While disability rates among the older U.S. population have been constant over the past decade, disability rates among the working-age population have increased. Rising rates of disability with respect to mobility and related functions, combined with such secular changes as the dramatic increase in overweight and obesity among nonelderly and the tendency for underprivileged populations to drop out of school, suggest that future generations may fare less well than their predecessors. This may affect both the capacity of these future generations to participate in the workforce as they pass through middle age and beyond and also their need for personal care services as they get older.

1d. Quantify the effects of demographic change on state and local government budgets. The fiscal discussion in this report surveyed work to date on the effects of demographic change on state and local government budgets, but much remains to be done. In particular, future research should focus on the impact of demographic change on state and local expenditures for education and health services and on state and local tax revenues, as well as on accurate measurements of the future liabilities for pensions and health benefits for state and local workers (considerable work has been done on the pension side but not on retiree health benefits). Further, an analysis of the potential interactions between federal tax and entitlement policies and state budgets could be important to understanding the total impact of policy reforms: For example, would a delay in the full Social Security or Medicare retirement age have implications for state and local governments?

1e. Evaluate and extend measures and projections of disability/functional status described in this report and elsewhere. U.S. survey data suggest that declines in disability among older persons seen in the 1980s and 1990s have ceased during the past decade. These data generally focus on activities of daily living. Alternative conceptions of functional status sometimes suggest different results. Some researchers are questioning the use of chronological age as a basis for understanding health expectancy and people’s views of their own life prospects and have developed alternative measures that address concepts of old-age dependency and work potential. The committee believes the time is ripe for a broad evaluation of different approaches, with an eye to building on work described in this report.

WORK CAPACITY AND INCENTIVES FOR
A LONGER WORKING LIFE

2a. Examine what past relationships between health status, age, and economic incentives for continued work suggest about the likely path of labor



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