An Older, Poorer America Is Coming
As more aging Americans slip into poverty, governments need to be ready.
For at least one demographic group, the War on Poverty has been pretty successful. The percentage of older Americans living below the federal poverty line has decreased by two-thirds since 1966. That year, according to data from the Pew Research Center, 28.5 percent of Americans age 65 and over were poor. By 2012, that number had declined to just 9.1 percent.
But we may be at the end of that happy trendline. I think that over the next five to 10 years we will see a dramatic reversal in the economic fortunes of millions of our oldest residents. That has profound implications for governments at all levels.
The diminution of poverty among aging Americans has rested on a three-legged stool of Social Security plus traditional pensions and personal savings. The latter two reflect the general prosperity of the postwar period in which labor unions flourished and wages rose with productivity.
Those days of a rising and stable middle class are gone, of course. Beginning in the 1970s and accelerating after 1980, union membership declined sharply, and with it private-sector pensions. According to the Bureau of Labor Statistics, only about 22 percent of private-sector workers now have a defined-pension benefit, compared to 42 percent in 1990. And personal savings, which took a massive hit during the Great Recession, have not recovered. Nearly half of all workers over the age of 50 -- and 3 in 5 retirees -- have less than $25,000 in savings and investments, according to research from AARP. On top of all that, today’s older residents are carrying significant and increasing amounts of mortgage, credit card and even student-aid debt.
You can put off retirement, and many are. The labor force participation rate for those 65 and older increased from 12.4 percent in 1994 to 18.6 percent in 2014. But you can’t put off aging. The collapse of incomes for this group when they no can longer work is going be a double hit for government, decreasing the taxes they pay just as they need more public services.
To the extent that they can, governments should be looking for ways to improve retirement security generally, such as with the government-administered retirement plans for private-sector workers being proposed or implemented by some states and cities. Governments also should be doing scenario planning for how they might deal with the consequences of dramatic increases in the older poor, including looking at affordable housing, transit and health care.
Today children constitute the group most likely to be poor in America; more than a fifth of them are below the poverty level. But children don’t vote. Seniors do, and the anger we see among voters now may only be a forerunner of things to come. Given the size of the baby boom population, a return to the poverty rates that existed among aging Americans before the War on Poverty would result in more than 8 million newly impoverished seniors. They’re not going to sit quietly on a street corner with a tin cup.