Demography is Destiny: The Coming Long-Term Care Crunch

And worker shortage

It’s been common knowledge for a long time that the country is getting older and that this trend is accelerating as Baby Boomers age. Given the size of the Baby Boom generation, at 71 million, a fifth of the U.S. population, this will have a great effect on the nation as they (we) retire and begin needing care.

Baby Boomers were born between 1946 and 1964, so today they are between 59 and 77 years old. The effects of their aging will be very different over the next 10 years and the 20 years following that. Between now and 2030, when the youngest Baby Boomers will be 66, most Baby Boomers who haven’t done so already will retire. This will have a great impact on employment, contributing to the the shortage of workers we are already experiencing.

Baby Boomer Retirement

According to the Pew Research Center, up until the Covid-19 pandemic Baby Boomers were staying in the workforce longer than prior generations, though there was still a huge drop off after age 65. In 2018, 66% of Americans between the age of 54 and 64 and 29% of those between 65 and 72 were in the labor force, as compared with 61% and 21%, respectively, of members of the Silent Generation and 58% and 18% of members of the Greatest Generation at similar ages. At that time, on average about 5,900 Baby Boomers were retiring every day.

This changed with the pandemic with Baby Boomer retirement accelerating from about two million a year from 2012 to 2019 (in fact, according to the Pew Research Center, there was a low of 1.5 million retiring in 2019) to more than three million in 2020. Interestingly, according to the U.S. Census Bureau self-reported effects of the pandemic appear less severe than the actual retirement numbers. They asked people aged 55 to 70 whether the pandemic would cause them to accelerate or postpone their expected retirements. The differential between these two expectations depended on their ages. For those aged 55 to 61, there was no differential with 2.2% saying it would cause them to retire early and the same percentage saying it would cause them to delay their retirement. It had the biggest effect on those aged 62 to 65 with it accelerating the retirement of 4.6% and delaying that of 2.9%. For those aged 66 to 70, the effects were 3.5% and 1.9%, respectively.

A study by the Federal Reserve Board finds that the the 1.5% decline in the labor force participation rate since the pandemic can be almost entirely explained by “excess” retirements. Some of this was natural, since as Baby Boomers age they can be expected to retire in greater numbers. But as of October 2022, the share of Baby Boomers who had retired was 0.6% above the previous trend line. Note that labor force participation rates and the number of people in the labor force are related, but not the same. Even with lower participation rates, the number of workers can increase with an influx of immigrants or younger people joining the labor force.

Immigration and Birthrates

However, the pandemic also impacted immigration with the number of visas issued for both legal permanent residence and temporary visits dropping by about half from 2019 to 2020.

With the U.S. birth rate declining to 1.64 births per woman on average today, absent immigration the size of our population and workforce would decline. According to the U.S. Census Bureau, the number of U.S. residents aged 18 or younger declined 1.4% between 2010 and 2020. There was considerable variation by region of the country, with the Northeast losing 5.1% of their child population while the South gained 2.1%. (During the prior decade, 2000 to 2010, the overall 18 and under population grew 2.6%, but this masked significant differences, with the Northeast and Midwest losing 5.5% and 3.1% of their youth numbers, respectively, while the numbers in the South grew 8.7%.)

Yet, despite our relatively low birthrate (though higher than in other developed nations) and decrease in immigration, even during the pandemic there was enough immigration for our population and workforce to increase. According to the U.S. Census Bureau, the U.S. population increased by 1,256,003 between 2020 and 2021, of whom 1,010,923 were immigrants. (This is the net population change. There were actually more immigrants, but this number subtracts out the number of residents leaving the country.)

Benefits of a Smaller Workforce

In some ways the lower number of workers is good. It has meant higher wages and more bargaining power for workers. This is especially important for lower-wage workers and minorities who typically have the least control of their circumstances of work. The Black unemployment rate at 5.0% has dropped to the lowest rate on record.

On the other hand, higher wages can contribute to inflation, which also has the most adverse effect on lower-wage workers.

Short-Term and Long-Term Long-Term Care Needs

Over the next decade, the need of seniors for care may actually decline. This is because the generation that preceded the Baby Boomers, who are now 78 and older, is relatively small since as a nation we produced fewer babies during the Great Depression and World War II. The people born during the baby drought from 1933 through 1945 today range in age from 78 to 90. As of 2020, there were about 23 million members of the Silent Generation as compared with 71 million Baby Boomers.

The likelihood of individuals needing care due to cognitive or physical decline increases dramatically after age 85. According to an Urban Institute report, 40% of Americans aged 85 and older have severe long-term care needs as compared with just 8% of those between 65 and 74. This means the numbers will be relatively low over the next decade. However, in 2031 the oldest Baby Boomers will begin passing the age-85 threshold and the number of seniors needing care will boom.

We’re far from ready. As a nation, we already struggle to provide quality care to the relatively small number of seniors needing assistance today. Given the demographic trends, it appears that the only remedy to our coming worker shortage, both in terms of caregivers and for empty job openings in general is immigration.