirical proof suggests there is surprisingly little association among national health care costs and ageing, at least in the past. Reviewing the information from 1960 to 1990, Marmour and Oberlander (1998) discovered no association across Organization for Economic Co-operation and Development countries among ageing populations and increase in medical costs. The likely cause is that other policy factors, specifically the design of the cost control strategies, have been far more significant.

Another political dimension is that the ‘affordability’ of any government program depends not merely on its costs but on the county’s desire to contribute to the support of administrative programs and the degree of other spending responsibilities. As the political matter, whether any given program may survive financial stress depends on its comparative popularity. There is no doubt that Medicare and Social Security are by far the most popular nationwide social programs. For instance, in a poll performed before passage of the tax cut of 2001, 65% of respondents demonstrated the support for using the projected budget surplus to conserve Social Security and Medicare or pay off the public debt; only 18% wanted to reduce taxes; 43 voters of all ages, not just older humans, have constantly indicated their reluctance to lessen the benefits or eligibility for these programs. The frequently forecasted generational conflict has yet to appear. Whether that will maintain being true in the future, it will almost certainly be the most vital determinant of the economic burden of ageing programs.


The ageing of the populace in the USA will place considerable added financial burden on public programs. In the future, a great deal will depend on the economy and the political will to manage health care costs and pay for these programs. Public policymakers and the business community are only starting to acknowledge the coming acceleration of populace aging. Up until now, there has been little requirement for the fast policy alterations as the aging has been slow and as baby-boomers have been fueling the business and economic development. However, the demand for policy adaptations to an aging populace will become more significant in the face of the retirement of baby boomers, slowing work force increase, and the rising expenses of pension and the health care systems.

Businesses will have little choice but to be more attentive to the capacities of older employees. It should be mentioned that the natural market alterations will offset the influence of altering demographics, for instance, capital substitution for work, or use of labor-saving methodic. On economy-wide scale, responses to longer life spans will demand numerous reforms to both public policy and business practices. Providing humans with a little more freedom of choice concerning the time of retirement is a good beginning point for public policy reform. Tax and benefit policies may also be utilized so as to support and capture the advantages of prolonged careers.

Financing health care systems are very difficult in many nations including the USA where healthcare coverage is yet not universal. Of possible benefit for both sending and receiving countries is the immigration of working-age people to aging societies. The Civil Act of 1964 stopped the discrimination in this nation. It defended the rights of many individuals, but no one had ever forecast age would play a part in discrimination (Kemp, 2010). Finally, the act was changed to include age discrimination among the labor force. Nevertheless, the organizations discover new ways to reject the old applicant on some other basis. In particular, these attitudinal factors at work put most females at a huge disadvantage and make them more vulnerable than men to difficulties as they age. These factors comprise numerous workplace policies and practices that penalize ladies for fulfilling their basic caretaking accountabilities.

To benefit from a more and more aged globe, businesses must alter the organizational practices. As a start, attitudes have to alter. Older employees are at times seen as a burden, with younger applicants preferred in the recruitment decisions. Nevertheless, in the current economy where knowledge is very important, the experience of elder employees grows in value, and they may serve as role models for younger stuff members. Workers over 60 are, in fact, more experienced, knowledgeable, dependable, and loyal than younger workers; practice should match that perception. Older workers who want to keep working may demand flexible schedules. Similarly, allocating demanding physical tasks to younger stuff members will produce similar advantage and may potentially lessen the health care costs arising from workplace accidents. Investing in health of all workers enhances productivity and avoids unnecessary expenses as the labor force ages. Though some adaptations lie on the more remote horizon, others may be undertaken right now, to the advantage of both younger and older workers, companies, and society – now and in future.


The ageing of the populace will certainly have an enormous influence on the organization and delivery of the health care and social programs, and the financial prosperity depends largely on the size and quality of the labor force, on public policymakers and the business community as they have to acknowledge the coming acceleration of populace aging. The aging population creates numerous challenges and sparks anxieties concerning the pace of future economic development, the operation and economic integrity of pension and health care systems, and the security of the elderly. The ageing of the populace in the USA will place substantial added financial burden on public programs. Many issues will depend on the economy and the political will to manage health care costs and pay for these programs.

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