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How Local Governments Can Address the Challenges of a Demographic Shift

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Candi Choi
July 11, 2017

The demographic shift is looming for the next 150 years. In roughly a decade, the older population is projected to begin outgrowing the younger population due to low fertility rates and higher life expectancies. It’s time for local governments to address the impacts of the demographic shift on the community. Some, like Prince William County, Virginia, have started to progress toward suitable housing for aging populations. There, local developers provide housing opportunities for the 55 or older community. As these communities grow, so will needs for services geared toward health care, policies for new work arrangements and measures for intergenerational fairness.

Currently, Americans are paying an increasing amount out of pocket costs for health care even though they are paying monthly premiums for health services. In 2016, a Kaiser Family Foundation Survey found that “83 percent of [American] workers have a deductible—at an average of $1,478.” The brunt of these costs is associated with emergency hospital visits when folks need health services the most. Because of an increase in out of pocket costs for those services, local governments can make reforms toward developing collaborative arrangements with nonprofits and businesses for the management of health services. Direct Primary Care (DPC), for example, provides patients an unprecedented amount of access to primary care physicians at a monthly membership rate. “A New kind of doctor’s office,” says Lydia Ramsey at the Business Insider. The model ensures primary care visits, tests and medication are provided at lower costs, without insurance intervention and copays. With less patients (usually capped at 3,000) there is less time spent in waiting rooms, and more flexibility for the doctor to FaceTime with patients or provide visits outside of normal business hours. This model is beneficial to more than just the aging population: Flexible spending accounts (or HSA’s) can pay toward DPC membership fees as well. Insurance coverage would then only be needed to offset the costs when more significant medical attention is required. A nonprofit collaboration for hospital management coupled with the DPC model can address the increasing burden of monthly premiums and out of pocket expenses for everyone. Approving these health care business structures enables residents to have less costly options available to them and alleviate pressures on local government services.


Remember the days of unending waitlists for local public housing assistance after the housing bubble burst? Foreclosures pulling revenues from local governments? With the demographic transition, there will be problems associated with a high “demand [for] more health services” and an “unwillingness” or inability for taxpayers to supply additional public assistance toward those services says the International Social Security Association. Higher tax rates on the shrinking workforce causes wage inflation. Instead productivity and growth are necessary for a viable economy during the transition. This will require an increase in flexibility for work arrangements. Of course, government sets the standard. The FMLA, for example, has been the standard since 1993 — almost 25 years of women working with the same stipulations regarding family work-life balance. Yet, there are lower fertility rates. Ensuring the workforce is productive and able to be productive is a key to addressing the impacts of the demographic transition on the economy.

The social needs of the aging population will have to be addressed whether now through planning and policy mechanisms, or later pooled through the tax structure. Pension commitments, and how they are used, will determine the social demands of the aging population. Currently, local and state public sector workers close to retirement age have incentives to leave their career earlier and secure their pensions at a much higher rate of return, increasing the demand on current pension funding. Since 2009, measures have attempted to address underfunded pension plans. Some requiring new (often younger) employees to pay more into retirement systems. The pay-as-you go model has provided offsets in income which applies only to the older workforce. In other cases, “new employees [are] required to make larger contributions, accept less favorable benefit formulas (possibly supplemented by moving to coverage under the Social Security system), shift to defined-contribution plans, or work more years before becoming vested” says Frank Russek of the Congressional Budgeting Office. Individuals spending more on pensions reduces the amount of capital investments and ultimately lowers the rate of economic growth. In sum, the present situation poses a bone of contention for younger generations who will make more pension contributions, face higher tax burdens and cover more public services through time. Commitments will have to be measured to a standard consistent with tax revenues. Public entities will need to consider the clear disparity between the costs associated with the pensions of the aging population and the amount workers able to pay toward those requirements. When the appropriate measures are in place, localities can help distribute the burden of the demographic transition across older and younger populations accordingly.

Author: Candi Choi holds an MPA with specialization in local government management. She has experience with local budgeting, planning and constituent affairs. Her contact email is [email protected]

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