Economics of ageing societies

As birth rates improve, following our ancestors’ excessive breeding, and improved health care allows more of us to reach old age, older people’s proportion of a population will naturally increase. We are often warned that births must be encouraged to ensure a steady supply of new workers.
This concern has validity only because pension systems are pyramid schemes. It doesn’t have to be this way. Workers supporting retirees is 20th Century thinking. Automation increasingly eliminates jobs, and unemployment rates reveal that breeding more wage slaves won’t bring in more taxes.

Articles in three categories below:
An ageing society is beneficial.
An ageing society may or may not be a problem.
An ageing society is detrimental if not disastrous.


An ageing society is beneficial

Nothing to fear from ageing population
November 23, 2020
A discussion paper released last week found that an ageing population was “more of a silver lining than a silver tsunami”.
In what was described as a classic case of the “cure being worse than the disease”, the paper concluded that any federal government policy of rapid population growth to off-set ageing brings far greater problems than any brought on by ageing itself, organisers said."

An ageing population is good for us and the planet.
November 23, 2018
Western society should embrace ageing and declining population growth, argue ecologists. A smaller population can create a more sustainable society, and the costs associated with the world’s ageing population are manageable. That is according to ecologists writing in a new opinion article in the scientific journal Trends in Ecology and Evolution.
“As the nations of the world grapple with the task of creating sustainable societies, ending and in some cases reversing population growth will be necessary to succeed. Yet stable or declining populations are typically reported in the media as a problem, or even a crisis, due to demographic ageing,”
Götmark and co-authors found no evidence that an ageing population leads to labour shortages. In fact, they report that it could have benefits for individual workers.
1. Rising wages for workers and higher wealth per capita.
2. Less crowding and reduced stress in populated areas.
3. Greater protection of green spaces and improved quality of life.
Increased health and pension costs associated with an older, smaller population, are a minor disadvantage when compared to the bigger picture.

The false-alarmists behind this shrinking population panic
February 26, 2013
Policy-making elites would have us believe a smaller workforce spells the end of prosperity. Actually, it spells redistribution.
The people who hire help—the very same who also dominate economic policy debates—are terrified over the prospect that they will have to pay workers more in the future. But the rest of us can sit back and enjoy watching them sweat as ordinary workers may finally start to see their share of the gains of the economic growth of the last three decades.

The demographic false alarm
May 10th, 2008
“The way we relieve the ‘burden’ of an ageing population is we use the money that would have been spent on the extra infrastructure for housing, schools and health services, trying to accommodate rising populations and immigration and spend more on new technology,“ says Canadian analyst Tim Murray. “Why we need to replace our current exploding population level is a question never asked,” says Murray. “This is in a world of 6.7 billion people and rising rapidly, where each new child will likely produce more than 20 metric tons of green house gases annually and where ‘civilisation’ everywhere, according to the International Panel on Climate Change, is in imminent peril as a result. All to serve a demographic Pyramid Scam that one day must collapse like a house of cards—our environment and any hope of a better life with it.“

Ageing and stable populations are not a threat
February 23rd, 2008
The Western fear of ageing populations must be faced one day, and the sooner the better. The solution to an ageing population cannot be by increasing the younger population, because they in turn will age and need more younger populations—the situation will only get worse.


An ageing society may or may not be a problem

As the World Ages: Rethinking a Demographic Crisis
A book by Arvind Sivaramakrishnan
November 10, 2018
On a new approach to understanding the elderly.
The United Nations says that by 2050 over two billion people—20% of humanity—will be 60 or over. None of the 62 recommendations made at the 1982 U.N.-sponsored World Assembly on Ageing in Vienna was carried out.
The author shows that ageing must be seen in the context of practices, cultures, and histories; those, however, are as challengeable as earlier gerontologists’ racist assumptions.

Population: Is the World Ready for 7 Billion People?
Time magazine’s Ecocentric blog
by Bryan Walsh
December 30, 2010
“... So here’s the planet we could have in 2050: an overpopulated, overstressed developing world and an aging, economically stagnant developed world, with inequality even larger than it is today. Is there any way to escape that fate? While development and education will be incredibly important (especially for women—literacy is one of the best ways to reduce fertility), the answer may end up being immigration. Think about it—in the future the developed world will lack young workers, and the developing world will have an excess of that resource. Immigration could be a way to balance demographics and economics—alleviating population pressure in the poorer parts of the world while jump starting aging developed nations. The U.S. already does this—immigration will provide most of American population growth. It would be a radical solution, given the political resistance to increased immigration in much of the rich world. (If you think it’s a hot topic in the U.S., try Japan, which steadfastly resists assimilating foreigners, despite the dire threat posed by an aging population.) But it might be the only way to save our overpopulated planet.” [How moving people around might save our overpopulated planet wasn’t specified].

Possible reforms to accomodate growing proportion of pensioners
The Brookings Institution
1997
“To restore long-term solvency to public pensions, policymakers confront a choice among four reform alternatives.
Three—cutting benefits, increasing contribution rates, or raising the age of retirement—can be implemented within the present pay-as-you-go framework. The fourth moves away from pay-as-you-go toward advance funding of retirement obligations—either within the public system or in privately owned and managed pension funds.”
[In this study, successful reforms require “The Key: Economic Growth.”]


An ageing society is detrimental if not disastrous

China to introduce new policies to tackle ageing population
November 23, 2020
State media says China will offer extensive financial and policy support to encourage couples to have more children.
China is planning to include new measures to encourage more births and address issues associated with its rapidly ageing population and shrinking workforce as part of its new 2021-2025 “five-year plan”, according to state media.
“More inclusive population policies will be introduced to improve fertility, the quality of the workforce and the structure of the population,”
In China, the number of citizens aged 60 or over stood at 254 million at the end of last year, accounting for 18.1 percent of the population. The number is expected to rise to 300 million by 2025 and 400 million by 2035, putting huge pressure on the country’s health and social care system, demographers say.
Meanwhile, based on the current trends, they say the number of people of working age could decline by 200 million by 2050.

Ageing population is 'economic time bomb'
November 18, 2019
Phillip Coorey
Treasurer Josh Frydenberg says the need to keep the budget in surplus is not only important to cope with current demands but also the long-term challenges, especially the "economic time bomb" of an ageing population. [article behind paywall]

Japan minister U-turns on birth-rate gaffe
February 5, 2019 Taro Aso, 78, said elderly people were being unfairly linked to Japan’s stagnating economy and worries about health costs.
“There are lots of weird people who say the elderly are at fault, but that’s incorrect,” he was quoted as saying. “Rather, those who aren’t giving birth to children are the problem. “The ageing population combined with the diminishing number of children is the grave issue.”
In May 2018, an MP from the country’s governing party said young Japanese women should have more children or face being a burden on the state.
Kanji Kato said that if he meets a woman who doesn’t intend to marry, he tells her she will end up in a care home paid for by taxes from other people’s children.

Our Counterfeit Social Security Crisis
Gerald E. Scorse
January 26, 2019
Linking Social Security to the nation’s red ink is hugely misleading. At the same time, it’s hugely true that demographic trends are continually pushing up total payouts. Sooner or later, Social Security will have to adjust to the new realities: longer life spans, more and more retirements (about 10,000 baby boomers turn 65 every day), fewer workers per beneficiary.
In 2018, for the first time since 1982, the latest numbers forced the Treasury to begin dipping into the trust fund to help pay benefits. That dipping will exhaust the fund by 2034.
...raise the payroll tax, and raise or eliminate the cap on earnings subject to the tax ($132,900 for 2019, adjusted annually for inflation). Going in the opposite direction, the shortfall could also be addressed with benefit cuts; e.g., lower payouts or a later retirement age.

China’s Birth Rate Set to Continue Decline This Year
November 1, 2018
In a sign that it would further relax curbs, China’s health commission said in September that it would abolish family planning offices.
Meanwhile, the population is quickly aging, with the elderly unable to provide for themselves, as they only have one child who is faced with the burden of caring for both parents and grandparents. The workforce is also shrinking.
China’s elderly population is expected to reach 400 million by the end of 2035, up from around 240 million this year, putting the country’s health services and pension funds under immense strain

Is China going down the same path as Japan with its ageing population?
Decline in new births, a shrinking labour force and more people over 65 could drag down economic growth in the long run, researchers warn
Sidney Leng
January 18, 2018
While China’s headline growth accelerated to 6.9 per cent in 2017 from 6.7 per cent in 2016, its demographic statistics are less positive.
Despite the nationwide introduction of a two-child policy in 2015, the number of new births fell to 17.23 million last year, from 17.86 million in 2016, the National Bureau of Statistics said on Thursday. At the same time, the labour force – defined as those aged between 16 and 59 – shrank by more than 5 million last year.
Meanwhile the proportion of people aged over 65 has continued to rise. This age group accounted for 11.4 per cent of China’s total population at the end of last year, up from 10.8 per cent a year earlier, according to the statistics bureau data. That means China has 158.31 million people aged over 65 – more than the population of Russia.
Although the greying population is not as acute as Japan’s – where more than a quarter of people are aged over 65 and adult diapers now outsell baby diapers – researchers warn China may face similar challenges down the track to those Japan is grappling with.
Yi Fuxian, a demographer at the University of Wisconsin-Madison, said Beijing’s policy to allow couples to have a second child had failed, and it needed to encourage people to have children if it was to avoid become like Japan. “If no strong measure is taken to address [the loss of population] the cumulative damage stemming from a shrinking labour force on consumer demand, incomes and GDP output will only get bigger,” Zhou wrote.
The government is under mounting pressure as provincial pension funds rapidly run out of money as the greying population puts a strain on the social security scheme. Close to half of China’s provincial pension funds are in deficit, as the burden shifts to the younger workforce to support the elderly.

World Demographics Are Changing Profoundly: What Does It Mean for the 21st Century?
Joseph Chamie
December 17, 2017
Due to the increasing elderly population coupled with the relative decline of workers paying taxes, many countries are confronting difficult choices concerning budgetary allocations, taxation levels and provision of social services. To avoid controversial budgetary reforms and unpopular tax increases, some governments are reducing expenditures and entitlements for the elderly and shifting more of the costs for support, care giving and health services to the old and their families.

UK birth rate: Number of children being born in Britain hits 10-year low.
An ageing population and declining birth rate could result in growing pressures on public services—particularly if immigration is curtailed after Brexit
Caroline Mortimer
November 21, 2017
It said the country depended on young migrants from the EU to ensure there were enough working tax-payers to pay for the increasingly elderly population and the pressure they place on the local health and social care systems which have been devolved to Holyrood (Authority transferred to Scottish parliament).

No way China can sustain its growth
February 6, 2012
U.S. Vice President Joe Biden warned on Monday that there is no way that China will be able to sustain its current level of economic growth...
“Because of that God-awful one-child policy they have, what happens now is in the next 20 years they’re going to have such an inverse proportion of the number of people working to the number of people retired that there is no way they can sustain that growth,” he said.

A Brief History of China's One-Child Policy
Laura Fitzpatrick
July 27, 2009
In 1979 they introduced a policy requiring couples from China's ethnic Han majority to have only one child (the law has largely exempted ethnic minorities). It has remained virtually the same ever since.
The total number of young people is a problem as well; factories have reported youth-labor shortages in recent years, a problem that will only get worse. In 2007 there were six adults of working age for every retiree, but by 2040 that ratio is expected to drop to 2 to 1. Analysts fear that with too few children to care for them, China's elderly people will suffer neglect.

How Declining Birth Rates Hurt Global Economies
“Around the world, there are more aging people and fewer young people to take care of them. A new study about the trend suggests this demographic shift could drag down the global economy. The report is called ‘The Sustainable Demographic Dividend’.”

Asia’s baby shortage sets demographic timebomb ticking
Dec 23, 2010
By Frank Zeller
“TOKYO, (AFP) East Asia’s booming economies have for years been the envy of the world, but a shortfall in one crucial area—babies—threatens to render yesterday’s tigers toothless. Some of the world’s lowest birth rates look set to slash labour forces in Singapore, South Korea and Taiwan, where fewer workers will support more retirees and their ballooning health care and pension costs.”

As Populations Age, a Chance for Younger Nations
New York Times
by Ted C. Fishman
October 14, 2010
“You may know that the world’s population is aging—that the number of older people is expanding faster than the number of young—but you probably don’t realize how fast this is happening... This means profound change in nearly every important relationship we have — as family members, neighbors, citizens of nations and the world. Aging populations also alter how business is done everywhere. The globalization of the economy is accelerating because the world is rapidly aging, and at the same time the pace of global aging is quickened by the speed and scope of globalization. These intertwined dynamics also bear on the international competition for wealth and power. The high costs of keeping our aging population healthy and out of poverty has caused the United States and other rich democracies to lose their economic and political footing. Countries on the rise amass wealth and geopolitical clout by refusing to bear those costs. Older countries lose work to younger countries.”

Patricia Muir Oregon State University
“The primary force driving these low birth rates seems to be economic; economic systems often provide more ‘rewards’ for women not having children than the reverse. Shrinking populations, and large numbers of old people relative to fewer young persons, are of increasing concern to the governments of many of these nations, including the ZPG nations of the world. Who will comprise the work force? Who will take care of the elderly? A declining population rapidly acquires an age structure that establishes momentum for further population decline, which would (obviously) become unsustainable if it continued—and the longer it continues, the harder it is to reverse it. A variety of these nations, have in fact begun policies aimed at encouraging some population growth—including things like providing paid maternity and paternity leaves (in some cases for 2 - 3 years), providing free child care and family housing allowances, and even cash payments for raising a child. (Seems amazing, doesn’t it, that some parts of the world can be struggling to control population growth, while others are concerned about shrinking populations?)”

Elderly to Outnumber Children by 2050 in Most Parts of World
ScienceDaily
Nov. 27, 2010
“The fact that the world population is growing older will not only affect our pensions. In just a few decades there will be more elderly people than children in most parts of the world (with the exception of Africa)... The ban on families having more than one child was intended to last for 30 or 40 years. Now the Chinese authorities are saying that the policy will continue until 2015. But they are gradually allowing exceptions. A number of couples, in particular farmers, are permitted to have more than one child. The authorities now realise that the one-child policy will have significant negative ramifications, both economically and socially.”

Shrinking Societies: The Other Population Crisis
By Venessa Wong
August 12, 2010
“The earth’s population is growing at an alarming rate, but in some countries the lack of growth is the biggest problem. A Japanese woman’s role in society is to give birth, and ‘all we can do is ask them to do their best per head,’ said Hakuo Yanagisawa, Japan’s former health minister.”

A bigger country is inevitable
The Australian
by Jessica Brown
August 04, 2010
“Under every realistic scenario, population growth is going to happen. This is a certainty. Australia's history has been one of growth and this growth looks set to continue for the foreseeable future.
Another certainty is population ageing. While ageing has been conspicuously left out of the population debate, in many ways it will provide a greater challenge for policymakers than population growth.
While the median age of our population is now 37, it will probably rise to about 40 through the next four decades, or even as high as 45 if our fertility levels drop. Because of this, Treasury believes that by 2050 health care, aged care and the aged pension will cost us an extra $60 billion a year in today's terms. However, there will be proportionally fewer taxpayers to meet these costs. Taxes will have to rise dramatically to keep the budget afloat.”

Population Research Presents a Sobering Prognosis
Sam Roberts
July 29, 2010
“With 267 people being born every minute and 108 dying, the world’s population will top seven billion next year, a research group projects, while the ratio of working-age adults to support the elderly in developed countries declines precipitously because of lower birthrates and longer life spans.
In a sobering assessment of those two trends, William P. Butz, president of the Population Reference Bureau, said that ‘chronically low birthrates in developed countries are beginning to challenge the health and financial security of the elderly’ at the same time that ‘developing countries are adding over 80 million to the population each year and the poorest of those countries are adding 20 million, exacerbating poverty and threatening the environment.’”

World population nears 7 billion: Can we handle it?
Associated Press
David Crary
10/17/2011
“...raising the question of who will pay the bills to support the elderly in the years ahead. It’s a question bedeviling many European countries which have grappled for years over how to cope with shrinking birth rates and aging populations—and are now faced with a financial crisis that has forced some to cut back on family-friendly government incentives.
Spain and Italy, both forced to enact painful austerity measures in a bid to narrow budget deficits, are battling common problems: Women have chosen to have their first child at a later age, and the difficulties of finding jobs and affordable housing are discouraging some couples from having any children at all.”
[Those “difficulties of finding jobs” reveal that creating more potential workers isn’t going to help: no job = no payroll taxes to “pay the bills to support the elderly.”]

Return to ECONOMICS