Productivity, GDP and Alzheimer’s

The disappointing 0.5% annual rate increase in our first quarter GDP confirms our dreary expectations for wage growth.  There are no good short term fixes and the most durable fix is education, a remedy that takes decades to bear fruit.  But, we may be ignoring a significant cause of our slipping productivity, namely the loss of highly productive workers to dementia (e.g. Alzheimer’s) or early retirement.

Significant job experience and advanced education can lead to better productivity in high skill and high knowledge occupations.  When aging but highly productive employees leave for medical reasons such as Alzheimer’s disease, employers feel the decrease in productivity because they are forced to replace the most experienced workers with less experienced workers.

In 2015, there were 5.4 million people diagnosed with Alzheimer’s disease in the US, and 5.2 million of them were aged 65 or older.  The average survival after diagnosis is 9 years.  When an aging worker experiences Alzheimer’s or another dementia, the symptoms start as mild memory and cognitive lapses, long before a confirming diagnosis is available.  Among patients who will eventually be diagnosed with Alzheimer’s 23% showed accelerated cognitive decline in the 5-6 years prior to being diagnosed.

This means that of the 600,000 who are newly diagnosed with Alzheimer’s yearly, about 138,000 could have been working for about 5 years with accelerated cognitive deficits.  The cognitive deficits may not be glaringly evident to co-workers and the patient may retire before a positive diagnosis.  But, during this period of pre-diagnosis, Alzheimer’s is likely degrading the productivity of the work group.  Because many seniors now prefer to remain in the workforce after age 65, Alzheimer’s is likely degrading the productivity of their work groups.  Alzheimer’s may not be a major explanation for the big drop in labor force productivity, but logically it makes a difference.

The average total wages for 138,000 people over 5 years at $50,000 per year would be $34.5 billion.  Assuming pre-Alzheimer’s disease reduces productivity for these people by 20%, the annual productivity “loss” would be $7 billion.

There is a substantial loss to the economy from being deprived of the productivity of seniors who would work in their post-65 years if it were not for Alzheimer’s.  There are 37.7 million people aged 65 or more who are “not in the labor force,” and there are 8.8 million over 65 who are in the labor force.  That means 13.8% of those over 65 want to be employed and don’t have Alzheimer’s.  That suggests Alzheimer’s has pushed 717,000 (14% of the 5.2 million with Alzheimer’s) from employment eligibility for an annual loss of $38 billion in income.

Aside from a decline in labor productivity centered on the afflicted worker, there are large social costs attributable to Alzheimer’s and borne by others.  In 2015, 16 million family members and friends provided 18.1 billion hours of unpaid care to those with Alzheimer’s and other dementias.  The care has an economic value of $221 billion.  Part of that total comes from the average of $15,000 in paid income foregone by those providing free care for the Alzheimer patient.  Another $236 billion per year is spent on paid medical and nursing care.  Much of that cost is borne by taxpayers.

Alzheimer’s imposes heartbreak and hard work on many families.  It also creates an economic drag on the economy of nearly a half trillion dollars each year, or 2.6% of our annual 2014 GDP.  This should justify a concerted effort to fund productive Alzheimer’s research – with federal funding where private sector funding is inadequate.