- October 1, 2005
- Posted by: matt
- Category: Archived Newsletters
The Coming Age Wave: What Does it Mean for Economic Development?
It seems like every day we get bombarded with new data about the profound economic effects of the aging baby boom generation. Beginning on January 1, the first baby boomers turn 60 and the economic, demographic and social effects of their retirement, work, and life decisions will reverberate among all of us. For those of us who were too young for Woodstock, it’s just another thing to resent!
This essay is not going to review all the ways this demographic shift will affect America. If you’re at all serious about economic development, you’ve been tracking these trends. Yet, nearly all of this information focuses at either the individual level (e.g., how will career patterns evolve?) or the macroeconomic level (e.g. will the boomers bankrupt social security?). This note takes a different look: how can and should communities respond to the coming age wave. Can
we do things to help our regions prosper (or at least limit the downsides) in the face of these population shifts?
Many communities have been grappling with these issues for decades. In fact, many states and regions have programs devoted to the attraction of retirees. Southern states, such as Alabama and Mississippi, are particularly aggressive on this front. The programs take many forms. Most states do some sort of promotion via their tourism boards, and tout their quality of life, scenic beauty, health care quality, and other amenities. A number of states back this up with real money by providing income tax exemptions for seniors. In fact, more than half of states with broad-based income taxes offer some sort of exemption for seniors.
These efforts seem to be paying off. For example, a study of Mississippi’s Mississippi Hometown Retirement program found that it generates a statewide annual economic impact of $194 million and 2,320 new jobs. Community level studies also indicate extremely positive economic effects from migrating seniors. These positive results have been generated prior to the coming age wave. If similar (or better) outcomes are generated by retiring boomers, the economic effects will be profound. At a minimum, we can expect a boom in new retiree attraction programs.
To date, retiree attraction advocates have viewed the process as something of an economic development “free lunch.” The message seems to be: attract wealthy retirees, and count the proceeds. Migrating retirees spend money, pay taxes, but don’t ask for much in return (especially in terms of spending on new schools and other amenities). As one recent newspaper article put it, there’s “gold in silver hair.”
In our view, this rosy picture suffers from several shortcomings. At a minimum, it ignores potential negative economic effects, particularly the effect of in-migration on rising housing costs. Even worse, it assumes that seniors will always remain in the demographic often referred to as the “young elderly.” This group has access to financial resources, is new to retirement, and is anxious for new experiences. This cohort represents the “holy grail” for economic developers and developers of golf courses, resort communities and the like.
But, the “young elderly” don’t stay young forever. As they gradually become the “old elderly,” their health may decline along with their positive economic impact on the community. At this point, many retirees may depart a community to live closer to relatives. Or, they may remain in place but generate increased demand on local services. In effect, the economic “free lunch” generated by migrating retirees may only provide a short-term economic stimulus while they remain in good health.
This demographic evolution is natural. Our challenge is not to stop it, but to prepare for it in advance. Communities must take a long-term look at future infrastructure and amenity needs, as well as the economic implications of an aging population.
Preparing for this potential economic downside makes sense. It makes even better sense for regions to think more deeply about how to get “the most bang for the buck” from migrating retirees. Too many communities attract retirees who remain isolated in a newcomer’s enclave, and often fail to become fully integrated in the community’s civic and economic life.
By failing to engage these newcomers in local economic activities, we do not fully capture the real benefits that could be generated by migrating retirees. The real strength that these retirees bring comes from their knowledge, career experiences, connections, and networks. Yet, economic developers often fail to tap into this important resource. We must stop simply viewing as migrating retirees as a cash machine that spends money and pays taxes. We must instead find a way to integrate new residents into the center of a community’s economic life.
How can this happen? Such integration could take many forms. Groups like the Service Corps of Retired Executives (SCORE) have long sought to tap retirees as mentors for new businesses. Local mentoring networks could be expanded as one means to encourage retirees to nurture local firms. In addition, retirees could be organized into mini-angel networks. By pooling resources, a new local source of start-up capital could be generated. Finally, retirees may opt to start their own businesses. According to the AARP, self-employment among those over the age of 50 is booming. This growing boomer entrepreneur market can help strengthen local economies in retirement havens.
While few communities are now focused on this challenge of integrating retirees into local civic life, some places are trying to get ahead of the game. For example, Wyoming’s Governor Dave Freudenthal has recently led an initiative that examines not only how Wyoming can attract retirees, but also on how the state can assist those who want to start their own companies. At the national level, groups like the Experience Corps are developing best practices for engaging Americans over 55 in community service. These are all nascent programs that should offer some useful lessons in the future.
As our population ages, the real community challenge is not to simply to attract retirees. Instead, it is to find the tools that create a win-win situation where both sides are enriched. Retirees enjoy a fulfilling period of life, with access to desired services and amenities. Meanwhile, communities are enriched by the investment, knowledge and connections that retirees bring to the community.
Related Resources: Here are some useful websites for further information.
Aging in Place Initiative: A joint program of the National Association of Area Agencies on Aging and Partners for Livable Communities. It is designed to build communities that are good places to grow old. (http://aipi.n4a.org/)
American Association of Retirement Communities (www.the-aarc.org): A trade association focused on “promoting economic development through retiree attraction.”
Experience Corps (www.experiencecorps.org): Program was started by leadership guru, John Gardner, and seeks to encourage community service by those over the age of 55.
Georgia Retire: To view an impressive and comprehensive program to attract retirees, check out www.georgiaretire.com. This website and program were developed by Triple Crown Hometowns, a partnership of three south Georgia counties (Lowndes, Brooks, and Lanier).
Mississippi: To learn more about Mississippi Hometown Retirement, visit www.mississippi.org/retire
Wyoming: Ahead of the Curve: Economic Planning for Wyoming’s Retirement Boom. A 2004 Report by Wyoming Governor Dave Freudenthal and AARP Wyoming, is available at: http://wyoming.gov/governor/policies/documents/AheadoftheCurveFINAL_000.pdf
Miscellaneous Plugs: Woe is Us Edition
In our travels around the world and around the web, we regularly find some very cool stuff that might interest our readers. This edition of EntreWorks Insights reports on the massive number of recent reports, books, and articles we’ve seen that highlight the dangers facing America’s competitive future. These things tend to run in cycles—we’re still waiting for that Japanese economic “take-over” predicted in the 1980s. But, that doesn’t mean that these reports don’t contain solid data and analysis. The challenge is not to count the problems facing America’s economy, but to find ways to fix them. If you’re looking to get depressed about our economic future, here’s a few “must reads:”
American Electronics Association. Losing the Competitive Advantage? The Challenge for Science and Technology in the United States. (Washington, DC: AeA, Feb. 2005). http://www.aeanet.org/publications/idjj_CompetitivenessMain0205.asp
Council on Competitiveness. National Innovation Initiative, Innovate America. (Washington, DC: Council on Competitiveness, 2004). http://www.compete.org/nii/NII_EXEC_SUM.asp
Task Force on the Future of American Innovation. The Knowledge Economy: Is the United States Losing Its Competitive Advantage? Washington, DC: Task Force on the Future of American Innovation, February 2005). http://www.futureofinnovation.org/PDF/Benchmarks.pdf
What’s Happening at EntreWorks Consulting?
Working with the RUPRI Center for Rural Entrepreneurship, EntreWorks has just completed a three-year evaluation of Kansas’ Enterprise Facilitation program. This innovative effort was developed in cooperation with Sirolli Institute (www.sirolli.com) and seeks to stimulate new business development and growth in five rural regions of Kansas. Our report, Enterprise Facilitation in Kansas: Lessons and Recommendations, is now available in the EntreWorks Library at http://www.entreworks.net/library/reports/SirolliReport.pdf
Also new in the EntreWorks Library is a September 2005 Conference Report, Knowledge Clusters and Entrepreneurship as Keys to Regional Economic Development, published by the State and Local Policy Program of the University of Minnesota’s Humphrey Institute of Public Affairs.To view the report, please click here.