THE OLDER WE GET... "[Baby boomers'] impact on long-term care, which may be the most explosive dimension of old-age dependency, still lies over the horizon.".

• Author: Jackson, Richard
• Position: MEDICINE & HEALTH

THE U.S., along with the rest of the developed world, is being overtaken by a stunning demographic transformation called global aging. By 2050, the elderly share of the U.S. population, which was 12% as recently as 2000, will climb to 22%. In Europe, the elderly share of the population will reach 28%, and in Japan, which is ground zero for global aging, it will reach 38%. Most developed countries not only will have aging populations, but stagnant or declining ones. By the 2030s, workforce growth will slow to near zero in the U.S., while in Japan and some European countries workforces will be contracting by between one percent and 1.5% per year.

Over the next few decades, the aging of America promises to have a profound effect on the size and shape of our government, the dynamism of our economy, and even our place in the world order. Global aging poses enormous challenges. Graying means paying more for pensions, health care, and long-term care for the elderly. Even as fiscal burdens rise, economic expansion will slow as employment growth falls, workforces gray, and rates of savings and investment decline.

Aging electorates may become more riskaverse, have shorter time horizons, and be more prone to protect current consumption claims on government budgets at the expense of investments with long-term payoffs. As the developed world shrinks in demographic and economic size relative to a faster-growing developing world, its geopolitical stature also may be diminished.

Although rising life expectancy may be the force that first leaps to mind when people think of population aging, falling fertility is the more quantitatively important driver. Life expectancy at birth in the developed world now ranges between a low of 79 in the U.S. and a high of 84 in Japan--a difference of just five years.

The fertility rate in the highest-fertility developed country (New Zealand, at 1.9 average lifetime births per woman) is nearly twice as high as the fertility rate in the lowest-fertility one (South Korea, at 1.1). Absent large-scale immigration, it is the countries with the lowest fertility rates that will age the most. It also is the countries with the lowest fertility rates that have or soon will have contracting workforces.

It often is assumed that the trend toward smaller families began with the end of the postwar baby boom but, in fact, fertility rates in the U.S. and most of today's developed countries began declining in the 19th century, and by World War U already were approaching the socalled 2.1 replacement rate needed to maintain a stable population from one generation to the next. After a temporary and, in some cases, dramatic reversal during the 1950s and 1960s, the decline resumed once more.

What was new was that fertility rates now plunged beneath the replacement rate, and in some countries far beneath it, something which never had...