The conventional wisdom is that an aging population is a net drag on a nation’s economic competitiveness. America, these naysayers point out, is almost ready to fall off a demographic cliff once the aging Baby Boomers start retiring. But in a paper published by the journal PLOS ONE, a group of international researchers at the IIASA, the Max Planck Institute and the University of Washington proposed exactly the opposite: In a Western, industrialized democracy, having an aging population might actually turn out to be a competitive advantage.
It’s an argument so counter-intuitive that it’s worth a closer look.
What the researchers found was that there were five reasons why an aging population might bring net benefits for any society. The researchers focused on Germany, which is second only to Japan in terms of an aging population — but the findings are relevant for all societies. Most importantly, an aging population could lead to productivity gains throughout the economy due to expected increases in workers’ educational levels. These productivity gains would theoretically offset the loss of workers in the labor force. Think of America’s future workforce in terms of a smaller pool of highly productive workers rather than a shrinking pool of average productivity workers.
There’s also a real argument to be made for the link between an aging population and innovation. This all starts with quality of life: The study suggests that the relationship between leisure and work will change in the future, with leisure time increasing on average. Everybody is going to have a lot more time on their hands — not just people in retirement – so you better hope that the people with time to tinker and innovate will be relatively well-educated, healthy and financially secure. And that’s exactly what these demographic researchers say is going to happen with an aging population.
That actually has enormous implications for the way we think about the innovation potential of the tens of millions in the Baby Boomer generation nearing retirement. Instead of thinking of these aging Baby Boomers as a net drag on America’s future economic growth, think of this demographic shift as a net gain of people who are healthier, greener and more productive. These are people who will care more about innovations in areas ranging from health care (since they are living longer) to renewable energy (since they will be consuming fewer energy-intensive goods).
The AARP has emphasized in the past that an aging Baby Boomer generation will actually be good for innovation. For example, last year AARP partnered with the SBA to promote the idea that “encore entrepreneurs” older than 50 might be an unexpected source of innovation activity for the American economy. “Many new entrepreneurs are saving their best acts for their encore performance,” said SBA Administrator Karen Mills in a statement. “They’re using their decades of expertise and their contacts to start new businesses and to finally pursue that venture that has been stirring their dreams for all these years.”
A renewed focus on these “encore entrepreneurs” might lead to a boost in late-stage venture financing. Not late-stage in terms of the lifecycle of the company, but late-stage in terms of the lifecycle of the founder. With all that extra leisure time on their hands, Baby Boomers might decide to launch new ventures in fields that help them lead better, more productive lives as they age. Who says you can’t launch a new venture at age 65? Or become an angel investor in a new start-up at age 80?
The second big reason why an aging population might be good for innovation is because it will finally force the United States to confront the types of innovative approaches needed to prepare for an aging society. We need to focus as much on the quality of life of elderly people as overall quality of life, and that’s going to require big changes. The latest rankings show that nations in Europe (Norway, Sweden, Germany and the Netherlands) and Canada do a lot better job than America of creating a high quality of life for elderly people.
That means that, when it comes to technological innovation, we need to put elderly Americans at the center of the innovation process rather than relegate them to the fringes. One role model might be Denmark, which is actively creating “welfare technologies” and “Welfare Tech Regions” in response to the challenges posed by an aging population. These Welfare Tech Regions focus on innovations in home care, health care and social services. For the United States, this means that regions of the country where there are high concentrations of retirees – Florida, for example – might become new innovation clusters for the development of technologies devoted to older Americans.
Of course, it’s going to take a lot of momentum to change the way we think about our aging generation. The consensus that an aging population will overburden the nation’s resources is a tough one to change. So kudos to those researchers and bold thinkers who are challenging this conventional wisdom and racing to create the types of innovations that will make America a better place to live for the nation’s aging population in the future.