The Composition of Income is Changing as the Population Ages

It is becoming increasingly understood by most people that the U.S. population is aging and that this has very real implications – health care needs are rising, housing needs are changing, school age populations are shrinking, etc. This aging process is also directly impacting the composition and make-up of personal income. For most of this nation’s history, most of the income received by people and families to use for everything they buy came from their employment. However, today more and more areas are receiving as much income from non-employment sources, such as from investments, Social Security and Medicare and Medicaid benefits, as they receive from employment sources, i.e., wage and salary earnings. Areas in dark black in the maps below receive as much or more of their personal income from non-employment sources as from workplace earnings. And there is a heavy concentration of these places in the northern Rockies.

This phenomena – area income bases shifting away from heavy reliance on employment earnings to non-employment sources of income – will become even more widespread over the course of the next ten to fifteen years as baby boomers increasingly retire. And most of this is ahead of us since the oldest of baby boomers reached 60 years of age this year. The series of maps at the top show the steady shift of income from employment sources to non-employment sources among U.S. counties. And the series of maps at the bottom show the steady pattern of aging across the U.S. as measured by the percent of the population 65 years of age and older. It is very possible that within ten to fifteen years, at least half of all counties in the U.S. will have incomes primarily supported by sources other than local area employment.

For many households and areas, this rising dependence on non-employment income will take the form of increased dependence on personal savings (whatever there is of these) and Social Security – that program that you and everyone else pay into each year while you work, assuring you and your family of having at least a minimal income to live off of after retirement. Administrations and congressional representatives in Washington, past and present, have been spending surplus payments into the Social Security trust fund as “cash” to be used for operating expenses – like fighting wars, reconstructing hurricane-ripped communities, educating our youth, and paving our highways – and substituting for these surplus funds “I.O.U.s” or treasury bonds. The wisdom of this “money management” will become much clearer as more people and communities increase their need for and dependence on those hard-earned retirement savings.

- Larry Swanson, O'Connor Center for the Rocky Mountain West