The twilight of the US baby
boom generation is approaching, and with it deep, structural economic shifts
whose impact will be felt for decades to come.1New research from the McKinsey
Global Institute (MGI) shows that there is only one realistic way to prevent
aging boomers from experiencing a significant decline in their living standards
and becoming a multidecade drag on US and world economic growth. Boomers will
have to continue working beyond the traditional retirement age, and that will
require important changes in public policy, business practices, and personal
behavior. These adjustments have become even more urgent with the recent financial
turmoil, which has sharply reduced the home values and financial investments
of millions of boomers just as they approach retirement.
Underlying the need for
change is a reversal of trends that have been in operation since the 1960s.
For decades, boomers swelled the ranks of the US labor force, driving up economic
output as they earned and consumed more than any other generation in history.
Now, as the boomers age and retire, US labor force participation rates are declining.
Without an unexpected burst of productivity growth or a significant upsurge
in investment per worker, the aging boomers’…
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