Are Demographics Destiny? Contending with America's Looming Demographic Upheavals
Thursday, October 15, 2009
By: Susan Raymond, Ph.D. and Mary Beth Martin, Esq.

We are an aging nation. On August 18 of this year, the Bureau of Census released a report that the average life expectancy of Americans was at an all time high, 78 years. By 2015, one in every 5 Americans will be over the age of 65. By mid-century, the number of those over 65 will have tripled. However, the story of aging, and its implications for philanthropy, extends far beyond even these striking numbers.

First, the larger economic consequences are significant.  By 2025, nearly 80% of dependents will be elderly rather than children.  Elder dependency has three times the societal support costs of youth dependency. 

Second, personal costs will also rise.  In 1960, the average 65 year old could look forward to 13 more years of life.  Now, that has grown to an average of 20 years.  The conventional wisdom has been that this leaves the nation with a large group of elderly women.  This is no longer true.  Advances in health care, especially for cardiovascular disease and cancer, have resulted in a narrowing of the gap between male and female life expectancy at age 65.  The aged will be men as well as women.  In either event, these extra years are almost purely consumption years.  For example, per capita expenditures on health care in 2000 were just over $4,000.  By 2014 that is projected to rise markedly to $11,000.

Third, the children of those over age 80, referred to as the “oldest old,” will also still be alive, and they will be in or approaching their 60s.  They too will face not only the extended lives of their aged parents, but expectations for extended lives for themselves.  Resource concerns will escalate.

Finally, and perhaps most critical, is the change in the profile of adults in America.  The combined process of changed fertility patterns, immigration rates higher than any seen since the 1920s, and health care advances means that, by 2015, the absolute number of minority adults will be growing and the number of white adults will be falling.  Those who are entering their years of expanded philanthropy – ages 40 to 65 – will increasingly be minorities.  And they will be wealthy.  By 2015, the base of the top quintile of African American and Hispanic incomes will be nearly $150,000, 40% higher than today in inflation adjusted terms.

The implications for philanthropic planning are significant.  Conventional wisdom about widows being the primary source of planned giving must change, and strategies adjust accordingly.  Lengthy lives will affect perspectives about how much philanthropy is possible or advisable.  Retaining enough in principal assets to provide for a longer life expectancy may make adults hesitant to make long term or large commitments. 

The simultaneous long lives of the “oldest old” and their elderly children will mean that major philanthropic decisions may not be those of individuals but those of families.  The philanthropic “unit of analysis” traditionally described by such resources as Giving USA as “individuals” may not be so individual at all.  Communications will need to be with families.

Most strikingly, completely new strategies need to take account of ethnicity.  This involves culture, language and perspectives with regard to giving.  But it involves more than just money.  Nonprofits must begin to reflect the realities of the change in adult characteristics in America and the rise of ethnic wealth.  The profession of philanthropy itself needs to reflect these changes, and build a deeper understanding of culture.  This is an area of change in tremendous need of leadership.

Jack Welch opened his 2000 letter to GE shareholders saying, “It has long been our observation that, for any institutions whose external environment is changing faster than it is changing internally, the end is in sight.”  Philanthropic planning must take heed.

This is not a matter of hanging crepe.  It is a matter of developing aggressive and creative strategy, built on sophisticated understanding of the implications of demographic change.  Certainly, these economic times only underscore the need for such planning.

This is the Introduction to a Paper Being Presented at the National Conference on Philanthropic Planning in National Harbor, Maryland, on October 17, 2009. To download the full paper, click here.

About the Authors

Susan Raymond, PhD is Executive Vice President of Changing Our World, Inc., a leading national philanthropy and nonprofit consulting firm. Her newest book, Nonprofit Finance for Hard Times: Leadership Strategies When Economies Falter, will be published by Wiley and Sons in November 2009. Mary Beth Martin, Esq. is a Senior Managing Director at Changing Our World, where she has provided planned giving advice to numerous clients in addition to providing fundraising strategy and capital campaign oversight. She is co-editor and a major contributor to Mapping the New World of American Philanthropy, published by Wiley and Sons in March 2007. The authors can be contacted at sraymond@changingourworld.com and mmartin@changingourworld.com.