The politics of aging

But our demographic transition is not just a problem of pension math. There’s also the problem of what it does to economic growth as society ages. As workforce growth slows, so does gross domestic product growth. In theory, this can be made up with greater productivity growth. But productivity growth is moving in the wrong direction — and because older people tend to be more risk-averse as workers and investors, that too may be a natural result of an aging society.

And, of course, there is the question of who will provide the actual hands-on care that people need. Here, the usual solution proposed is immigration. There are a couple of problems with that. The first is that everywhere else is undergoing the same demographic transition as we are, so the limitless supply of young foreigners may dry up as aging parents require them to be nearer to home and family capital gets concentrated upon a few people rather than dispersed among many children.

But there’s another problem, which is that old people are often vulnerable. This is why stories of abuses in nursing homes are so common; it is not that the state doesn’t care about the people in its charge, but that “the state” does not actually provide the care — individual people do, some of whom are badly motivated. And incentives get very tangled when strangers are in charge of caring for frail people who may be experiencing cognitive decline.