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Forum: We're getting younger every year

In the coming decades, the Pittsburgh region's population will grow less gray. Christopher Briem examines the impact on the economy (not to mention our self-image)

Sunday, January 02, 2000

It is an all too often cited statistic that we live in an "old" region. With over 18 percent of the regional population aged 65 and over, the concentration of the elderly here surpasses all other regions in the country other than some of the traditional retirement locations in Florida.

  Christopher Briem, a Ph.D. candidate in economics at the University of Pittsburgh, is a research associate at the University Center for Social and Urban Research, where his work focuses on regional economic forecasting and public policy analysis. 

What is far less well known is that this distinction will not long continue. A surprising fact is that the elderly population in the region is actually decreasing and will continue to do so for more than the next decade.

In the middle 1990s, the size of the elderly population in Allegheny County reached a peak of over 240,000, a level it may take a quarter-century to reach again. This demographic shift is expected to happen fairly quickly. The official state population forecast projects the elderly population for the county to decrease to 210,000 by the year 2010. At the same time, the under-65 population will maintain a slow increase. Both in magnitude and concentration, the region will not be considered as "old" in the next decade as it was in the last.

This is surprising because of all the news we hear about the growing elderly population and the stress it will soon cause on many programs, in particular Social Security and Medicare. These projections are valid for the nation as a whole, but do not apply to the region.

With the large baby boom generation beginning to reach 65 in the next decade, the national elderly population will expand rapidly. What is true for the nation is not true for Pittsburgh. The baby boom generation here is a lost generation, after having left the region in record numbers during the 1980s. The result is that the pre-elderly population is relatively much smaller than elsewhere. As the population ages, the regional elderly population will inevitably shrink in size.

The projected decline in the elderly population is significant in Allegheny County, but is also true across the region and state. The percentage of the population over 65 in Pennsylvania was ranked second only to Florida in 1998. Census forecasts show that Pennsylvania will drop to fifth on this list by 2005, ninth by 2015 and 17th by 2025. In the longer run, the region and Pennsylvania will achieve an age profile similar to the national average.

This demographic shift will have a real impact on the regional economy.

The elderly bring significant income into the region in the form of Social Security and other retirement income. Retirement benefits in the Pittsburgh metropolitan region amounted to over $10 billion in 1995. To put this in perspective, this amount was $4 billion more than the Denver metropolitan region, despite having a nearly identical total population size.

Additional money is brought into the region in the form of Medicare and other federal programs that are closely tied to the size of the elderly population. This translates to jobs, specifically service and retail jobs created by money spent directly in the local economy.

As the population changes, significant changes need to be anticipated in the local economy.

This demographic transition may partially explain some of the confusing economic statistics that have been reported for the region in the last few years. Job creation here appears to be quite modest. Between 1993 and 1998, local employment growth was well below the employment growth nationally over the same period.

This anemic performance may not be indicative of the success of the local economy in developing new jobs or industries. As an important segment of the population declines, it is unavoidable that some jobs will go away. Service and retail jobs in particular are tied directly to the size of the population.

Natural population decline is the result of structural changes here that occurred over the last several decades. It does not represent a failure of current local economic development policy or even a prediction for the future.

Local economic policy cannot be expected to have a significant impact on mortality and fertility rates in the population.

Looking within the overall number gives a brighter outlook for the region. Sectors such as manufacturing that export their products out of the region are much less affected by the size and composition of the local population. In fact, the long-term regional decline in manufacturing jobs stabilized - and even has shown some modest increases in the 1990s.

Future economic growth may better be predicted by employment in the construction sector, which grew at 5.5 percent last year and 6.3 percent the year before that. The job base that was geared toward our unique population has had the secondary effect of dampening employment on these nonservice-based parts of the economy.

Into the future, relatively fewer jobs will be needed in the service sector and more of the labor pool will be available for export oriented industries.

Economic forecasting is a tricky business, but some aspects of the future are easier to predict than others. The demographic shift described here seems unavoidable. Understanding the changes and altering local policy and programs is an even more difficult endeavor. This is especially true if the changes are large and rapid.

The region is no stranger to major changes in the local economy. When the steel industry began to slump, Pittsburgh was forced to survive what may be the highest concentration of job destruction in U.S. history. In many ways the local economy is stronger than ever with unemployment at its lowest level in decades.

This does not mean that there are not significant changes taking place within the local economy.

Public policy must not forget about the structural changes within the local economy even as the overall job market appears tighter than ever. Once there was a major need to train laid-off steelworkers to work in the service industries. Job training in the region will have to focus on the opposite problem very soon.

Public policy must always guard against solving yesterday's problems and instead look toward shaping the future.

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