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The U.S. Aging Population as an Economic Growth Driver for Global Competitiveness

Speakers: Joseph F. Coughlin, Founder and Director, AgeLab, Massachusetts Institute of Technology, and Kelly Michel, Senior Vice President, Institutional Business Development, Employer Solutions, and Pensions, AEGON USA
Presider: Michael W. Hodin, Adjunct Senior Fellow, Council on Foreign Relations, Executive Director, Global Coalition on Aging
February 14, 2012, Washington D.C.
Council on Foreign Relations

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MICHAEL HODIN: We would like to welcome everyone to today's meeting; delighted to have you here.

I'm Mike Hodin, adjunct senior fellow at the Council on Foreign Relations, running a studies program on aging populations.

Kelly Michel, senior executive at AEGON Corporation, a global insurance firm. Many of you here in America know it as Transamerica. AEGON is a global company based out of The Hague in The Netherlands. And Dr. Joe Coughlin, founder and head of MIT AgeLab. You have the bios in your materials, so we won't spend much time on that.

Today's meeting is co-sponsored by the Washington meetings program and the studies program at CFR. It is on the record.

But before I go much further, I did want to give you an explanation of why there are only three of us on the podium here, and not the fourth, Undersecretary Bob Hormats. For those of you who did not read your emails that you got, it was either yesterday--I guess it was yesterday -- which was a reminder that indicated that at the last minute, unfortunately, the undersecretary, due to another commitment--actually, a couple of blocks from here--is unable to join us. So we do apologize for that. But I can assure you that it was a responsibility, and we within CFR understand that these things happen, particularly with someone like the undersecretary who, obviously, has these senior political responsibilities.

But I did want to open by turning your attention to a post that the undersecretary did which appeared yesterday afternoon in the Huffington Post to, not least, indicate his interest in this topic and command of its framing, titled "Aging Population, Economic Growth and Global Competitiveness," a reference to this meeting here today--which, by the way, is on the record.

And it's about the U.S. aging population as an economic growth driver for global competitiveness. And a couple of the references that the undersecretary makes: It is vital that we create opportunities to enable older persons to contribute to their economies and communities in increasingly effective and productive ways. This will require new policies and innovations, and promote healthy aging.

And then he goes on to say: Providing opportunities for continued contribution by an aging population is an economic imperative in a growing number of countries, both developed and developing, including, of course, the United States. And then, toward the conclusion: We need a focused, societywide effort to transform our vision of aging from a time of dependency to a time of continued growth, contribution and social and economic participation.

So I think that really sets the framework for us. So let me give you a couple of other points of introduction, and then we'll immediately go to our discussion, which we will undertake for about 20 or 25 minutes among us here, and then open it up for the second 30 minutes for audience participation and questions and/or comments.

As indicated, this is a somewhat unusual event in Council on Foreign Relations framework. It is a collaboration between the studies program, which has our aging populations framework undertaking reports and studies and round tables and meetings of this kind; but then also, CFR broadly has a program celebrating its 90th anniversary this year, from last September to September of 2012. And the framework for that is renewing America and America's strength in the world, America's competitiveness.

Many of us think of that topic as related to pure economic and fiscal policy, perhaps military policy. What we're here to discuss today is the relationship that that has to our aging populations. In this 21st century, our new demographic reality is such that America and all of our G-20 partners, and a growing number of countries around the world, including developing countries, align to trends of urbanization, globalization; have populations where there are more people over 50, 55, than under that in working age. This will be a growing trend during the course of the next several decades.

And in a word, the idea that we can remain competitiveness--remain competitive, the idea that we could maintain fiscal sustainability, not to speak of looking for economic growth, in an environment where this aging population demographic reality has shifted, is something we want to bring to our discussions around public policy generally, and foreign policy in particular.

So perhaps we can open up, and I wanted to just--I have a few suggested questions that we might at least start the conversation. Joe, perhaps you could give us an opening by reviewing some of the data, the demographics of where we are in America, where some of the other countries, our competitors, are, and where we stand in that context.

JOSEPH COUGHLIN: Sure. You know, it's very interesting that aging has been quite often--I would say it has been dominantly told as a story of concern. When was the last time any of us felt that living longer was a problem? We should be declaring -- giving ourselves an applause for getting the ability to live longer.

Essentially, what we're looking at is two converging forces: a(n) increase in longevity, where life expectancy at the year 1900 was somewhere about 45, 47 years old -- 45 probably in the United States; 47 roughly in Europe--to today, if you look at some statistics, is well into your 70s. But interestingly enough, the fastest-growing part of the population is 85-plus. By the way, within that cohort is 100-plus.

So, yes, we are living longer. And essentially, if you can get kids to live past five years old, or past 10 years old, you get to live probably a pretty good, long, healthy life in general, or at least manage well. That's one part of the story.

The other part of the story is--is that, as income and education goes up, fertility tends to go very far down. So we're looking at countries in Europe, for instance, that have a fertility rate of 1.7, 1.8 children per female. You need 2.1 just to keep the population even. The United States with immigration like--is at about 2.1. We are the few (sic), and some would even argue the only, industrialized country still growing.

So anecdotally, what do these numbers mean? Well, let's--you can see a lot by looking, as the great philosopher Yogi Berra said. There are now more wheelchairs and walkers in places like Italy, Germany and France, than there are, say, baby carriages. In the United States -- we'll do a test here. How many of you were born between 1946 and '64? These are the Baby Boomers. The people who don't have their hands up are younger, wish you'd just be quiet; and the older folks would wish you'd just go away. (Laughter.)

One of us is turning 66 -- one every seven or eight seconds. And is this just an industrialized world phenomenon? Absolutely not. The one child, one family policy of China has had a demographic destiny of where there's 165 million people over age 60 there. And by the way, as we're looking at nations, as we're looking at regions, we must look within nations as well. The average farmer in Indonesia -- one of the most populous countries in the world, and indeed one of the youngest -- but now the average farmer is 47.

So it's not just a matter of looking at a region, looking at a nation; we have to look at industries, we have to look at specific regions, and we have to plan to make aging an opportunity not just to live longer, but to live better.

HODIN: Thank you. Great, great contextual start.

So Kelly, as one thinks of this topic of aging populations, many people automatically go to the policies and innovations around health. And we'll get to that, and that's clear. But there are other topics as well, and one, of course, is critical around financial policy, financial security. Perhaps you can give us some sense of where the innovative thinking in that is.

KELLY MICHEL: Thank you. First, let me start off by saying thank you for having me on the panel. And I'm honored to be here for the 90th anniversary. The center has expand -- or has exceeded the actuarial tables of most organizations, or at least people's life spans -- (laughter) -- so that's always the good news. We can all aspire to be 90. Particularly relevant to our topic today.

It is a really exciting time to be in our business, which is the business of protecting people's futures with lots of type of financial instruments. And the things that we're talking about today in the United States are topical around the entire country.

Our focus today is -- and there's a lot of discussion today about the idea of longevity and living longer and trying to create products that help people feel secure about their longevity or their -- you know, like to your earlier point, like, is it a bad thing that we're actually going to live to 85 or beyond that? I mean, this is the debate that we're having.

And in the financial services market, of course, we're trying to find solutions to help people feel good about those things. I think the debates that we see today with respect to entitlement reform and all that is a lot around people's insecurity around what's going to happen in that future. And so it's incumbent upon our business market to think through ways to help provide that type of security through programs that are available from the early parts of an individual's life, so that it's not something that they start to think about when, arguably, we might think it's too late to start thinking about it or if there's not enough time.

So we're challenged on a global basis, and it's important to kind of take the lessons that we learn in one market and transfer them into the opportunity that it might create in another market. So if you look at the European marketplace and their philosophy around living and social networks that provide for things that may not necessarily, let's say, be available in the United States, it's important to try to look at that and look for opportunities where we can learn, but, more importantly, where we can look for opportunities to enhance the life of our folks here in the United States specifically, for my particular interest, but more importantly, that we look for products that can augment or forgo what may have happened poorly in another marketplace. So we're spending a tremendous amount of time trying to look for opportunities there.

HODIN: So -- thank you. So speaking of Europe, as many of us will know, 2012 -- Europe has announced that it is the year of healthy and active aging, not least, as Joe mentioned, because of this proportion they now have to deal with of work/retirement, if one looks at retirement in the traditional sense of over 60.

I look around the room. Several of us came back from the first APEC meeting in 2012, held in Moscow. It was cold. But APEC now has a strategy on active aging, huge interest throughout particularly the Asian region. We know that those dependency ratios in Taiwan, China, Singapore, are going to be reaching 40 percent within the next couple decades. It's not surprising, then, that the World Health Organization has declared that 2012, its World Health Day will be dedicated to aging populations.

So 2012 has sort of emerged as a year where we look at this topic of aging populations, and inside that, as we look here in the council at what does it mean for America and our competitiveness and of foreign economic policy, I suppose my question is, what is America's value proposition relative our trading partners, relative our G-20 competitors? And how can we take some steps that could model ourselves in a way that perhaps our European friends or friends in APEC and other places will look to?

Joe, if you could pick that one up.

COUGHLIN: I'm going to give -- identify, I think, two assets -- one tangible, one less so, but I will argue that the less tangible asset is America's greatest source of strategic advantage. We did a study with Gallup-Healthways Well-Being Index to measure the well-being of adults of any age, but we focused primarily on the 50-plus. And we looked at the well-being of older Germans, the well-being of older folks in the U.K. and, of course, older Americans.

And we found that the Germans were healthier overall -- chronic disease and much more physically fit and walked and did all the things we should do. The British had better access, in many cases, to services, like National Health Service and the like. And the Americans, you can tell by looking at me, did not exercise as much. We thought that cheese steak was a food group. (Laughter.) And on objective measures, we were not faring as well in old age as our German and U.K. counterparts.

But guess what? We blew the index off in terms of being in a far higher state of well-being. That less tangible asset, that I would argue is distinctly American -- some may say misguided, but I'll go with it -- is optimism; that the older population in the United States had a far greater sense of optimism that tomorrow will be better than yesterday, where we will find a way.

So that optimism -- less tangible -- tied to something I do think is more tangible, is that the U.S. has got a very strong base of universities and industries developing new technologies -- and technology without service is just a commodity -- and services brought together to figure out how to live longer better: how to stay in your home, how to be able to remain in the car or the metro system, how to stay in the workplace longer; to reinvent not just living longer, but how to reinvent living entirely.

So I'd say that the U.S. strategic advantage is essentially at its core of its political culture: optimism, and that there's always going to be a silver bullet to somehow make it better.

HODIN: So Kelly, as you look around the world, working for a major global corporation, where are some of the countries that do have a competitive advantage, or disadvantage, from the standpoint of aging populations, and particularly since you're developing and designing financial instruments that are going to be useful? You're looking at pension, you're looking at retirement, you're looking at financial security.

MICHEL: Well, a couple things. If you think about just the United States -- and I'll just use Europe as an example -- the European market is very DB (ph)-focused. They're very focused around the idea of the social network. And while that still exists in the United States, it's a very different culture, particularly if you start looking at the younger ages. We're very defined-contribution oriented, we're very self-reliant in many ways, and I think it's all a matter of how you look at it.

Right now we focus on that lack of -- it's easy to get very mired in the idea that people don't have that same pension opportunity or pension security blanket like the Europeans look at, and look at that potentially as a negative. But I think particularly as you look at the younger ages, that may ultimately end up being a significant advantage, in that we are culturally already gearing ourselves toward this notion of self-reliance and the need to save for retirement.

In fact, Jan and I -- Janet Servonce (ph) from AEGON -- and I were talking a little bit. We're conducting a study right now between the nuances and differences in attitudes between the U.S. and the EU with respect to retirement. And one of the things that is -- the questions that we want to understand is how people feel about the ability to stay in their homes. And the folks that were participating in the EU side of the survey were sort of completely baffled by the idea of having to potentially lose their home.

That just doesn't even occur in their lexicon of concerns. And their questions were more centered around the loss of happiness or the loss of self-worth and what not. It's a completely different paradigm.

So the degree that -- I suppose it's a matter of how you're looking at the glass, but the idea that we're very self-reliant and that we have this culture of self-reliance in the U.S., I think, while we look at the shortcomings, that we're not there yet, we have a lot of work to do to get people to be financially secure; the notion that the average man is actually thinking about that, I think, is a substantial competitive advantage.

And I think I'd like to add to your comments the fact that U.S., particularly the entrepreneurship of the U.S., cannot be underestimated as it relates to trying to solve this problem, to bring us to some innovative conclusions. And, you know, working with government to try to create that environment, I think will help us tremendously in the long run.

COUGHLIN: Yeah. Especially if you look at some of the Kauffman Foundation data, it suggests that the next-generation entrepreneur is not someone who's 20-something from MIT or Stanford and Silicon Valley but rather is more likely to be someone 45 and older, and more likely to be a woman. So as I look in the mirror every day and aging becomes a greater reality --

MICHEL: You could be talking about me. I love that! (Laughs.)

MR. : -- I need that entrepreneur.

HODIN: Well, as we get very close to opening up to the full discussion, let's -- our proposition here is really, in a way, very simple, but many will look at it as ranging from naive to idealistic to unrealizable. And it is simply that in our 21st century, we've now, over the last century, added roughly three decades to life. That's certainly true in America, and it's true largely around the G-20. So if we're going to live into our 90s, the idea of being -- having a work-retirement structure and public policies aligned to that -- that was built, by the way, off of the Bismarck model in the 19th century, and operating through the 20th century -- how in the world can that be applicable to the 21st?

Yet, whether we're talking about Wisconsin, the budget that was just put out yesterday -- I guess this direction -- or Greece, politics certainly seems to get in the way.

How do we manage this? How do we find our way toward a future where the aging population begins to be understood as engaging in economic activity, part of a growth driver? You know, that's a -- such a huge sociological and cultural shift that it's almost how do you get your mind around that? What is the realism for that?

COUGHLIN: How do we get it done?

HODIN: Yes.

COUGHLIN: At least it's an easy question, right?

I think -- and this is a conversation that Mike and I have had offline as well, but I think we now really need to have a phased redefinition of our social contract with -- as individuals, with governments, individuals with each other and the like. We cannot use yesterday's policies when life expectancy was only 45 to 50 to redefine our future 50 years. So that means yes, working longer is a new reality, not just to hedge financial problems, but frankly, working longer is healthier for you as well.

But before we just say that's all about the individual, institutions need to change. The workplace needs to be redesigned physically as well as perhaps ideologically at how we look at older workers, how we look at education. We need to rethink in terms of what does old age mean in terms of what your contribution is going to be. Is it to families alone? Is it to yourself? It is to those around you? So I think that the real change has got to be about how to look at that next 30 years not just as a personal dividend of living longer, but a dividend that society needs to also equally benefit from, since it also invested in it.

HODIN: Great. Kelly?

MICHEL: I would add that -- I completely agree, and I would really add to that that we have to rethink about how we educate people in this respect, because I can tell you, 20-some years I've been working in the financial services market and thinking about education and walking into a workplace and talking about retirement. For many, it's the first time they've ever had a conversation about saving in their entire life. And that's not just the youngest of employees; that's a lot of the employees. And so for our fundamental understanding of how we live to change, how we educate people about this is going to have to change. And whose responsibility that is to educate these people has to change.

And so to the degree that this can be begun at a much younger age in a different -- in a way that is not meant to be something that sits on its own -- it should be integrated into all of the things that we do -- then you'll find -- I think that we'll see the workplace change more so than it -- I just don't think we can do it with the same sort of understanding that we have today about the importance of living longer and how to sustain yourself through that. It really has to have a big educational component to it.

COUGHLIN: The near normal, I think, has -- the new normal has to be reinforced, if you will, by peer pressure. You know, it worked when we were teenagers; it'll work through midlife and older life. What is it that we expect from each other? And before, we used to expect retirement -- 55, 60, 62 years old was the normal. That's not going to be sustainable. But how do we reinforce it amongst each other?

HODIN: Thank you. So hopefully, we've at least set a little bit of a context, perhaps gotten the juices flowing a little bit intellectually. We'd now like to open it up. Just raise your hand -- yes -- and we'll call on you. There will be a microphone. You can either direct your questions or just throw it out there. And if you want to make a comment, that's fine too, but do limit it so others have a chance.

QUESTIONER: Thank you. I'm Steven Koltai. I run the Global Entrepreneurship Program at the State Department. I have a question about the size of the contingent liability for pensions and Social Security payments and how that compares between the United States, Europe and Japan. And what I'm especially interested in is not just the public sector size -- so in other words, not just the Social Security piece -- but also the private sector pension liability. And from an economic competitiveness standpoint, I'm curious how that compares between the U.S., Europe and Japan.

MICHEL: You mean -- I'm sorry, I just want to make sure I understand the question. You want to know how big it is --

QUESTIONER: Yes.

MICHEL: -- compared to other countries?

QUESTIONER: Yes. In other words, I want to know whether we are advantaged or disadvantaged in the U.S.

MICHEL: I don't know if I have the exact statistic -- and I apologize for that; I can certainly get that for you -- of what the actual total market is. But I want to say it's, in aggregate, if you look at defined contribution and defined benefit, somewhere upwards around the $4 trillion -- and I don't know if I can give you an accurate comparison to another country, but I think what's -- to the topic, I think what's most important is the ability for people to rely on that compared to other countries.

And maybe I'm not getting at the heart of what you're interested in, but from my perspective, our -- in the United States, I think the typical -- outside of your home, the typical total savings on average is around $72,000 right now. And if you look at that as a means to measure whether you're financially secure or not, I think it doesn't take someone on a panel to tell you that that's probably not close enough to what you are going to probably need. So to that end, compared to some other countries, we may be behind.

But I think in large part, there is a tremendous amount of support toward the -- of course, the increasing of that pool of dollars, but doing it in such a way where the individual is really driving that component, which -- and depends on how you look at it, whether that's an advantage or a disadvantage. I don't know.

Joe, you want to add something to that?

COUGHLIN: Yeah, I look at those numbers in terms of per capita -- you know, how many legs to their Social Security stool that they have. There may be many more supports, for instance, in a -- in a social welfare state. But now we're starting to find that both the trust of the viability of that -- those supports may be in question. So I'd lean on that.

HODIN: And the only thing I would add to that is when we look -- when we draw our lines out the next two and three decades, across the G-20 countries, and you start getting upwards of 40 percent dependency ratios in some countries, the numbers become unsustainable.

I'm also very worried -- there are some very fine experts in a number of these topics among all of you out there, so if anyone has a particular data point or fact that you want to throw out, please raise your hand on that one. We're not the experts.

Danley (ph).

QUESTIONER: Donmer Haskul (ph), the Social Security Administration. When we look at the comparative weight or the burden of the aging in the future, some countries come out very well, and quite unexpectedly: Sweden, Italy, Poland. And these are countries which have tied the retirement age to life expectancy. It's in the law. And that makes a tremendous difference when you're projecting those numbers out 20, 30 years.

Now, the question is going to be a political question: Will they let the law work and raise the retirement age to 70, 72, 73? The Swedish prime minister just said 75, and it caused a press uproar. (Laughter.) So you know, it may be in the law, but will the political process let it run out? But it is one way to tackle the burden.

HODIN: And notwithstanding the firebombs in the streets of Paris that we saw when President Sarkozy made his announcements about a year and a half ago with respect to the age, he did make progress on tying it to how long we live. Again, whether that will be implemented or not is another story.

There were -- yes, in the back.

COUGHLIN: Perhaps we need to tie it to the -- most people, when you ask them what old age is, it's always 15 to 20 years older than they are. That's what we should tie retirement to. (Laughter.)

QUESTIONER: I'm Welbry Lyman (ph) from Ways and Means. You talked a bit about the potential, the consumption potential of an aging American population, and also mentioned just briefly the potential for productive -- you know, extended productive capacity. Can you describe a bit how that works? What are the types of jobs that we can be globally competitive in as an aging population? And does this prioritize services over manufacturing, for example? And if so, what does that do to the sort of generational mix of jobs? Do we keep -- does everyone in this audience basically hold onto their jobs for an extra 10 years, and then the folks underneath have a new ceiling that they can't reach? Do we need to do something for them?

COUGHLIN: Like most things from House and Means (sic), that's got about five or six intertwined questions in there. (Laughter.) That -- a great question.

First off, I think it plays to America's strategic advantage even today, which is we don't manufacture everything; we tend to manage the more high-quality, high-craft jobs. And guess what? Whether you're talking about BMW or the high-end product manufacturing of, you know, IT devices and the like, it tends to be the 45- to 50-plus-year-old worker who either knows exactly what that craft is -- so exactly how to, say, get a dashboard into a very expensive vehicle -- or how a system should be manufactured in IT.

So, yeah, there may be a bias in services, but not necessarily. The 50-plus, whether we like to admit or not when we are under 50, know what organizations or companies know. So there's going to be a bias to high-quality/high-value product.

With respect to the folks who actually work for a living -- that is, those who use their bodies and carry bricks and the like -- we are seeing great advances, particularly in Europe, around cobotics and robotics being able to enable people to stay in the workplace longer.

And lastly -- and I'll yield to Kelly -- is the notion that there's this low -- long line of young people banging on the door for the job, waiting for you to get of your way -- get out of the way, is true in some areas, but in most areas, particularly in high tech, it is not the case. We have a tremendous shortage of people in government service, engineering, air traffic controls. If anyone flew here, you should know that the average air traffic controller is closer to 60 than they are to 40. And we don't have anyone taking those jobs. So we really need to keep folks as long as possible.

And I guess -- and the last point is that hopefully none of us will stay in the same job for 30 or 40 years. Hopefully we will reinvent institutions and our own expectations to have three or four different careers in a 60- to 70-year lifespan of work.

MICHEL: I think the average life insurance salesman is also in the same situation as your --

MR. : Yeah.

MICHEL: -- as your -- as your high-tech person.

But I would add to the comments that you just made -- were that the -- whether you stay in -- whether you're in a job that can stay -- that you can sustain for an extra 10 years or an extra 15 years has a lot to do with the institution or the industry that you're in and their value that they place on the intellectual capital that you have in that job.

So I think to your point, if you're a bricklayer, there's a point where your physical stamina can't keep up with that job at an older age. But to the degree that you're in a professional service then -- and that your employer wants to retain that intellectual capital, it's going to be very important to know whether or not you're going to have to find a new career or not.

Moreover, I think it's important to see that those companies or those industries that do value that intellectual capital keep -- that -- again, getting back to, like, the need for the educational reinvestment in our people -- that industry, you would hope, is going to continue to invest in their -- in their employees' educational ability to continue to be competitive.

HODIN: Yes, I would just highlight the point that there aren't that many -- unfortunately there aren't that many places that we can turn to right now to give great best practices. But the few that exist, there are at least as many that are in the -- what we might consider blue-collar versus white-collar arena. And you mentioned BMW factory workers. Harley-Davidson is another -- some of you may have seen some pieces on -- which are doing very interesting and innovative work.

And when you combine that, as Joe mentioned, with the technology component, we -- we're going to have to break down all kinds of assumptions over the next couple decades. So, you know, this is as much about a culture and sociological shift as anything else.

Tom, you had a question.

We'll try to get to everyone. We'll move it around quickly.

QUESTIONER: Tom Miller, I work -- I head an -- oh, excuse me -- Tom Miller, I head an organization called International Executive Service Corps, which is a nonprofit, and we have about 11,000 volunteers, most of them retired.

And my question kind of follows up on what you were just talking about. It's a specific question for you, Kelly. What is -- what is AEGON doing specifically for older people in terms of integrating or keeping them in the workforce?

And Joe, it's more -- you know, you talk about changing the culture, and I'd like to get -- you know, we've talked to a lot of companies, and it's hard to get them to think that people over 65 can still contribute to the workforce. And once you get to that, they say, well, then we keep people younger from advancing. And so, Mike, I'd like you to maybe deal with that.

And our colleague from the State Department -- I was at the State Department for 30 years, and we used to have these questions there. And you know, you always got hung up with, well, you know, you would really destroy morale and a lot (other ?) things if you kind of kept people over a certain age.

HODIN (?): Well, just on the last point, to jump in, I mean, the example that I always like to use is the women's movement. I mean, there was a time -- some of us can remember -- at the beginning of the women's movement when it was assumed that that was awful because it would take -- you know, in those days, I was younger, but -- my job. Wasn't true.

If -- you know, it's basically the point if you have a growing economy, if you can look at growth and opportunity, then you've got an expanding pie. If you do have a pie that you're, you know, cutting up among -- and it's limited, then you're going to have beggar thy neighbor. But that's not the place that America has been, and that's not the place that America has to be.

COUGHLIN (?): (I think ?) also there's bureaucratic realities. Corporations are -- have split personalities, much like government agencies do. So while you're asking for early outs for your 55-plus or even 60-year-olds that go out the door, the head of human resources and the chief financial officer are all throwing a party. They've checked that box. They've costed -- they've downsized, and they've saved money.

The technology officer or the chief of product development and the like is going, if I only knew what we know. And by the way, the person who just walked out took with her the relationship with our client or took with him how we actually deliver a given set of services.

And so there's a split personality in there in terms of how organizations want some people to get out quickly, so we can bring in new talent. On the other hand, we also know that the folks that sit, you know -- in their heads and in their drawers are the things that power and knowledge is made of.

MICHEL: I agree with that, and I'll just make one final comment.

You had asked about AEGON. AEGON is a -- has a tremendous program to keep and reinvest in their own staff. But I think more importantly the comments that I would make about this topic are relative to the clients and the organizations that we serve -- are -- which are everything from very small, micro-sized employers to very large employers. And by and large, these are -- of course, to your point of sort of organizational sort of reality that employees sort of come and go, and it may be lots of reasons why they may do that -- but most companies don't make decisions about to keep somebody or to let someone go based strictly on age. It could -- there's all sorts of factors around that.

And I think, again, going back to reinventing or reinvesting in those people as products and innovation changes, that comes oftentimes not just by young people, it comes with a lot of experience and thoughtfulness around how the marketplace actually works. So the loss of intellectual capital at -- for our older employees is -- it will be just that, in fact, a really huge loss.

HODIN: And one of the components that we haven't talked about that -- just so -- to throw out -- the -- being realistic, there is -- there are health factors.

You know, the kind of numbers that we're looking at -- with Alzheimer's, diabetes, cardiovascular and cancer -- will be our nightmare of this century. Alzheimer's alone, many of you know, is 604 billion, 1 percent of global GDP, and we're confident that that number is understated and that's today. With risks of getting it 1-in-8 when you're over 65 and 1-in-2 1/2 when you're over 85, this is a 21st century nightmare, as I said. And you look at diabetes and cancer, it's the same thing.

So, you know, we can have all the great intentions, we can have the right kind of programs, we can even begin to count an aging workforce as part of diversity, but if we don't address the health problems, that's going to be an issue as well. And that's something America is particularly well-suited to, I think, drive on the innovation side.

I think it's probably -- rather than trying to answer every question -- and all of three of us, why don't we take four or five together and then we can try to have -- so Mitzi (sp) and then Chris (sp) and you were -- let's say you go next, and then right there. And then --

QUESTIONER: I actually have two questions. I guess one is that we have a corporate desire for efficiency, which always means getting rid of people. I mean, it -- I spent 13 years at IBM; I mean, I just watched all this happen there.

The other is the opposite end of the population. I don't know; are we talking about 20 percent, 30 percent, 40 percent of the working population that aren't a part of these institutions where they can go on? I mean, it's -- some of them are the working poor, and some of them are just the poor. And how do we deal with them?

And I guess the last question is, I don't want to have a lingering death, but it's illegal for my daughter to get me pills so I could basically bring my life to an end. How do we deal with something like that? Those of us that would -- I mean, I just don't want a lingering death. (Chuckles.)

HODIN (?): A good question. Let's -- Chris, did you --

QUESTIONER: On the heels of that question, everything seems trivial, I'm afraid. (Laughter.) My name is Chris Graves with Ogilvy. And linking on from IBM, IBM learned that while their -- surprisingly, their mainframes did not die as predicted, the people who know how to maintain them did. (Laughter.) So nobody young and cool wants to work on them, which brings me to my question for you.

Are we so obsessed with youth culture that there's an enormous gap in consumer products addressing the aging? I noticed your very cool watch -- (laughter) -- and I wondered if that MIT AgeLab, whether there -- you see any hope there of filling that gap. And is the obstacle what you alluded to earlier, that none of us wants to admit that we reach for the reading glasses and the ibuprofen every day -- (laughter) -- and so we always consider ourselves 30 years younger than we really are, thus marketing aging products to us is very difficult?

HODIN: You have to show them your glasses -- (inaudible) --

MICHEL: I was just noticing that -- Mitzi (sp) -- I just want to say, before you answer the question, Mitzi (sp), I was just noticing your nametag. It's very large, "Mitzi," so you're the only person I can name, actually -- (chuckles) -- in the entire crowd. And I appreciate that.

QUESTIONER: (Off mic.)

HODIN: Thank you, Chris. I think -- sir, yes? This also gives us a chance to actually pick certain questions to answer and avoid others, like whether you should die when you're 95 or not. (Laughter.)

QUESTIONER: Could you please comment on the financial support required to sustain the two principal vehicles for supporting the aging population in the U.S., namely Medicare and Social Security? Both seem to be inadequately financed at the moment. And this problem looks as though it will get worse. Do you believe that means testing is the way to go about sustaining these support services? Should it come out of general revenue? Should we increase the contributions from the working population? How do we make them financially viable?

HODIN: Great question and very relevant. Let's keep them coming.

QUESTIONER: Hi, Rob Cortel (sp) with Initelics (sp). I actually have a foreign policy question. Attitudes about public policy are often experiential, not logical. So we have a generation that's disappearing from World War II. I think the last World War I vet just died a couple days ago. They came out of the war with a certain set of experiences, the Marshall fund and things like that, which led to a more internationalist point of view, and then we had the Soviets and all that. As this population, the American population, ages, it'd be interesting to -- I'd like to understand what you are seeing in attitudes about foreign policy and the U.S. engagement in that, if we are in fact still the dominant power in foreign policy.

HODIN: Good question.

Yes, Katherine (sp).

QUESTIONER: Thank you. I'm interested in the potential of older adults to solve social problems. Often we think of late life as a roleless phase of life where when you go to a party, you have no answer to the question "what do you do." So how can we reposition aging as a real time of contribution, where older adults are looked at as real contributors to solving social problems and there's an infrastructure in place to make that easy for them to do that? So many volunteer opportunities seem piddly, you know, where you're licking envelopes. They're not really tapping into your worth as a -- and experience as a person.

HODIN: Zavin (ph).

COUGHLIN: Are you memorizing all these? Because my brain can't hold them -- I'm writing them down. (Laughter.) We're going to start answering them.

QUESTIONER: One of the issues, I think -- I spent most of my career at the National Institute on Aging, where we struggled with one of the key issues, that is, the public perception of what aging is about. I think there needs to be a distinction between chronological age and functional age. The Bismarck model was based on chronological age and didn't take into account the functional aging. As an example, in the late '70s the National Institute on Aging worked with the FAA trying to change the retirement age for pilots at age 60, where it was automatic, without taking into account whether a pilot could continue functioning.

So I think that should be the -- perhaps one of the challenges is how do we change public policy where it's more based on a person's ability to continue functioning well. As longevity revolution ticks on, we're going to see tremendous heterogeneity in the ability of people to function. There are many 80-year-olds that can function quite well. They function as well as some 40-year-olds or 50-year-olds. So I think that's probably a critical issue in how we design public policies to become more based on functional ability of a person to continue working or to continue functioning, whether it be with --

COUGHLIN: That's where technology plays a role ---

QUESTIONER: Technology plays a role.

MR. : -- extending the functionality.

HODIN: Thank you, Zavin (ph).

So why don't we start answering some of these? Joe -- (chuckles) -- perhaps start with Zavin's (ph) point, which I think is -- captures --

COUGHLIN: Yeah, I think I was going to say, you recall a number of years ago, did a show, old memory of baby boomers and defense policy gone past. The notion of technology was always considered a force multiplier in military policy, you know, one soldier -- good technology is five soldiers on the field. We're now looking at technology as fundamentally a force multiplier for either providing care or for providing improved performance behind the wheel of a car, in the workplace or being able to stay at home. So I think functional age is incredibly important.

We will be all chronically ill. Probably most us in this room have at least one chronic disease, or you've been ignoring your doctor, and you don't know that you probably have two. So it's not a matter of how sick you're going to be; the question is whether you'll be ill, but still be in the game.

To take the question about ageism, if you will, and product development, I've got good news and bad news in that department, the cool watch aside. And I couldn't find my glasses, ironically. (Laughter.) I had my glass case -- a number of my students are tired of me losing my glasses; they've put a radio frequency identification tag on my case so that they can go on the computer and say, Joe, your glasses are wherever I've left them. (Laughter.)

The good news and bad news -- and this -- I have noticed this even in Europe, where there had tended to be a celebration of how bald I can be in terms of aging. And around the world, we're starting to find that youth culture is perhaps one of America's greatest exports. That said, no one wants to make or build an old man's service or product. And the reason for that is the following: because a young man or a young woman will not buy it or touch it or look at it. But guess what? Neither will an old man or an older woman.

And so one of the contributions of an aging society that has got an attitude that it's all about me and has more discretionary income even after the downturn than any other cohort is you are going to have a cool watch that I'm wearing because, frankly, I can see it without my glasses, and I can personalize it. I'm going to have something that's safer because I'm frailer, but 20-year-olds don't complain about safety. And because I have a youthful mindset, I want something that I can personalize, that's safe and easy to use that all of a sudden becomes ageless.

The notion of creating an old man's world is neither competitive nor attractive. And so I think one of the great contributions will be that the next generation of old will make a generation of better, easier-used, more fun living experience in the future.

MICHEL: And I think that goes to your question, too, Katherine (sp). And I don't know if that's what you were asking. But really, the -- it's already happening, I think, to some degree. And again, this is more taking a very positive notation over this discussion, right? I think that we're maybe a lot -- very focused on the negative aspects of having this aging population, but the fact is is that that older American or older worker that really wants to participate is going to be amongst their own cohort deciding how to live out their life.

And they're not going to be the -- I think the notion of what an aged population means is changing as we talk today and that there will be other opportunities, and it's really to the degree that they wish to continue to be engaged. And they won't have to just be, hopefully, licking envelopes. And if that's -- if that is what they want to do, that's fine, but I don't think that that's going to always be the case, as it stands.

COUGHLIN: And I want to pick up on a theme that Mike touched on, but I want to expand on it based upon, you know, what are we going to contribute as we -- as we age. Aging is very new. Yes, there have been older people before. We're not the first generation of folks to get older. We are the first generation to grow old in these numbers, with greater expectations -- in fact, the big difference is an expectations gap -- to reinvent institutions, to build new processes and to have new roles for ourselves, so that if we continue to believe that old age is all about the numbers, and we take today's policy apparatus, be it foreign or domestic, and we simply need to make it bigger and better for the population, then yes, we're going to fail dismally and go bankrupt. But if we take your question as an opportunity, which says, I've got all this human capital over age 50, 60, whatever you want to call age; how do I invent new things to do, new ways to get it done and to stay involved, then it's a global success, not just an individual birthday party.

HODIN: Well, but the other critical point that you alluded to earlier, but did not in that framework, is this lower fertility issue. I mean, if we were sitting here with an extra 30 or 40 years added to life, there would be one set of topics that one might be talking about -- and probably wouldn't be at CFR talking about it, frankly -- and one of the core topics would be around what do I do when I'm 94 and, you know, lying there and want to -- whatever you want to have happen to yourself --

QUESTIONER: (I'd call for an ?) end.

HODIN: Called to an end --

COUGHLIN: She doesn't want to linger. (Laughter.)

HODIN: -- you know, that would be one set of discussions. Because of the low fertility that is stunningly impactful around the world, in country after country after country, you have this profound shift that make the institutional arrangements of the 20th century fiscally unsustainable.

Which gets to the point that the gentleman asked about, you know, Medicare and Social Security, or one can ask about the national health scheme in the U.K., or Greece, or any number of places where underlying the basic point is that when there are fewer people working to support a larger number of people who are traditionally retired, the numbers just don't work.

So one answer, I would suggest, is that you have people active and working, in various ways of redefining work, longer and perhaps much longer. And if we define, as the Europeans are claiming to articulate it, a healthy and active aging, then you can actually achieve this. You know, getting from here to there is not easy, but that's why this is the kind of topic that we're attempting to address here.

So you know, my answer to your question, to go directly, you know, no, the answer is, we -- and there's some, again, in the audience who are more familiar with this than I am and more expert -- we can fiddle with Social Security, as we are doing, and as happens, that can find at least openings for solutions with respect to when we pay, how much we pay, how we do it.

Medicare is different matter. If we -- again, you look at the five or six -- what's now in the term of art being used is noncommunicable diseases -- you know, we had that U.N. outcomes last year -- diabetes, cancer, Alzheimer's. You know, if those numbers continue the way they are today -- and so this just is fiscally unsustainable.

So the question is, how do we spend on finding -- for prevention and actual solutions versus care? I mean, this is a huge debate that we're -- we must step up to.

But you know, as a friend of mine looked at a picture in the '50s of people in iron lungs, with polio, you know, how many of those could you have warehoused, to be very blunt, you know, had we not had the Salk vaccine?

Well, again, the same thing with Alzheimer's. We can care for people and be as wonderful as we want to be, but if we don't find the way to cure it and ultimately to prevent it, it's just not going to be manageable fiscally.

So what I'm suggesting is that aging populations and components of it are really economic policy. It's not about how do we take care of 90-year-olds, even though it will get us there. It's about how do we find economic growth and how do we manage today's fiscal sustainability challenges?

COUGHLIN: And part of the policy's also about personal responsibility as well and what level does one begin to treat themselves well in their 30s so that they live well in their 40s and so on. If you go through life, as I did growing up in Philly, believing that cheese steaks, Tastykakes and scrapple are food groups -- (laughter) -- I'm not sure I have the right to ask any of you, when I am 67 years old and hypertensive, diabetic and God knows what else, to, say, flip the bill. And -- but we have to have that phased discussion on what is that new social contract.

MICHEL: Yeah, I --

HODIN: We have maybe one or two other questions. Just to -- yes. Go ahead.

It's all right. Jump in.

MICHEL: OK.

QUESTIONER: Thanks. Alessandro Pio from Asian Development Bank. If you compare the United States to other countries, even with all the optimistic -- and I think they are good points -- assumptions about longer life and longer work life and so forth, one of the key differences is the savings rate. I mean, you will still have to finance some of these health expenditures, some of these living expenditures as a share of your income is lower compared to your expenses. And in the United States you quibble about, well, the savings rate is 4 percent or 5 percent, and the impact that has on the recovery, whereas both Europe and Asian countries have saving rates in the order of 20, 30 percent. That does imply -- of course have an impact, then, on what you can reinvest through insurance and other financial mechanisms that allow you to pay for these things. So I think there is very basic questions about consumption versus savings. And the consumption model that you have, you go to a store, you cannot buy one screwdriver; you have to buy packs of six. You don't really need to do that if you only need one.

So I think there is some thinking about the consumption and savings model that needs to be considered. I don't know what your views are on that.

MICHEL: I think they should start manufacturing screws that have different sizes. That would solve that. (Laughter.)

But -- I'm sorry. But your point is good one, because we do have to -- we do have to save more.

And I'll tell you, policy should think about this, because -- I'll give you a great example. We -- in the financial services market we're using or looking a lot at behavioral finance and how people make decisions about their savings. And there was a very successful exercise that was put in place for auto and -- autoenrollment into your retirement plan, auto-escalation ideas. And while I think that's a really excellent example of some things that we can do to help increase, we also have to be really thoughtful around the "set it and forget it" mentality, which I think is very problematic to savings.

Understanding savings takes a lot of time. There is not a financial community that is prepared or equipped really to support the education that's necessary. If you -- just think about your own work experience. And I can't speak for what it's like to work for government, but just think about your own personal experience, how many times someone's offered you financial education that was not personally sought out for yourself. It's hard to get that. And you don't learn it in an hour.

In fact, the amount of people who've told me that the most they've ever learned about saving in their life for anything, whether it's children's education, buying a home, retirement, they learned in their 401(k) enrollment meeting. That's a -- that's a very problematic testimony to our commitment to helping people understand how to get there and how to save, how to balance the choices that need to be made between saving for college for their children, putting a down payment on a home and saving for retirement.

You talk to a 30-year-old, they have completely different savings challenges than somebody who's 20 or somebody who's 40 or somebody who's 50. And we have to help people learn how to do that better, and maybe things like behavioral finance will help us understand how to do that better, in a more efficient way.

But right now policy -- we should be thinking about how to drive policy to help employers, which, in -- at least in the United States, is the primary delivery system for retirement or savings products, in a more efficient way, because right now we really don't have an infrastructure to support education on a broad basis, to help people understand how to do it.

I don't know if you have --

HODIN: Thank you.

Hazel.

QUESTIONER: Hazel Denton, Georgetown University. I wanted to pick up the point about the savings rate and also the independence that we should have, the self-care we should have.

Whenever I go back home to England, I ask my young relatives -- these are people in their 20s -- what in your pension plan? And every one of them has a good answer. Britain is moving away from these lifetime employment situations to short-term contract work. That's something I see beginning to come in here and surely is going to be one way in which it's going to be a lot easier to hire the older people. We just have to get away from the idea that anyone over 65 falls in the box of elderly. I think this audience will agree. (Laughter.)

HODIN: Absolutely.

QUESTIONER: Can I -- one more?

HODIN: We have -- we have about two more minutes. So maybe one more question.

QUESTIONER: She passed it to me. I'm Arbra Johnson (sp) with Itochio (sp). And I'm hoping you can speak to the fact that it's not just retirement that's getting later. It's having kids, buying houses, paying for college. So how does everything have to shift?

I mean, I'm 40. My youngest is 2, and I'm not atypical, at least in the Washington region.

COUGHLIN: No. Over a half million women every year have their first child after age 41 in the United States alone. In Europe they're not having children, pretty much period. In Germany there was a headline on their newspaper that was a -- celebrating a year ago that they had 600 more kids that year than they did the year before.

So no, things are shifting and things are elongating -- multiple careers, cycling in and out. So really longevity's rewriting all the things that we took for granted.

MICHEL: But you know, I'm -- I have a -- I had my child at -- one child -- I'm so statistically on point with whatever you're talking about here --

MR. : Yeah.

MICHEL: -- thirty-seven years old when I had my child. And the idea of sustaining a career -- and for many women particularly, if we're going to talk about women and retirement -- has a lot to do with when to have that child relative to your career advancement. And for women in their 30s, those decisions become very defining on whether you continue a career or you continue with a job. And so I think there's a very important nuance to that decision, whether it's a career or whether it's a job.

And as our -- as our discussion will probably end here shortly, it's really important, I think, to understand and to be very thoughtful about what we want our society to be doing. Do we want to develop careers, or do we want to develop just a job where you come in and you come out, but you have some sort of social network beyond that that's going to help sustain you? Because that's a hard thing particularly for women to be able to do. But that saving rate should be -- the concept of that has to start much younger for women or men, I think.

HODIN: So maybe we'll conclude on two points. One is related to this, and that is when you look at the work that is being prepared at the World Health Organization or that was discussed in Moscow last week inside APEC on the topic of aging populations -- World Health Organization's preparation for their celebration of aging at World Health Day, which is the first week in April -- they're focused on healthy lifestyles. And it's a -- it's not about 93-year-olds living or not; it's about healthy lifestyles.

And I think, as Joe and Kelly said, what this shift in demographics is doing to us, the longevity on the one hand, the lower fertility on the other, is transforming how we live and what kind of institutions, both private and public, are aligned to that, are fit for purpose.

Let me conclude with a concluding comment that Undersecretary Hormats certainly wrote yesterday and might have said if he were here: "Working together, we can turn the longevity bequeathed us from the 20th century into a positive driver of growth, contribution and economic activity into the 21st." Some of you may know there was a book that was launched at Davos about a week and a half ago now -- that's two weeks ago -- titled "Global Population Aging: Peril or Promise?" You know, I vote for the promise side, but there's a lot of space between here and there, and I think that's what the undersecretary was saying, and that's what we're all saying, that we have the opportunity to do this, but it's a matter of stepping up to the policy.

We were talking beforehand that one looks for examples in history. And you don't have to go back that far to think of some major issues that have been picked up as very profound policy challenges with institutions to accompany them, the environment being one example. You know, pre roughly 1970, that as an issue didn't exist, let alone -- let alone, for better and worse, having institutions around it. Well, you know, perhaps the 21st century is suggesting that around this aging populations, we need a similar kind of framework.

So thank you all for coming. We will continue these round tables and discussions and appreciate your attention. (Applause.)

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