LONDON (Financial Times),
January 23, 2008:
The world's population is ageing and almost everywhere that is seen as a problem not an opportunity.
The issue is well defined. The combination of falling fertility rates and rapidly rising longevity is changing the shape of the world's population, producing spectacular changes in the dependency ratio - the number of workers per retiree.
Ageing Holy Man in Modern India.AP Photo
In 1950, the number of people aged over 60 in the world was around 200m or 8 per cent of the world's population, according to United Nations statistics. Currently it is around 700m or 11 per cent. By 2050 it is projected to be over 2bn, or more than 22 per cent, and in some countries the proportion will be appreciably higher. And it is not just that the numbers of what the demographers still tend to classify as the elderly will grow, but the numbers of "old old" - those over 80 - will grow even faster proportionately.
The numbers are dizzying, and the decline in support ratios dramatic - from four, five, six or more workers per pensioner in recent years to two to one or even three to two in some countries.
Elderly French lady checks e-mail. Copyright photo.Developed countries, in the main, are facing this first. But developing countries too are ageing and on current trends will make the transition far faster but with less well-developed infrastructures to support pensions, health and social care in place. Among the extreme examples is China, where its one-child policy, combined with rapidly rising life expectancy, is expected to see the proportion of adults over 65 rise from a mere 5 per cent in 1950 to 25 per cent by 2050.
It has been said that China, for all its rapid development, may grow old before it gets rich - facing the so-called 4-2-1 problem where a lone child, in a country where long-term care has traditionally been provided by the family, risks being responsible for two parents and perhaps four grandparents. Many developed countries face a less extreme version of the same thing, with the likelihood of four, five, or even at the extreme six generation families being alive at the same time, putting a big pressure on those in the middle who will find themselves dividing their time between - and possibly being at least in part responsible for - children and grandchildren and parents and grandparents.
Ban-Hua-Tapan, Thailand. Photo: GAA.
But the sense that all this may be insuperable - producing poorer pensioners, poorer productivity and lower economic growth along with uncontrollably mounting health and social care bills - relies on the assumption that nothing changes. And things are changing, albeit often slowly, and sometimes painfully.
In many OECD countries, state pension ages are slowly creeping upwards to make pensions more affordable. A small but growing number of countries are legislating to push state pension age up from 65 to 67 or even 68, and for both men and women. The mantra coined by Lord Turner in his recent report on UK pensions that people either have to pay more tax, save more or work longer - and probably a combination of the three - is beginning to be taken to heart.
Working longer, of course, poses huge challenges for society and companies. Final salary pension schemes, where they remain, need ideally to be converted to "career average" ones, so that people can take a less senior job as they get older without that having a big effect on their pension. Companies will no longer tend to be led by their older, more senior employees - a change already visible. Employees will need to feel they can take a less senior job as they age without any loss of respect - overturning decades of social conditioning. People will also need to be able to claim a pension, or part-pension, and work on, perhaps part-time.
Healthy Afghan woman makes a picture of graceful ageing. Photo: GAA.Will they be fit enough? The encouraging answer is: "almost certainly". It is not just that for many people - to coin a US phrase - "60 is the new 55". It is better than that.
Studies tend to show that people self-report higher levels of disability than they used to. But this may be the result of rising expectations - that people now expect to be able to play pain-free sport at much older ages. More medically based studies show levels of disability declining, generation by generation, so that on average - and "on average" is an important qualifier - people are living longer and fitter, not longer and sicker.
Evidence from studies in the US, the UK, the Netherlands, and elsewhere, also suggests that the chief component of the cost of health care in old age is the cost of care in the last six months or year of life - more or less regardless of the age people die. In other words, it is the cost of dying. So while ageing populations will push up the demand for healthcare in terms of replacement joints, cataracts and the like, the increased costs may not be as catastrophic as feared.
Pressured by life: English 'Oldie' Lady. Photo: The Times, London.
Some key medical breakthroughs - an effective treatment for Alzheimer's - could also transform cost projections while having a huge impact on the costs of social care, the least well-defined and understood of the three spending challenges that an ageing society brings.
Older man from Ethiopia's Omo River Valley.
Photo: GAA.
Governments fight to encourage people to change their behaviour. If there is to be a fit and happy society, it is a fight worth having.
By Nicholas Timmins
Public Policy Editor.
Copyright:
The Financial Times Limited 2008
