Birthrates in several countries are falling rapidly, and thanks to advances in medical sciences and life expectancy increasing, what we have is an increasingly older population
Rima M. | Rakesh Sharma
Just last week, on the 11th of July, we celebrated World Population Day. By 2050, India’s population may increase by another 273 million. It is likely that some of us in India may scoff at the notion of celebrating a Population Day, considering we have been told ad nauseam that overpopulation is the root cause of most Indian problems. What many of us do not understand is under-population is a problem in some other parts of the world. Birthrates in several countries are falling rapidly, and thanks to advances in medical sciences and life expectancy increasing, what we have is an increasingly older population. Business Insider recently published a report according to which there are now more people over the age of 65 than there are under the age of five. This dispersion supposedly has never occurred before, according to a Deutsche Bank analysis of United Nations data, Haver Analytics data, and the firm's global research.
What has widely been described as a demographic time bomb may change the world and on this edition of Digging Deeper with Moneycontrol, we will explore just how that may happen.
Ageing populations, falling birthrates and the fall out
Rebecca Ungarino, writing for Business Insider, explains that while the world's population is ageing, many countries' birth rates are failing to keep up. All around the world, countries are seeing dwindling birth rates with concomitant rising life expectancy. Ageing populations incur higher spending on healthcare and pensions, and the percentage of working and tax-paying individuals is steadily going down. In the US, for example, after reaching its historical peak at 67.1 percent in 2000, the labor force participation rate for all workers (age 16 and over) is projected to decline to 61.0 percent in 2026. The decline in the rate is largely the result of the aging population, as more and more workers move into higher age groups that tend to have lower participation rates. The overall labor force participation rate has been declining since 2000, dropping sharply following the 2007–09 recession and reaching 62.8 percent in 2016. (Data from Bureau of Labor Statistics, US government)
Simply put, the older the population is, the slower the economy grows. Japan, South Korea, Singapore, Bulgaria, Spain are all looking at rapidly declining populations with no replacement in the offing. The US is teetering right on the edge of replacement, according to Ed Yardeni who has been researching the ageing demographic and its economic impact for decades now. China understands this problem now too. As we know, it has only recently reversed its one child only policy.
Economists point out that these “demographic time bombs” could spark off widespread consequences. The findings have led fund managers to take notice of "secular stagnation" conditions often associated with persistent low inflation and low growth, and they are adjusting their allocations accordingly.
Business Insider said, "The extreme data point underscores a broader economic trend that some economists are warning clients about: declining fertility rates lead to an ageing population, which is thought to usher in depressed productivity, labor-force participation, and stagnant inflation. More indirect results of declining birth rates may also have an impact on macroeconomic factors like homeownership.”
Torsten Sløk, Deutsche Bank's chief international economist has stated that the key issue for investors in equities, rates, and credit is if the global economy is able to generate enough productivity growth to offset these demographic trends. He also says that for [foreign exchange] the question is which parts of the world will be hit harder than others by a demographic slowdown in growth.
Sløk cited the ”secular stagnation," theory what we have also mentioned before and which as is widely known is a Larry Summers-endorsed construct. Lawrence Henry Summers, just to give you context is an American economist, former Vice President of Development Economics and Chief Economist of the World Bank, senior U.S. Treasury Department official throughout President Clinton's administration, and former director of the National Economic Council for President Obama. (You know, an appointee who was actually qualified to do his job. Those halcyon days of three years ago!)
Secular stagnation is a condition wherein savings rise and investment slows, causing economic growth to stall out. Summers has argued the condition may be the "defining macro-economic challenge of our times."
Ed Yardeni says that generally, fertility rates around the world have fallen below "replacement" levels, or below the level that can support population growth. And that "baby bust" is weighing on global growth.
To be more specific, Yardeni - who has long written about the economic impact of an ageing population, particularly in China - has stated that the US has a fertility rate slightly below replacement. He said, "Our fertility is right around replacement. So we're not as advanced in the birth dearth and on this kind of road to self-extinction as Japan is, and China, and some other countries.".
Wall Street is also cognisant of the broader "stagnation" theme associated with an ageing population. For two straight months last year, the theme dominated Bank of America Merrill Lynch's Global Fund Manager survey, which takes the pulse of how big-money managers view global markets and economies.
However, there are many others who see no clear negative association between an ageing population and declining growth. Ungarino, on Business Insider, cited a 2017 paper by Daron Acemoglu, a Massachusetts Institute of Technology economist, and Pascual Restrepo, an assistant professor at Boston University, who found that contrary to the themes and concepts Summers and others have popularized, there is "no negative relationship between population ageing and slower growth of GDP per capita."
We quote, "In a counterintuitive result, they found that countries undergoing rapid ageing have grown more in recent decades, likely reflecting a faster adoption of labor-replacing technologies and automation.”
The paper concluded: "There is a clear need for future work that systematically investigates the relationship between demographic change and GDP growth as well as the channels via which this relationship works."
More to the data than meets the eye?
However, the disquiet over the increase in the world's ageing population has been gathering attention from both economists and population researchers. On 5 February 2018, the WHO released a report, which said that between 2015 and 2050, the proportion of the world's population over 60 years will nearly double from 12% to 22%.
And that by 2020, the number of people aged 60 years and older will outnumber children younger than 5 years and in 2050, 80% of older people will be living in low- and middle-income countries.
We quote, "The pace of population ageing is much faster than in the past. All countries face major challenges to ensure that their health and social systems are ready to make the most of this demographic shift. People worldwide are living longer. Today, for the first time in history, most people can expect to live into their sixties and beyond. By 2050, the world’s population aged 60 years and older is expected to total 2 billion, up from 900 million in 2015. Today, 125 million people are aged 80 years or older. By 2050, there will be almost this many (120 million) living in China alone, and 434 million people in this age group worldwide. By 2050, 80% of all older people will live in low- and middle-income countries."
Not just that, the report states that the pace of population ageing around the world is also increasing dramatically. France, we are told, had almost 150 years to adapt to a change from 10% to 20% in the proportion of the population that was older than 60 years. However, places such as Brazil, China and India will have slightly more than 20 years to make the same adaptation.
We quote again, "While this shift in distribution of a country's population towards older ages – known as population ageing - started in high-income countries (for example in Japan 30% of the population are already over 60 years old), it is now low- and middle-income countries that are experiencing the greatest change. By the middle of the century many countries for e.g. Chile, China, the Islamic Republic of Iran and the Russian Federation will have a similar proportion of older people to Japan."
As the report puts it poignantly, though longer life brings with it opportunities, not only for older people and their families, but also for societies as a whole, yet the extent of these opportunities and contributions depends heavily on one factor: health. Are older people living in societies geared up to serve their economic, medical and psychological needs? That is a question that needs deeper introspection.
As the piece says, if these added years are dominated by declines in physical and mental capacity, the implications for older people and for society are more negative because simply put, ageing does result from the impact of the accumulation of a wide variety of molecular and cellular damage over time.
We quote, "Beyond biological changes, ageing is also associated with other life transitions such as retirement, relocation to more appropriate housing, and the death of friends and partners. In developing a public-health response to ageing, it is important not just to consider approaches that ameliorate the losses associated with older age, but also those that may reinforce recovery, adaptation and psychosocial growth."
Are societies, especially in countries that are still struggling with economic issues, equipped to deal with rapidly ageing populations? Are already stretched public health services, old age homes, youth-centric neighbourhoods, and communities prepared to deal with age-related issues in large demographic tracts?
Also complicating the issue, according to the piece, is that variations in older people’s health are genetic, and much is due to people’s physical and social environments – including their personal characteristics – such as their sex, ethnicity, or socioeconomic status.
We quote, "The availability of safe and accessible public buildings and transport, and environments that are easy to walk around are examples of supportive environments. A comprehensive public health response must address the wide range of older people’s experiences and needs. Public health policy must be crafted to reduce, rather than reinforce, inequities. Public health, and society as a whole, need to address ageist attitudes, which can lead to discrimination, affect the way policies are developed for older people."
WHO’s response to the crisis
The piece outlines how in accordance with a recent World Health Resolution, a comprehensive Global Strategy and Action Plan on Ageing and Health is being developed by WHO in consultation with Member States and other partners. The Strategy and Action Plan draws on the evidence of the World report on ageing and health and builds on existing activities to address a few priority areas for action. We present them here with minor edits.
Commitment to Healthy Ageing must be made and it requires sustained commitment and action to formulate evidence-based policies that strengthen the abilities of older persons.
Health systems need to be better organized around older people’s needs and preferences. They must be designed to enhance older peoples’ intrinsic capacity, and integrated across settings and care providers.
Developing systems for providing long-term care are a must. Systems of long-term care are needed in all countries to meet the needs of older people. This requires developing, sometimes from nothing, governance systems, infrastructure and workforce capacity.
Creating age-friendly environments is a priority. This will require actions to combat ageism, enable autonomy and support Healthy Ageing in all policies and at all levels of government.
Another much needed step is improving measurement, monitoring and understanding, focused research, new metrics and analytical methods for a wide range of ageing issues.
After all, a society is measured by how it cares for its very young and its very elderly citizens.
A crisis brewing in India?
Romita Datta wrote in India Today in April of last year about how India's elderly population will grow dramatically by mid-century, and while branded corporate eldercare is thriving, the welfare of senior citizens remains a quiet crisis.
We quote from the informative piece, "For all the talk of India's demographic dividend, its bulging youth population, the country is also greying rapidly. According to a 2016 report by the ministry for statistics and programme implementation, India has 103.9 million elderly, people above age 60, about 8.5 per cent of the population. These numbers are reliant on the 2011 census. The elderly population has grown at about 3.5 per cent per year, double the rate for the population as a whole; a 2014 report by the non-profit HelpAge India shows that while India will be the youngest country in the world by 2020, by 2050, as many as 325 million people, or 20 per cent of the population, will be 'elderly'. While the overall population of India will have grown by about 40 per cent between 2006 and 2050, the report adds, the elderly population will have grown by 270 per cent."
Romita asks, "What are the economic and social policies being put into place to tackle this exponential growth in India's elderly population?"
The answers are not reassuring. The statistics ministry report shows that the old-age dependency ratio, a measure of the pressure on the economically productive section of the population, rose from 10.9 per cent in 1961 to 14.2 per cent in 2011. Though 41.6 per cent of the elderly population still works (with significant differences between rural and urban, men and women), few feel financially secure, informs the article.
We quote, "The large majority of the elderly in the workforce are rural men (66.4 per cent over 60 work, compared to just 11.3 per cent urban men) and formal pension coverage is limited and largely inadequate. A 2016 survey by the Agewell Foundation with 15,000 rural and urban respondents showed 65 per cent reported themselves as either financially dependent or facing a financial crisis. Nearly 80 per cent of those in financial trouble said it was due to medical costs. Meanwhile, a 2015-16 AISCCON (All India Senior Citizens' Confederation) survey shows that 60 per cent of elderly people living with their families face abuse and harassment, 66 per cent are either 'very poor' or below the poverty line and 39 per cent have been either abandoned or live alone. The associated mental health issues of living alone, especially for the elderly, are so serious that the United Kingdom appointed a Minister for Loneliness this January."
Let’s also remember this statistic: India spends just 1.2 per cent of its GDP on healthcare.
This is worrisome given the fact that a National Sample Survey Organisation (NSSO) report showed that in 2014, the average urban hospital stay cost 176 per cent more than it did in 2004, with rural patients paying 160 per cent more than they did a decade before. NSSO data also showed that a household comprising only elders spends 3.8 times more per month on healthcare than one without elderly kin. No wonder so many elderly Indians are financially dependent on their families, points out Romita.
In this scenario, quality homecare services, daycare centres designed to help elderly patients recover from hospitalisation are few and far between though as is expected where the government has lagged behind, private services and assisted living elder care homes have mushroomed but could be unaffordable for those who most need them.The report cites AISCCON further to inform that , the elderly are disproportionately vulnerable to crime, whether violent, or, increasingly, electronic, with bank and credit card frauds. We quote, "AISCCON wants monthly pensions to increase from Rs 3,500 to Rs 7,000. Most importantly, it needs the central and state governments to recognise the needs of a growing elderly population. On June 15, India recognises World Elderly Abuse Day. In 2017, hundreds gathered at Jantar Mantar in Delhi to swap horror stories and protest institutionalised indifference. Too much still has to change to make India a country for old men. And women."Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.