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A Ticking Demographic Time Bomb


Push-pull between workers, retirees about to get ugly.


Deb Wot, a teacher in the Northwest Territories, and I were exchanging emails about US and Canadian demographics last week. Her blog is Making Sense of my World.

We were discussing a dynamic demographic chart from the US census bureau. The chart shows a population pyramid every year from 1950 through 2050 in five-year increments. Everything past 2005 is a projection. Here are four snapshots, 30 years apart.

Demographics 1950

Demographics 1980

Demographics 2010

Demographics 2040

The charts are interesting but to put things into perspective, I wanted to see workers vs. non-workers and workers vs. pensioners. Given that the US and Canada break things down in five-year increments, the logical breakdowns seem to be:

Youth: Age 0-19
Workers: Age 20-64
Pensioners: Age 65 and up

The dynamic chart has a provision for extracting data. I also have an Excel spreadsheet of demographic data from Canada that Deb Wot extracted from a Canadian source. Deb commented:

I looked closer at the numbers for Canada versus US, in particular the ratio of working age to senior age and I don't like what I see at all. The trend simply looks disastrous to me.

With that in mind, I contacted my friend Nick at Sharelynx Gold to see if he could make some charts. Nick was kind enough to oblige. Here are some interesting charts of US and Canadian demographics.

US Population Demographics

Canada Population Demographics

Ratio of Workers to Non-Workers

Ratio of Workers to Pensioners

The charts show the ratio of workers to non-workers will peak within the next four years or so in both the US and Canada. Workers vs. pensioners in the US is peaking now. Workers vs. pensioners in Canada has already peaked.

Fewer workers making less money than their parents will be supporting both social security and more importantly medical expenses (Medicare) for retirees. Retirees who think home prices will keep financing retirement need to start thinking again.

Home prices are falling and will likely continue to fall for another four years or so. That statement is based on logic presented in the following articles:

Boomers hoping to cash out on their homes, are two years or more too late in most places. Four years from now they'll be six years too late. To support consumption at the current pace, boomers will have to start cashing out their IRAs and stock portfolios. They'll also be looking to downsize autos and homes. When it comes to the latter, who are the buyers? What about the increasing tax burdens placed on the working force to support retirees? That backlash will be starting soon.

Interestingly, this demographic time bomb that is now about to go off has been known and understood for years, decades even. Nothing was done about it. Sadly, it's too late now. The only choices at this point are a cutback in promised benefits or increased taxes on the working population. I expect both are about to happen.

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