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This is a joint post with Rachel Nugent.

A new report from the US Census Bureau offers the surprising fact that in the next 30 years, the human population over 65 will double. In ten years, there will be more over-65s than under-fives. Old news, you say? Yes, in Italy, Japan, and Russia this is old news. In developing countries, it is new – and somewhat alarming. In 2008, 62 percent of all those aged 65 and over (313 million people) lived in the developing countries of Africa, Asia, Latin America, the Caribbean, and Oceania.  The elderly population in developing countries is growing twice as fast as in developed countries (on a not very small base in India and China, as it turns out. Those two countries account for 1/3 of the world’s aged population and 37% of the total global population.)

Demographers and statisticians have been telling us for years that the world is getting older. In a CGD lecture last fall, demographer Joel Cohen called this a “tsunami.” Almost 10 years ago, a United Nations Population Division report for the 2002 World Assembly on Ageing, stated that population aging is an unprecedented, pervasive, profound and enduring phenomenon that requires global action. But what kind of action does it require? Countries, donor agencies, and even households will be wrestling with this question more and more.

These strong words from UNPD may be appropriate. But there’s a lot to learn about aging before getting too alarmed. Such as what is old? Is it really 65, or it is closer to 85? Or, as still defined in many European and other countries for retirement purposes, is it 55 to 60? Like the t-shirt logo “50 is the new 30” suggests, a lot has changed since our grandparents’ day. And since real-life changes faster than government policy or statistics, maybe we should look at what it really means to be in your 60s or 70s. The U.S. age-specific disability rate at age 60 represents the fraction of 60-year-olds unable to do normal activities of daily living (ADLs). In a forthcoming CGD paper in the Demographics and Development series, Joel Cohen informs us that number has been dropping by 1.5% per year for 25 years. And over-65s in the U.S. and other rich countries are more active and less impaired than ever. As of 2005, it is reported that those 65+ with any disability were more likely to be in the 1-2 ADL group (3.1%) as opposed to groups with higher levels of disability, and that the distribution represented a 25.6 % decline in this category from 1982. This is why your parents aren’t yet living with you!

If they are, or eventually will be living with you, what does this mean for you and your children? Some of this comes down to how countries choose to re-distribute income across generations: through social programs or privately. Interesting preliminary findings presented at a World Bank workshop we recently attended provide some answers. The papers describe the effects of aging in Latin America on pressing policy issues like public finance, education and health. They will be published as: Daniel Cotlear (editor). Demographic Change and Social Policy in LAC. World Bank. The authors closely examined demographic trends in many Latin American and Caribbean countries. The results focus attention quickly. For instance:

  • In Brazil, age is the main driver of the distribution of public finance. The elderly use a greater proportion of public funds than do the young thanks to a social security system that covers 90% of those 70 and above, and is especially generous to the high income retirees.
  • Projections to 2050 for 10 LAC countries show that population ageing will have a huge impact on spending for health care and pensions, as well as reducing educational investments in the region.
  • The young are poorer than the aged in many LAC countries (mirroring the situation in the U.S. since the 1970s when the elderly became a powerful political constituency), but elderly poverty depends largely on the generosity (as in Brazil and the Southern Cone) or miserliness (like in Colombia, Mexico, Jamaica) of pension systems, as well as remittance levels and labor income.*

The focus of this set of World Bank studies, and much discussion around aging in other regions, is public finance and how it needs to adjust to new realities. Other public policies are also being tried in by now familiar bastions of the aged such as China. Illustrating the concern in China over growing health and retirement needs of the aged – at a time when traditional family structures cannot be counted on to help out -- the government of Shanghai is now urging eligible couples to have a second child. Such pro-natalist policies have been tried in some European countries and generally failed (Botev, 2008).

It is going to be tricky to figure out how to balance spending and transfers across generations, and across an individual life cycle, especially as different age cohorts expand and contract and elderly populations grow. Tricky also because as these elderly constituencies amplify, so does their voice in advocating for policies that are shifted towards personal interests, and potentially away from the interests of younger populations.

So in many ways, the issue of population aging is important for you. Not only now, but because ooh, ooh, one day you’ll be older too.

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* - All Latin American studies cited here are preliminary findings from an authors workshop held at the World Bank on July 14 and 15 2009.