Why Population Aging Matters: A Global Perspective

- People are living longer and in some places healthier lives

o Crown achievement but also a significant challenge
- Societal aging may affect economic growth, sustainability of families, the ability of states
and communities to provide resources for older citizens, and international relation
- Global Burden of Disease predicts a very large increase in disability caused by increases
in age-related chronic diseases in all regions of the world
- Loss of health and life worldwide will be greater from non-communicable or chronic
disease than from infectious diseases, childhood diseases and accidents
- Significance of population aging and its global implication have yet to be fully
appreciated
- Preparing financially for longer lives and finding ways to reduce aging-related disability
should become national and global priorities
- Critical to address problems sooner rather than later
- Waiting significantly increases the costs and difficulties of address these challenges
Our Aging World
- In 2006 almost 500 million people worldwide were 65 and older
- By 2030 it is projected to increase to 1 billion
o 1 in every 8 people will be 65 and over
- Most rapid increases in the 65-and-older population is occurring in developing countries
which will see a jump of 140% by 2030
A Host of Challenges:
- Population aging strains social insurance and pension systems and challenges existing
models of social support
- Affects economic growth, trade, migration, disease patterns and prevalence and
fundamental assumption about growing older
- Challenges and opportunities that clearly show why population aging matters:
o For the first time in human history and probably for the rest of human history,
people age 65 and over will outnumber children under 5
o Life expectancy is increasing even in developing countries they show a steady
increase in longevity over time
o The number of oldest old is rising
 Age 85 and over are now the fastest growing portion of many national
populations
o Noncommunicable diseases are becoming a growing burden
 Chronic diseases are now a major cause of death among older people in
both more developed and less developed countries
o Some population will shrink in the next few decades
 World population is aging at an unpredictable rate the total population in
some countries is also declining
o Family structure is changing
 People live longer and have fewer children there are less people to look
after them when older
o Shrinking ratios of workers to pensioners and people spending larger portions of
their lives in retirement increasingly strains existing health and pension systems
 Shift in patter of work and retirement
 o Social insurance systems are evolving
 Increasing number of countries are evaluating the sustainability of these
systems
o Aging population will have a dramatic effect on social entitlement programs,
labour supple, trade, and savings around the world and may demand new fiscal
approaches to accommodate a changing world
- A window of opportunity
o Some governments have begun to plan but most haven’t
o Europe currently has 4 people of working age for every elderly person it will only
have 2 workers by 2050
o Share of gross domestic product devoted to social insurance for older people is
expected to more than double in upcoming years
o Opportunities for economic expansion and cross-national collaborations
The Cost of Waiting:
- People living longer and healthier than ever before represents the triumph of public
health, medical advancement and economic development over disease and injury which
have constrained human life expectancy for 1000’s of years
- Nations must quickly recognize the scope of the new demographic reality and adjust
current policies accordingly
- Changes in retirement ages and medical benefits are not widely popular
- Easier to address problems sooner rather than later
- At individual level people need to focus on preventive health and financial preparedness
o Many approach older ages with little or no savings
- Small and gradual changes distributed over a longer time horizon are more easily
absorbed by a country than sudden and more substantial actions required to meet a
particular savings target over a shorter time horizon
- GDP growth rates are projected to fall cross the EU and the potential EU GDP growth
rate will be cut in half with 2030 if changes are not made
- Some countries have initiated changes in retirement age that promise to ease the burden
of public spending
o Those changes alone are not enough
- Similar to the impact of an individual worker delaying savings delays at national level
will increase the costs of adjustment and shift an enormous economic burden to the next
generation of workers and taxpayers
Trend 1: An Aging Population
- Since the beginning of human history young children have outnumbered older people
o This will change very soon
o People over 65 now outnumber children under 5
o 500 million people are 65 or older which is 8% of world population
- By 2030 the world is likely to have 1 billion older people, 13% of population
- Proportions of older people are highest in developed countries the rapid increase is larger
in developing countries
- 2006-2030 the number of older people in less developed countries is projected to increase
by 140% as compared to 51% in developed countries
- Population aging is driven by declines in fertility levels and increased health and
longevity
 - Declines in fertility began in early 1900’s and is now below the population replacement
rate of 2 live births per women
- Last 20 years the pace of fertility decline has been large in developing countries
- Most of the more developed nations have had decades to adjust to this change in age
structure but less developed countries are experiencing rapid increases in the number and
percent of older people
o Often within a single generation
- Compression of aging institutions must adapt quickly to accommodate a new age
structure
o Less developed countries will be forced to confront issues like social support and
the allocation of resources across generation without accompanying economic
growth that characterizes the aging societies in the West world
 Some countries may grow old before they grow rich
Trend 2: Increasing Life Expectancy
- Life expectancy at birth in Japan is now around 82 the highest level among the world’s
more developed countries where it is 79
- Less developed countries have experienced a steady increase in life expectancy since
WWII
o Expect Latin American and Africa due to the AIDs epidemic
- Most dramatic gains have occurred in East Asia
o In 1950 life expectancy at birth was 45 and now it’s more than 73
- Changes in life expectancy are characterized by a set of changes:
o A shift from high to low fertility
o A steady increase in life expectancy at birth and at older ages
o A shift from the predominance of infectious and parasitic diseases to the growing
impact of Noncommunicable diseases and chronic conditions
- Health transition shifts the human survival curve so that the chances of surviving another
year are higher at every age
o Early nonindustrial societies the risk of death was high at every age and only a
small number of people lives to old age
o Modern survival curve for industrialized societies most people live past middle
age and deaths are highly concentrated at older ages
- Notion that life expectancy must be approaching a limit but study showed that female life
expectancies from 1840 to 2000 show a steady increase of 3 months per year
- Sweden use to have the highest average life expectancy but today it is Japan
- HIV and obesity may temper expectation for continued increase in longevity some factors
encourage a more optimistic outlook:
o Studies showing that death rates at very old ages level off or decline
o The explosion in the number of centenarians worldwide
o The finding that even at older ages mortality rates are malleable and amenable to
social interventions
o Evidence that medical advances and new drugs are increasing life expectancy
- Research shows that gene insertion, caloric restriction and diet can increase lifespan in
animals
Trend 3: Rising Numbers of the Oldest Old:
- Progressive aging of the older population itself
 - More older people survive to even more advanced ages
- Oldest people are those 85 and over and have the highest population levels of disability
that require long-term care because of chronic disease
o Consume public resources discrepantly as well
- Growth of the oldest old population has a number of implications:
o Pensions and retirement income will need to cover a longer period of time
o Health care costs will rise even if disability rates decline somewhat
o Intergenerational relationships will take on an added dimension as the number of
grandparents and great-grandparents increase
o The number of centenarians will grow significantly for the first time in history
- Oldest old constitute 7% of the worlds 65 and over population
o 10% in more developed and 5% in less developed countries
- More than 50% of the world’s oldest old live in 6 countries
o China, Japan, US, India, Germany, Russia
- On global level the 85 and over are projected to increase more than the 65 and over
population and under 65
o Studies underestimate the decrease in mortality rates
- Percentage of the oldest old varies from country to country
o In US the % today will not differ much in 2030 because of the aging baby boom
generation
o In Europe some countries will see steady increase and others will see increase
then decline
- Most striking increase will be in Japan by 2030 they will make up 24% of the population
- Most less developed countries should experience modest long term increases in their 85-
and-over population
- Four-generation families become more common
o Great-grandparent boom
o Working adults face stress of supporting both children and parents at same time
possibly
- Centenarians make up a small portion of total population but their numbers are growing
o Number of people age 100 and over has doubled each decade since 1950 in more
developed countries
o Projected to quadruple between 2005 and 2030
o Odds of living from birth to age 100 may have risen from 1 in 20 million to 1 in
50 for females in low mortality nations like Japan and Sweden
Trend 4: Growing Burden of Noncommunicable Diseases:
- In the next 10 -15 years the loss of health and life in every region of the world (including
Africa) will be greater from Noncommunicable diseases like heart disease, cancer and
diabetes than from infectious and parasitic diseases
o Represents a shift in disease epidemiology that has become the focus of
increasing attention in light of global aging
- Myth that noncommunicable diseases are diseases of affluence is dispelled by the results
of the Global Burden of Disease project
 o In 2002 the project estimates noncommunicable diseases accounted for 85% of
the burden of disease in high income countries and 44% in low and middle
income countries
- Noncommunicable diseases already account for as much of the burden of disease in low
and middle income countries as all communicable diseases, maternal and perinatal
conditions and nutritional conditions
o By 2030 it will reach 54% communicable will fall to 32%
- In the older population noncommunicable diseases account for 87% of the burden in low,
middle and high income countries
o Struggle for low and middle income nations is how to allocate resources to
address noncommunicable diseases when also dealing with communication
diseases
- Compression of morbidity
o A decrease in the prevalence of disability as life expectancy increases
- Expansion of morbidity
o An increase in the prevalence of disability as life expectancy increases
- Advances in medicine are believed to slow down the progression from chronic disease to
disability
o Decrease in the prevalence of severe disability but an increase in milder chronic
diseases
- Three patterns of disability trends among older people over the past 5-10 years:
o A reduction in severe disability rates in Denmark, Finland, Italy, The Netherlands,
US
o Stable rates, even as population ages in Australia, Canada, and France
o An increase in severe disability rates in Belgium, Japan, Sweden
Trend 5: Aging and Population Decline:
- Global population is aging at an unprecedented rate
- Some countries are witnessing a historically unprecedented demographic phenomenon of
simultaneous population aging and population decline
- More than 20 countries are expected to experience population declines
o Russia is supposed to shrink by 13 million by 2030
o Japan’s population is expected to decrease by 11 million overall but aging
population will increase by 8 million between 2006 and 2030
- Population declines in developed countries are the result of mostly decreased fertility
rates
o Russia and Japan both have low fertility below the rate needed to replenish the
population
- In less developed countries like South Africa population is expected to decrease due to
HIV
- Policy makers need to pay close attention to the age-specific changes in the population
o Russia will more likely need to spend more money on health care than schools in
the future
- Working-age population contributes to the economic growth and pension system is
shrinking and older population is growing
 o Economic expansion could be hampered and businesses struggle to attract new
workers
- Shift in age structure of population is expected in a lot of developed countries even if the
population is not expected to decrease
o UK and France will both experience population increases from 2006 to 2030 but
their age structure will be the same pattern as Russia
 Non-workers outnumbering workers
Trend 6: Changing Family Structure:
- Changes in family structure has important implications for the care of the older
population as people are having fewer children and living longer
- Future generations will have fewer if any siblings
- As life expectancy increases so does the odds of having different generation within a
family coexisting
- Beanpole family
o Vertical expansion of family structure characterized by an increase in the number
of living generation within a lineage and a decrease in the number of people
within each generation
o More people in their 50s and 60s will have living parents and more children will
have their great grandparents
- Among baby boom generation in the West the family unit may take a variety of shapes
o Reflects higher rates of divorce, remarriage, blended and step-family relations
o More women waiting until 30s and 40s to have children or remain childless
- People currently divorced constitute a small portion of the older population
o This will change as younger populations with higher rates of the divorce and
separation age
o Non married women are less likely than non-married men to have accumulated
assets and pension wealth for use in older age
o Non married men are less likely to form and maintain supportive social networks
- In modern societies around 20% of women do not give birth and percent is rising in
Europe and North America, Latin America, Southeast Asia
- In Europe 1/3 of adult women intend to remain childless or are uncertain about having
children
- Older people’s living arrangements reflect their need for family, community or
institutional support
o Also indicate sociocultural preferences
- Number and percent of older people choosing to live along is rising in most countries
- Even in societies with strong traditions of older parents living with children like Japan
traditional living arrangements are becoming less common
- In the past living alone as an older person was associated with social isolation and family
abandonment but now they prefer to live along in their own homes and communities
o Reinforced by greater longevity, expanded social benefits, increased home
ownership, elder-friendly housing, and community care
- Multigenerational homes decreasing in more developed countries they are still the norm
in most less developed countries
o Unmarried women or widows without children can have little support and
nowhere to live if extended family will not take them in
 o Number of AIDS deaths in parts of Africa may leave many orphans living with
grandparents and being supported by them
- Long term care for older people has become a key issue in the West and also in many less
developed middle income countries
o Home nursing, community care and assisted living, residential care, long-stay
hospitals
- Cost of long-term care is a burden to families and society
o Staffing needs for aging population has increased the migration for health workers
from lower income to higher income countries
Trend 7: Shifting Patterns of Work and Retirement:
- In western democracies, eastern Europe’s transitional economies and much of the less
developed world policy makers struggle with the balance between public and private
income security systems
- Prominent economic concerns in out aging world is the shrinking of the workforce
relative to the number of pensioners
o Ratio declines as people live longer and participation in the work force falls
- Mid 1950s-1980s workforce participation among older men declined in most of the more
developed nations but trend reversed in the 1990s
- Women in more developed countries have a steady increase in the workforce
participation at older ages in the past 2 decades
- Less developed countries
o Rates decrease for older males and increase for older females
- Relationship between the official (statutory) retirement age and the actual retirement age
(average age at which retirement benefits are awarded)
o More developed nations lowered the official age at which people become fully
entitled to public pension benefits
 Due to generic economic conditions, changes in welfare philosophy and
private pension trends
o Significant gap between official and actual retirement ages persist
 Even in developing countries like Taiwan where average age fell below 55
o Tendency to retire varies from country to country and so does the route taken to
retirement
 Part time jobs, transitional jobs or leaving workforce because disability
- In 20th century as life expectancy increased the retirement age decreased
o People spending more time in retirement
- Lifespan can be divide into 4 periods:
o Years before entry into the workforce (primarily spent in school)
o Years not working due to unemployment or economic activity
o Years in workforce
o Years in retirement
- 1960 a man on average would spend 46 years in workforce and a little over 1 in
retirement
o 1995 they spent 37 in workforce and 12 in retirement
- Italy has average retirement age of 59 and average of 21 years spent in retirement
 - Continuing education, workplace design and part-time employment for older people will
become more important
- In most countries public pensions provide enormous disincentives for continued work at
older ages and encourage early retirement
- Important relationship between the incentives for workforce participation of older people
and the provision of social security programs
Trend 8: Evolving Social Insurance Systems
- In response to escalating pension expenditures an increasing number of countries across
the development spectrum are evaluating the sustainability of old-age social insurance
systems
- In the future the economic well-being of older populations will depend on a combinations
of income sources
o Earning from containing work, social insurance programs, occupational pensions
and private savings
 Public polices affect each of these sources
- Common reform is to increase the age at which workers are eligible for full public
pension benefits
o US and Japan did this
o Highest current statutory age is 67 in Norway and Iceland
- Some countries have lower ages for women than men but 60% now have equal ages
- Some parts of Africa that age is set higher than the life expectancy of the adults there
- Another strategy is to increase the contribution of tax rates on workers
o Payroll tax rates that equal or exceed 20% of wages are common
 Can raise needed revenues they also discourage people from working in
the formal sector
- Other measures to enhance income for older populations include
o New financial instruments for private savings, tax incentives for individual
retirement savings, supplemental occupational pension plans
- 16 countries have a Provident Fund
o Compulsory savings program that is funded fully with investments managed by
the government
- A trend toward defined contribution plans where employees contribute a portion of
earnings into investment accounts that they control rather than defined benefit plans in
which employers guarantee specified levels of pension payment in the future
- In private sector the popularity of defined contribution plans in not driven by population
aging by the increased job mobility, global competition and growth of smaller firms
Trend 9: Emerging Economic Challenges:
- Population aging will have a dramatic effect on global, local, regional economies
o Mostly financial expenditures, labour supply and total savings will be affected
- Population aging will strain national budgets especially those with extensive social
programs targeted to older populations
o Health care and income support programs
 Number of eligible recipients will increase and the cost of the programs
will escalate and length of eligibility increases
o Shortfalls may need to be financed through using general revenues
- In countries where tax hikes are needed to pay for transfers to growing older populations
the tax burden may discourage future workforce participation
- Less developed countries may be able to shift economy from labour intensive to capital
intensive sectors
- Countries age at different paces it’s possible that elements of production like labour and
capital will flow across national boundaries and mitigate the impact of population aging
o Surplus of capital will flow from Europe and North America to emerging markets
in Asia and Latin America
 Population is younger and supplies of capital are low
 In the next 20 years as baby boomers retire it’s possible the flow
will reverse
o Labour viewed as less mobile than capital
- Life-cycle theory of consumption and savings is that households accumulate wealth
during working years to maintain consumption in retirement
o Total of a countries individual life cycle savings determines if it’s a net saver or
non-saver
o Country with large portion of workers will be savers