To Be Eighty Years Young: Work, Health and Income of the Elderly

On April 27 2007, I was one of 200 invitees to a party to celebrate the 80th birthday and retirement of a member of the James Buchannan Center for Public Choice, at George Mason University. The feted lady, by all accounts and for those of us who are fortunate to know her is a remarkable person. She exudes warmth, efficiency and good southern hospitality. Whether at the society meetings or during my stay at the Center, I have always marveled at how such an efficient person could be so warm and caring for all of us visitors at the Center and not just to members of the Center and the University. On The 27th of April all of us who came to celebrate the day had no need to tell her how much her warmth have touched us all. On that day a major event had taken place for her and for us as well. She turned “Eighty”, and she has “Retired”, thus concluding her tenure at the Center. At eighty years young, she is as vibrant as she was at sixty, happy and in good health.

The celebration prompted me to revisit an issue that has been festering in my thoughts for some time: “AGING”. This issue has occupied, still does occupy economists, gerontologists, health care professionals, cosmetologists, policy makers and the public at large. The inevitability of aging is something that stares us in the face on a daily basis. Our society is obsessed about it. The health and beauty market is saturated with products that claim to restore our youth, products that let us “deify” aging and prolong our life. Yet when everything is said and done, no one “thus far” has escaped the aging process.

Over the past few weeks, Brian Williams the News Anchor of NBC have been exposing his viewers to snippets of the perils of aging in the “Trading Places” segment of the broadcast. The program opened with a view of how some aging family members of the network are dealing with aging. In putting before us the experience of their parents as how they cope with aging, the program succeeded in reminding its viewers that “we shall all be there”. Most importantly perhaps, the program brought to the forefront the dilemma facing adult children in caring for their aging parents. In another segment of the program the problem facing childless single parents was briefly highlighted. Given that sooner or later we shall all be aboard this train, it is perhaps useful to put forth some statistics before enumerating some of the problems facing the elderly.

It is a common practice to use the term “elderly” to refer to person 65 years old and over. As of the year 2000 in the US there were 32.6 million in that age group; 13.9 million males and 18.7 million females (this year is chosen for availability of data which will be cited here). Classified by marital status, single persons constitute 3.9% (4.2% male, 3.6% female); married with spouse present 54.6% (72.6% male, 41.3% female), widowed 34.2% (male 14.4%, female 45.3%).

What are the survival probabilities for this group?

One can assess survival probability for everyone aged or not from three types of information: age, race and sex. Expectation of life at an age in the bracket (67-70) is estimated to be in the range of 16.9-15.5 years; (71-75) in the range of 14.2-12.3 years; (75-80) in the range of 11.7-9.4 years; (80-85) in the range of 8.4-7.0 years ; (85-90) in the range 6.6-5.1 years; (90- 95) the range is 4.8-3.7 years. After the age of 95 it is somewhere between 3.5 and 2.5 years. The numbers are somewhat different when the population group is broken down by race, with the difference is more between white and black males than between white females and black females (data from National Vital Statistics Reports, vol54, # 14, April 19, 2006).
According to The National Vital Statistics, a male who was 65 years of age in 2003 would have ahead of him 16.8 years to enjoy; a female would have 19.7 years. Ten years later, at the age of 75 the years are 10.5 for males, 12.5 for females. At 80 years young, the numbers are 7.9 for males and 9.5 for females. The years dwindle down so that once the age 90 is passed it is but a few years left (unless you are an economist, as reported in THE ECONOMIST: “Economists live longer”).

Year in and year out, the data show an increase in life expectancy of both males and females with the largest increase recently recorded for black females. It is interesting to note that the much talked about “obesity” of the US population did not impact the survival probabilities. The 10 year probability of death between the years 1999-2002 has fallen for all age groups. Among those aged 55-74, it fell from 25.7% to 21.7% based on the findings of Cutler, Glaser and Rosen (NBER, program Report Winter 2006-2007). According to the authors, the risk profile of the US population is healthier now than it was bock in the 1970’s.

Longevity has good and not so good implications. The “Trading Places” stories shown on NBC, although small in magnitude to be statistically significant, nonetheless they give the impression that it is the latter than the former. It is good to be alive one hears, but few would couple the sentiment with at what price. The quality of life falls by the wayside, but when compared to no quality at all – what can one say; after all we have yet to discover the “quality” of dying. Perhaps someday we shall.

Having put down the life expectation statistics, there is a need to enumerate the problems associated with ageing. Clearly the first and foremost among these are the work and health status; the second is income or wealth, and the third is the life style and the delivery of care.
Let me first begin with few of my prejudices about labels. I do not much care for the labels “Elderly” and/or “Retired”. These labels project images of frailty and zero productivity. Let us think a bit about the work- income experience of persons 65 years and older. Retirement laws, written and unwritten employment codes influence if not often dictate retirement decisions of workers irrespective of health, ability to perform tasks assigned or productivity. At the work place, there is “a silent majority” voice for easing the “elderly’ out to enhance the upward mobility of the young and to economize on the wage bill. Given the statistic that a 67-70 years old who has already retired has a survival probability of 16-15 years how might one measures the value of life for such a person? And, given that we are healthier than three decades ago the chances are pretty good that such a person is likely to be as productive or nearly so as a person much younger in earlier decades. But society does not enter that into its calculus. For a non economist, the question may not be relevant even down right silly. But for economists this is as much as relevant as our valuation of risk to life (health and safety in the work place and or in cases of accidents). Value of life estimates (the courts use them to make awards) are made on the basis of the person age, education, income and work history. This value measures the contribution of the individual to society. If the individual is retired (assuming he/she does not have a second carrier) what measure should we use to calculate his/her contribution? I have always wondered why when a person is retiring it is assumed that he/she will be taking up fishing. This probably is an activity for which productivity can be calculated – the number of fish caught, the price of the fish, the value of the leisure associated with the act of fishing (assuming of course that one can make a catch). Of course there are non societal valuations of the retiree’ activities such as the contribution to friends and family as well as the contribution to oneself in term of enjoyment of leisure. But there is a diminishing utility to the consumption of leisure, when that is the only use of one’s time. Moreover, as with any non market activities valuations are individual specific. Since the “retiring” population in the years ahead is likely to increase in numbers, I would like to put before you the following questions: How should society valuate retirement as a non-market activity? Does it really matter for the individual and social welfare if a social value (positive or negative) were to be placed on a year of retirement? These are questions worth thinking about.

Being engaged in a non market activity does not mean that no income is received. Through the public and private pension systems and insurance plans, most retirees will receive pension income. There are numerous studies about retirement plans and retirement income and wealth. If the lack of income or insufficiency of income is not an issue facing a retiree, then the question of meeting need whether for living expenses or health care or nursing care would not arise. However there are segments of the populations 65 years and older whose needs currently are not being met and most likely will not be in the future. A quick reference is to look at poverty statistics.

In the year 2000, 9.7% of people 65 years of age and older were below the poverty level with the percentage much higher for females (11.8% compare to 9.7% for males). Add to this the fact that the majority of this age group are women without partners — single, divorced and widowed (56.1% of the total number of females), this places a further hardship on this group, not only to meet basic needs but also their future health care need. This is a subject that needs to be addressed collectively and individually. In reforming the health care system in the US, a subject that is likely to be taken up by the presidential candidates on their run to the White House, it is worthy of discussion to get informed about the future health care need of an aging population and the special needs group. Personal and social responsibilities for care have to be identified and choices of various options for the future critically examined. For the moment, two pieces of information are of note. In the year 2000, 4.5 % (1,557,800 persons) of the 65 years of age and older are in nursing homes. Of this total, 574,908 persons are in the age group 75-85, and 772,737 in the 85 years and over group. The cost of care varies according to type of accommodation, quality of care, location and severity of condition. A 2006 study by Sheila M. Loboprablu et.al. (Care Giver in Dementia: A guide for Health Care Professionals), put the cost of informal care at $257 billion, home care at $32 billion and nursing care at $92 billion. A Harvard Medical school study (2004), reports that the Massachusetts Division of Insurance put the yearly cost of nursing care at $76,000, while the average yearly Medicaid nursing care is put at $ 12,000 ( Care Giver’s Hand Book: A Guide to Caring for the ill, Elderly and Disabled—and Yourself). That is the good and bad of it. The good news, we live longer than our parents and grandparents; the not so good news is that without planning for longevity, getting quality care turn out to be an elusive dream.