The Retirement Factory
Building a local economy around retirees may seem like the perfect growth formula, but it has its flaws.
Not long ago, I was interviewing a retired politician in a fast-growing Southern metropolis. Even though he was a good old boy who had never left home, he had no resentment for the retired Yankees who flooded his town. In fact, he attributed the whole area's prosperity to them. A retirement community, he said, "is like a high-wage factory. You build 1,000 houses, you have 1,000 households making $90,000 a year. A high-wage factory - without the factory."
I've heard a lot of people make the economic development argument in favor of a retirement-based economy, and it's a hard one to refute. People with money in the bank arrive from somewhere and become part of your community, spending their cash locally and using their knowledge and experience on various do-gooder volunteer tasks. Who wouldn't want that?
But the comparison to a factory got me thinking. A factory is a huge and multi-faceted contribution to a region's economy. Is a retirement community really like a factory?
In some ways the answer to this question is yes - and that's a good thing. The most obvious similarity, as my politician friend pointed out, is that the residents are like factory workers. They live in town, get steady paychecks to spend locally and become involved in local life. Like factory workers, retirees can support a whole service economy with their local spending.
But there's more to a factory-town economy than simply Saturday grocery shopping by the factory workers. That's because factories are in the export business, while retirement communities are in the import business. And an export economy spins off all kinds of economic benefits that you don't get from an import economy. A big factory requires lots of suppliers and tends to stimulate the creation of an entire economic cluster - a group of businesses that can then feed off each other and, in time, find new customers outside the region.
A retirement community creates a cluster of suppliers, too. But these tend to be local service-sector suppliers that create low-wage jobs and aren't interested in repackaging their services for export outside the region - retailers, contractors, landscapers and pool-maintenance companies.
There's also a psychological difference. Factory workers are connected to the local economy in a way that retirees are not. If orders fall off, they might get laid off for a while. They might switch jobs and go to work over at a supplier - sometimes for more money, sometimes for less. But the point is that they have a stake in the regional economy. Factory workers don't like traffic jams anymore than the rest of us, but they see the value of an expanding economy. They see how growth can be good as well as bad.
Retirees see no such thing. They are tied to a global economic system in which their investments are based, or else to the economic fortunes of, say, a government pension system in another part of the country. They might want tax revenue floating into public coffers in New York or Ohio, so their public pension isn't threatened; or they might want interest rates to go up so their income rises.
But they see no benefit in an expanding local economy. If a bunch of factory workers get laid off, the retirees don't need to worry - in fact, they might actually benefit because prices in the local economy might fall. If business is booming and people are employed and labor rates are going up, they don't have to worry about that, either. They might even be harmed by it, because their incomes are fixed - not tied to the local economy - and prices will go up.
Not all retirees view the world in such narrow terms. Many embrace the community to which they move. And retirees can be a wonderful asset because they have time and skills to devote to community causes. But the downsides are typical of any economy based on imports rather than exports, especially the importation of people, whether retirees, part-time residents or tourists.
These economic sectors are only going to grow in the decades ahead, and they do bring significant benefit to many communities. How many formerly rural towns now have a full-time supermarket and drugstore just because of the retirees? But a retirement community brings with it a particular type of economy, one that is not always good for the region hosting it and for many of the regular folk who are trying to make a living because retirement isn't their profession.