That issue is trivial to solve. We simply stop wasting so much labor. Labor has been cheap for a long time. That’s resulted in companies using it very inefficiently. Think of all those office workers that lose half their day to pointless unproductive meetings that could have been an email. Companies can only exist with such comically inefficient practices because labor is cheap.

Higher labor costs will encourage them to use labor more efficiently. The total economic output need not decrease. There will still be plenty of resources available to take care of the elderly. We’ll just stop wasting so much labor.