The Greatest Demographic Challenge Facing the Tri-Cities
Whatever else that can be said about the Baby Boom Generation, the fact remains they radically changed virtually everything from the culture to the economy as they moved along their timeline, and that won't be over until the Boomers say it's over. The labor force is a prime example because the elders of the Tri-Cities' Silent Generation and the first wave of Boomers, who are now in their golden years, are still on the job – some of them by choice, some by necessity.
A recent study by the asset management firm BlackRock found the average Boomer has $136,000 saved for retirement. If they could manage a 7% return on that investment, it would give them $9,000 per year to add to their Social Security checks, but it wouldn't add up to the ideal annual retirement income of $45,000.
Other studies show similar concerns. The Insured Retirement Institute's analysis found one in four Boomers have nothing saved for retirement and the Transamerica Center for Retirement Studies survey said 36% of Boomers plan to rely on Social Security as their primary source of income in retirement. That’s the dark side of the demographics, but another segment of Boomers is actually rather well off. They are doting grandparents, they like to travel and volunteer. Some of them still like the challenge and reward provided by part-time jobs or contract work.
According to the current U.S. jobs report, almost 19% of people 65 or older were working at least part time. That squares with the Census Bureau's just-released American Survey for the Tri-Cities region – it shows 18.4% of Tri-Cities resident over 65 are still on the job. More than 6,000 of those 18,612 elders work full time. That number is expected to increase as the peak of the Boomer population hits retirement age. More than 100,000 Tri-Cities residents are already in the elder class, but we haven't reached the crest of the wave.
When will that happen?
The Baby Boom Generation's birth rate peaked between 1957 and 1961. On the local level, there are more than 30,000 Boomers who will reach the traditional retirement age of 67 between 2025 and 2029, but that won't be the end of the gray tsunami. There are another 30,000 who will reach retirement age between 2030 and 2034, and another 28,000 are queued up just behind that group.
The increase of elder workers is both good and bad news. It’s good news because spending drops, on average, 37.5% during full retirement, and an aging population usually means a smaller labor force. That equates to less consumption, and consumer spending accounts for about 70% of the economy. So those elder workers are helping to keep the cash registers ringing during a period when population growth has become stagnant and parts of the economy are struggling to maintain the status quo.
It's bad news because many of the graybeards who remain on the job are delaying younger workers’ advancement. That sets up a contagion throughout the labor market that makes recruiting fresh talent more challenging.
The labor market is just one of the ways Boomers are redefining retirement. The economic and social demand this group creates will continue to rapidly change the local marketplace. Expect more demand in senior housing, financial services, healthcare, restaurants and travel services. Those are just a few obvious examples driven by necessity and the way Boomers invest their time and money.
Since the Baby Boom was the largest generation during the last century, its aging puts big demands on Generation X. Realistically, Gen-Xers won't be able to pick up the slack from the Boomers’ consumption levels. Nor will it be able to sustain programs and the level of government services supported by taxes like the Boomers did. It's not because they won't make as much money or they’ll pay lower taxes. It's because there are 35% fewer of them. They're inheriting the good, the bad and the ugly that the Boomers are leaving behind, and it's pushing economic development and population retention to a whole new level of local importance.
We have to prepare ourselves for this change to our demographic landscape and its impact on our local economy. What do you think we need to focus on to not only sustain our local economy but affect positive change?