Question

Demography can have important economic effects. The United States has an aging population. Explain one economic benefit and one economic cost of an aging population as well as of a population that is very young.

Short answer

An aging population, with a larger proportion of people over 65, economically benefits from increased healthcare spending, stimulating the growth of related industries. However, it strains social security and Medicare systems as the financial responsibility falls on a smaller working-age population. A very young population, with a larger proportion of people under 18, provides the benefit of a large future labor force, thus increasing economic output and resources for public investment. The cost associated with a very young population is the increased demand for education, healthcare, and other services, which can strain government budgets and necessitate job creation to accommodate the future labor force.

Step-by-step solution

Define Aging Population and Very Young Population

In the context of demography, an aging population refers to a society with a larger proportion of older people (typically over the age of 65), whereas a very young population refers to a society with a larger proportion of younger people (typically under the age of 18).

Economic Benefit of an Aging Population

One economic benefit of an aging population is the increase in consumer spending on healthcare, assisted living, and other related industries. Older people often have more health-related needs and are typically willing to spend on high-quality healthcare services, which can contribute to the growth of these industries and overall economic development.

Economic Cost of an Aging Population

One economic cost of an aging population is the increased financial strain on social security and Medicare systems. As older people leave the workforce and start receiving benefits and healthcare services, the financial responsibility of supporting these systems falls on a smaller working-age population, which can lead to higher taxes and/or reduced benefits and services.

Economic Benefit of a Very Young Population

One economic benefit of a very young population is a large future labor force. As this young generation enters the workforce in the coming years, they will contribute to the economy by working, paying taxes, and supporting social services such as education, healthcare, and public infrastructure. This can lead to a more prosperous society with greater economic output and resources available for public investment.

Economic Cost of a Very Young Population

One economic cost of a very young population is the increased demand for education, healthcare, and other related services. A large number of young people results in higher demand for public resources and services such as schools, healthcare facilities, and housing, which can strain government budgets and lead to increased public spending and/or taxes. Additionally, it becomes increasingly important for the economy to create sufficient job opportunities for this young population once they enter the labor market.