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The Gerontologist 43:897-903 (2003)
© 2003 The Gerontological Society of America

Economic Consequences of Retiree Concentrations: A Review of North American Studies

William J. Serow, PhD1

Correspondence: Address correspondence to William J. Serow, PhD, Professor of Economics, Center for Demography and Population Health, 603 Bellamy Building, The Florida State University, Tallahassee, FL 32306-2240. E-mail: serow{at}fsu.edu


    Abstract
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 Abstract
 Retirement as a Source...
 Analytical Strategies
 Special Cases
 Conclusions
 References
 
Purpose: The study of patterns of residential mobility among individuals around the age of retirement has led to the recognition that for many reasons—climate and cost of living being the most frequently cited—settlement patterns of comparatively affluent retirees will often differ from those of the working-age population. Increasingly, localities may often seek this type of relocation, on the theory that the newcomers will provide a boost to the local economy through expenditures and tax payments. In addition, there is often the perception that such a strategy will not cost the community much in the way of locally provided public services. The past several years have witnessed a substantial increase in efforts to provide some quantitative estimates on the magnitude of these hypothetical effects. Design and Methods: This article aims at providing a summary assessment of such analyses, incorporating research projects in both the United States and Canada. Results: Practically all such studies may be characterized as being exclusively short term in nature; that is, they focus more or less exclusively on the near-term implications of retiree inmigration, which do tend to be overwhelmingly positive from an economic or fiscal perspective. Implications: In general, this area of inquiry may be characterized by a paucity of knowledge regarding the longer term effects of such population movement. There has been no effort to analyze the aging in place of the erstwhile newcomers or the failure of the retirement migration process to generate other than a plethora of opportunities for comparatively low-skill, low-wage service employment. Policies intended to foster amenity migration as an economic development tool would greatly benefit from longer term analyses of the economic implications of the process.

Key Words: Amenity retirement • Migration • Economic development policies


The study of patterns of residential mobility among individuals near the time of their withdrawal from the labor force has led to the recognition that for many reasons—climate and cost of living being the most frequently cited—settlement patterns of comparatively affluent retirees will often differ from those of the working-age population. Increasingly, localities may promote this type of relocation on the theory that the newcomers will provide a boost to the local economy through expenditures and tax payments but will not cost the community much in the way of locally provided public services. This statement should not be construed to imply that all communities would welcome large numbers of retirees, however. Some of the concerns that have been raised include whether the number of prospective migrants would be large enough to make a real difference (Haas & Serow, 2002; Stallmann & Siegel, 1995); the sustained economic implications (Serow, 1990; 2001); and the social impact caused by new residents in otherwise traditional communities (Rowles & Watkins, 1993). There is also a fear that large numbers of newcomers might vote as a block in local referenda opposing tax increases earmarked for expenditures on education (Button, 1992; Deller & Walzer, 1993).

The past several years have witnessed a substantial increase in efforts to provide some quantitative estimates of the magnitude of the effects of retiree inmigration. This article aims at providing a summary assessment of such analyses, incorporating research results from the United States and Canada. In his fine review of the entire question of the spatial distribution and migration of older persons, Longino (2001) touched on the issue of economic impact but did not attempt quantitative comparisons across studies.


    Retirement as a Source of Economic Development
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 Abstract
 Retirement as a Source...
 Analytical Strategies
 Special Cases
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The concept of attracting retirees as a means of local economic development was introduced in the North American literature some 20 years ago (Aday & Miles, 1982; Summers & Hirschl, 1985). Over the past few years, attention to the phenomenon has become quite pronounced. Arguably, this is due to the growing awareness of the long-term trend toward population aging and more specifically of the incipient retirement of the post World War II "baby boom" generation. Despite the fears of some that population aging will bring about secular decline in local communities (Haas, 1990; Longino, 1988), more often the concept of a retirement community as a source of nonpolluting economic growth has been accepted. Examples of such thinking would include that of Cook (1990), Glasgow (1990), Fagan and Longino (1993), and Stallmann and Jones (1995). The United States Department of Agriculture (Reeder, 1998) recently issued a detailed monograph on the subject.

Although many researchers have studied the role played by retirement migration in increased service demands, few approach the question from a fiscal perspective. Lee (1980) seems to be among the first to have raised the issue, followed by Longino and Biggar (1982), Bryant and El-Attar (1984), and Glasgow (1995). Haas and Crandall (1988) considered specifically the crucial issue of demands for privately provided health care, whereas Joseph and Cloutier (1991) added a non–United States perspective in their consideration of elderly migration and their impact on service demand in rural Ontario. There has yet to be a comprehensive effort that integrates the analysis of this issue with a more fiscally oriented approach in order to ascertain the balance between positive and negative implications of retiree migration. Similarly, few studies consider how this balance might change over time.

More generally, the following observations have to be emphasized here. First, those who move at the age of retirement are usually, but not always, selective of those who are economically better off. A study by Shields, Stallmann, and Deller (1999) quantified the differences that might be expected to arise when there are real differences in the level of economic well-being among incoming retirees. Second, economic impacts at the local level depend heavily on the level of programmatic responsibility and fiscal authority possessed by the government in question. Both will vary widely within and across national settings. Third, economic impacts will vary with the time horizon of the analysis. The key issues here are the "aging in place" of retirees and the duration of the fiscal and employment responses to their initial arrival. In this context, Frey, Liaw, and Lin (2000) raised the issue of the potentially adverse effects on the original area of origin for elderly return migrants. This problem would be personified by an individual who leaves an area at the time of retirement, remains elsewhere for a while, and then returns to the original community after encountering adverse physical or fiscal circumstances. Understanding the magnitude and implications of this scenario would require extensive residential histories, which are typically unavailable from the census-type data that underlie much of the research on this topic.


    Analytical Strategies
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 Abstract
 Retirement as a Source...
 Analytical Strategies
 Special Cases
 Conclusions
 References
 
In order to assess the economic impact of retiree migration, choices have to be made regarding both the analytical tools to be used and the geopolitical level (neighborhood, community, state or province, and nation) for which the assessment will be made. As a general statement, the results are probably most meaningful for the smallest area that retains independent taxing authority. In my view, a meaningful assessment must include the impact of retirement migration on public revenues and expenditures as well as on consumption and employment-generating effects. Thus, studies of particular residential developments (Siegel & Leuthold, 1993; Woods, Miller, Voth, Song, & Jones, 1997) may fall short of demonstrating complete consequences for all affected areas. Studies for one (Deller, 1995; Sastry, 1992) or all states or provinces may do a fine job of capturing aggregate effects (Crown, 1988; Crown & Longino, 1991). However, they will not provide much insight at the community level, where, even in major retirement areas such as Florida or Arizona, there remains considerable interlocality variation.

An analysis of economic impact may use secondary data or may require the collection of primary data. Secondary data analysis, in turn, typically proceeds in one of two directions. Some studies observe aggregate relationships between elderly migration behavior and selected economic outcomes (income or employment growth, for example); others apply simulation techniques whereby input–output models are used to trace through the overall effects of assumed levels and distributions of retiree spending.

Examples of the former include Glasgow and Reeder's (1990) assessment of retirement migration across nonmetropolitan counties within the United States; Mullins and Rosentraub's (1992) regression analysis of the relationship between public expenditures and elderly migration into large American counties; and Day and Barlett's (2000) correlation analysis on the relationship between retirement to the Texas hill country and growth of employment in selected sectors. At a more local level is Li and MacLean's (1989) study of small towns in Saskatchewan; this study analyzed the impact of the entire older population, not merely inmigrating retirees. Simulation techniques have been used for the state of Maine by Deller (1995) and for three rural Wisconsin counties by Shields and colleagues (1999); Shields, Deller, and Stallmann (2001); and Stallmann, Deller, and Shields (1999).

The latter two groups made an important contribution by differentiating between wealthier and poorer retirees and younger and older retirees, respectively. In both cases it was the authors' implicit intent to develop a proxy for the aging in place of inmigrants to the community: "[f]rom a modelling perspective, this comparison is akin to examining the difference between those retirees who might in-migrate to a region (rich) and those who age in place (poor)" (Shields et al., 1999, p. 185). Although the simulation results did not support the concern that the phenomenon of aging in place may carry with it a transition in the direction of net economic impact of inmigrants, Stallmann and colleagues (1999) concluded their paper with the observation that "(t)he young-old may provide a larger positive fiscal impact for the community than the old-old" (p. 609). For a more definitive answer to this question to be provided, longitudinal data following a cohort of one-time migrants as they age are needed.

The collection of such primary data can be an elaborate, costly, and time-consuming exercise. The data collected can more readily be directly related to actual locally felt economic impact, but there are always the problems of sampling variability and respondent and sampling bias. Completed analyses by Bennett (1993, 1996) study the economic effects of a random sample of newly arrived residents in several areas along the southeast Atlantic coast in the United States. Serow and Haas (1992) studied the economic impact of a self-selected group of retiree migrants in the mountains of North Carolina, whereas Hodge (1991) collected data from random samples of retirees (not entirely migratory) in three communities in British Columbia. Both of the latter two studies included multiplier analyses to determine both direct and induced consequences of expenditures, including the number of jobs (directly and indirectly) resulting from the behavior of these older consumers. Comparative data from these and several of the simulation studies are summarized in Table 1.


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Table 1. Comparative Results From Empirical Estimates of the Economic Impact of Retirement Migration.

 
Although researchers have some data on the number of jobs that might be created as a result of migrant expenditures, they have no real information about the characteristics of these jobs. The studies by both Sastry and Deller included considerable industrial detail as to the induced employment effects of elderly migration, whereas Serow and Haas related employment to consumption sectors. The methods used showed employment by industry, not occupation, and there is no real way to evaluate the impact of retiree migration as a source of local economic development relative to (for example) attracting an automobile assembly plant.

There is actually considerable congruity across studies in terms of the number of jobs generated by inmigrating retirees (roughly one-half job per inmigrant, regardless of level of analysis or methodological technique). The simulation by Deller at the state level, the simulations by Stallmann and colleagues and Shields and colleagues at the county level, Sastry's input–output analysis of secondary data at the state level, and Serow and Haas' input–output analysis of primary data at the local level show the number of jobs per person to range from 0.58 to 0.34.

Estimates of expenditures per person among inmigrants are also relatively equal, even when differences in methodology are allowed for. The Bennett and the Serow–Haas analyses showed estimated expenditures of approximately $35,000–40,000 per household, with approximately a third being attributable to a (one-time) housing purchase. Net of housing, this amount is slightly greater than Hodge's finding of total economic impact of $14,400 (Canadian) per person (roughly $10,000 U.S. at current exchange rates) but somewhat less than Sastry's estimate of more than $30,000. Because Hodge's Canadian sample includes all retirees, not merely inmigrants, the high degree of economic selectivity present in the Bennett and Serow–Haas samples is lacking. The primary data supporting these studies were collected from the late 1980s to the early 1990s. Therefore, changes in living costs over time are not of any real concern. More important is the difference in place of analysis, especially when one is comparing Hodge's results for western Canada with those of Bennett or of Serow and Haas, which deal with (different) localities in the southeastern United States.

The Sastry results are based on his assumptions of consumer behavior derived from the 1972–1973 Consumer Expenditure Survey (CES), rather than the direct collection of data common to the other three studies. Items such as taxes and social insurance payments, found in the CES but not in the Bennett and Serow–Haas studies, will account for at least some of the excess of Sastry's estimates over those of the other analysts.

The Serow–Haas study makes a unique contribution in ascertaining the extent to which retirees bring bank and brokerage accounts into their new community. However, their sample is highly skewed toward well-educated and relatively affluent persons (more than 60% were college graduates; Haas & Serow, 1993, p. 213), and it is particularly difficult to generalize from this aspect of their study. This research also captures estimates of the gross and net fiscal impact of elderly migration, which is a feature shared by the simulation studies of Stallmann and colleagues and Shields and colleagues but with none of the other work involving actual observation. These studies all conclude that, at the margin, older newcomers to a community pay more in taxes (directly and indirectly) than they cost in terms of additional service demand. In the simulation work, the net margin of revenue enhancement varies according to the assumed characteristics of the inmigrants. As would be expected, those scenarios in which the retirees are comparatively affluent and young produce much more favorable outcomes.


    Special Cases
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 Abstract
 Retirement as a Source...
 Analytical Strategies
 Special Cases
 Conclusions
 References
 
There is some literature that finds highly concentrated streams of older migrants specific to both place of origin and place of destination (Longino, 1995, chap. 5). There is another form of concentration that is also noteworthy, at least in the U.S. context, and that is the tendency of retirees from the armed forces to congregate near existing military hospitals, because medical care will be provided to them by these facilities. In a short study, Fagan and Reeder (1996) collected data from a sample of these retirees (who tend to be both young and relatively affluent) in Alabama and demonstrated the general nature of their economic impact on a local community, in the context of the community's potential economic loss if the military base in question (and its hospital) were to close.

In addition to these studies of permanent retiree residents who have moved into a community, there also exists a smaller body of literature on the economic impact of seasonal residents. Because conventional data sources (census and representative surveys) in North America usually fail to measure this phenomenon (Hogan & Steinnes, 1993), it has been necessary to collect primary data in order to ascertain the economic consequences of this type of mobility. Most of the research in the United States has been done for Arizona by a research team at Arizona State University (Happel, Hogan, & Pflanz, 1988; Sullivan, 1985). Extensive research has also been done for the case of Canadians who are winter residents in the more salubrious climate of south Florida. Among the many studies of this phenomenon, one by Marshall and Tucker (1990) dealt explicitly with the economic contributions to the Florida economy of seasonal residents whose usual place of residence is Canada. Although it is by no means uncommon that individuals who are seasonal residents of a locality will ultimately become permanent residents (Cuba, 1989; Haas & Serow, 1993), it is most unlikely that such a transition would occur in this case. Because of the differences in the system of health insurance operative in Canada and the United States, it would be foolish for older Canadians to renounce their access to health care in Canada by remaining south of the border for more than 6 months per year.


    Conclusions
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 Abstract
 Retirement as a Source...
 Analytical Strategies
 Special Cases
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 References
 
The basic demography of both the United States and Canada (as well, of course, of all other industrialized nations) suggests that the number of so-called amenity retirement migrants may well rise sharply within the next 5 to 10 years. This is simply the consequence of the attainment of the conventional age of retirement by the post World War II baby boom. There has been considerable attention paid to this phenomenon in the context of attracting these retirees as a mechanism for stimulating economic growth. State and local entities are now actively promoting retirement as an ideal policy tool for this purpose. Very recently, Florida's Governor, Jeb Bush, appointed a Destination Florida Commission whose task was "to evaluate Florida's competitive position in attracting retirees and to recommend ways to make Florida more retiree friendly" (Florida Department of Elder Affairs, 2003, p. 1) Among the Commission's conclusions are that "Florida has to approach retirement migration as an ongoing high priority economic development strategy" (p. 56). The results summarized here do not necessarily negate such a conclusion, but some caution might be in order. Particular attention has to be paid to our paucity of knowledge regarding the longer term effects of retiree migration, regardless of where it may occur. We know practically nothing of the consequences of the aging in place of the erstwhile newcomers. More generally, the lack of understanding of potentially adverse consequences suggests that, from a policy perspective, a strategy of attracting retirees as an economic development tool must be a long-term commitment, simply in order to ensure a continual replenishment of the supply of comparatively young, healthy, and affluent retirees.

From research perspective, a clear priority must be the development of some sort of longitudinal study that will follow over time the effects of retiree migration to specific destinations. It is unlikely that any existing data set would prove adequate to the task. Longitudinal data such as those from the Health and Retirement Survey, the Panel Study of Income Dynamics, or the National Longitudinal Survey are nationally representative in nature and could not provide a large enough sample size to conduct meaningful analysis at the local level. The Health and Retirement Survey does contain an "oversample" of older Floridians, so that some meaningful analysis could possibly be undertaken at the state level in this case, although it is at the municipal and county level where economic changes will be felt most clearly.

An analysis of aggregate data, such as that from the decennial census, could provide some insight by analyzing economic and demographic changes over time for carefully selected counties with a known history of retirement migration, and by comparing these changes with those observed for initially similar counties without substantial migration. A case study could be done for Flagler County, Florida, for instance. In this county there is a pronounced and recent pattern of retirement inmigration; there are many small rural counties elsewhere in the southeast that could serve as a basis for comparison. Although such an exercise would add to our knowledge of the economic impact of retirement migration, it would remain imperfect. Ecological analyses such as intercensal comparisons of demographic and economic change do not allow the categorization of observed economic outcomes between those arising from retirees and those resulting from other sources of economic change.

It is important at this juncture to distinguish between economic effects at the local level and those at the national level. Analyses of the impact of population aging on social security and other pension systems and the provision of paying for health care have proliferated in recent years. By and large, these are not issues relevant at the level of local government at all. Health care is relevant at the state or province level, involving Medicaid funding in the United States and the health insurance system in Canada. It has been useful in many national level studies to conduct straightforward dependency or labor-force-to-population ratio analyses as a means of seeing the size and, depending on context, relative costs of the "dependent" or nonworking population. Such a strategy could also be useful at the local level, particularly if there were a means of separating public and private costs. Ultimately, though, there is no way of providing a universal answer because the degree to which such costs are sustainable depends on the taxing authority of the affected government and the extent of the economic growth that would occur there.


    Footnotes
 
1 Center for Demography and Population Health, The Florida State University, Tallahassee. Back

Decision Editor: Linda S. Noelker, PhD

Received for publication February 26, 2003. Accepted for publication May 13, 2003.


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