Market Data
California Faces ‘Unprecedented’ Population Shift
By 2040, California is set to experience a dramatic demographic shift, with the older adult population (65 years and over) projected to increase by 59 percent, from 5.7 million to just over 9 million, according to a report by the Public Policy Institute of California (PPIC) published on January 31. This rapid growth will mean that nearly one-quarter (22 percent) of Californians will be 65 or older, a significant increase from the 14 percent recorded in 2020. Meanwhile, the working-age population (20-64 years old) will remain relatively stable, increasing by only 3 percent, and the child population (0-17 years old) will shrink by 24 percent, with the 10-14 years old age range facing the largest decrease, shrinking by 29 percent. Conversely, the population of those 90 and above will surge by 138 percent.
Why It Matters
This demographic shift is not just a statistical change; it has profound economic and political implications for California. A growing older adult population could result in a smaller workforce, potentially leading to labor shortages and increased competition for jobs. The economic burden on the younger working population will also grow, as they will bear the responsibility of supporting a larger number of retirees. Additionally, the demand for health care services will rise, requiring more investment in health care infrastructure and personnel. Politically, the aging population could shift California further to the right, as older adults are more likely to lean towards the Republican Party. This trend was evident in the 2024 election, where California, along with New York, saw the largest swing towards the Republicans, moving 12 percentage points towards Trump compared to 2020. Debates around immigration levels are likely to intensify as the state seeks to balance its demographic needs.
A More Diverse Aging Population
The aging population in California will also become more diverse, with no single racial or ethnic group forming a majority by 2040. The report projects that Latino and Asian older adults will make up 23.9 percent and 20.1 percent of the population, respectively, up from 18.6 percent and 17.1 percent in 2020. A significant portion—60 percent of Latinos and 85 percent of Asians—of these groups will be foreign-born, with about 75 percent expected to speak a language other than English at home. This reflects the substantial increase in immigrants from Latin America and Asia to the state in the 1980s. The growing diversity among older adults will require tailored approaches to health care, social services, and community engagement, ensuring that these populations have access to culturally and linguistically appropriate support.
Economic Disparities and Housing Challenges
Despite slight improvements, economic disparities among older adults are expected to persist. The share of older adults living below twice the federal poverty level is projected to drop from 24 percent in 2000 to 22 percent in 2040. However, due to overall population growth, the number of low-income seniors will rise by approximately 600,000. Labor force participation among those in the 65 to 74 age group is expected to increase, particularly among less-educated workers, likely due to financial necessity. Housing will be another critical issue. While 70 percent of older Californians are expected to be homeowners—only slightly down from 73 percent in 2020—those who rent may face significant financial burdens. With rising housing costs, the 30 percent of seniors projected to be renters could struggle with affordability, posing challenges for stable housing as they age.
Expert Opinions
The report’s findings are underscored by insights from leading demographers. Dowell Myers, Professor of Policy, Planning, and Demography at the University of Southern California, emphasized the need for comprehensive preparation: "Important to note that all those older Californians already live here today. We need to help prepare them for their future lives. That starts with also preparing today’s school children who will be the workers and tax payers of the future. We are going to strongly need those economic supporters to be at their highest capacity but that depends on the investments we make today! Californians all need to pull together for a better future for all." William Frey, demographer and senior fellow at the Brookings Institute, added, "California will be on the forefront, demographically, in learning how to deal with a growing diverse aging population. More so than other states, its current working-age population is much more diverse than the rest of the country, allowing it to work with this population to plan for assistance in their older years. Already the state is much better positioned to deal with the health and social services of this population which should put it in a good position to address its needs as it becomes older. In some ways, it can be a model for other parts of the country in dealing with diverse populations of seniors."
What Happens Next
California is expected to continue growing by millions in the coming decades and continue getting older. This will increase demand for critical infrastructure and public services such as education, housing, transportation, water, health care, and social welfare. The California Department of Aging projects that the state’s older adult population will reach 11.4 million—about 28 percent of the total population—by 2040. Addressing the needs of this aging population will require significant investments in health care, social services, and infrastructure. The future of immigration to the state and the nation will also play a crucial role in mitigating the economic and demographic challenges. By proactively planning and investing in the well-being of its diverse older adult population, California can set a positive example for other states facing similar demographic transitions.
