Global Aging: A Curse or a Blessing?

The 20th Century was filled with some of the most dramatic changes across the globe. Borders were redrawn (and continue to be disputed). The largest conflicts in history were fought. The plague of smallpox was eradicated from the face of the earth just as the threat of HIV/AIDS was materializing. The same amazing human imagination that took mankind from horse drawn buggies to cars to planes to landing on the moon also bestowed upon us the ability to destroy a city in seconds from continents away. The 20th century undoubtedly has been a time of unprecedented change, with the complicated web of cause and effect it has woven shaping the world of today. Unsurprisingly, the demographics of this dynamic world are no exception. The global population has been growing in a rate that we have never seen before. At the start of the century, there were 1.6 billion people in the world; by 2000 there were 6.1 billion people and by 2012 it had already reached 7 billion. By 2015, the

UN estimates that the total population will reach 9.6 billion. However, the elderly population is also growing in nearly every corner of the globe. The global share of elderly people (classified by the UN as 60 years of age and older) increased from 9.2% in 1990 to 11.7% in 2013. By 2050, the proportion is expected to reach 21.1%. This would mean that the current elderly cohort of 841 million people would balloon to a massive 2 billion in 2050. The elderly population will exceed the number of children for the first time in history by 2047.

This trend is best explained by a theory known as the Demographic Transition. According to the theory, as a country transitions from a pre-industrial economic system to an industrialized one, it goes through five stages. Stage one is marked by high death and birth rates and slow population growth. All human populations were in this phase until Western Europe broke the pattern in the 18th century as a result of the Industrial Revolution. Stage two is marked by a drastic drop in death rates. The imbalance between the decreasing deaths and the continuous high birth rates causes rapid population increase. Better access to education, healthcare and improvements in public health (sanitation, water supply, and the use of vaccinations) result in less infant and childhood deaths, increased life spans and general health. In stage three, birth rates also decrease due to factors including the elevated status of women, urbanization, less subsistence farming and child labor, and access to contraceptives. The momentum from stage carries through stage three and the population continues to grow rapidly despite the decreasing birth rate. In stage four, the birth and death rates balance out at a low level and population growth begins to plateau. Stage five occurs if a developed nation’s birth rates fall below replacement level (an average of 2.1 children per woman of childbearing age).

Most well developed nations, especially western ones, have reached stage four or five and did so through most of the 19th and 20th century. Some countries, such as China and Brazil, have transitioned very quickly due to rapid social and economic changes. Others, like much of sub-Saharan Africa, seem to have stalled in the second stage due to stagnant development, conflict and the effects of the HIV/AIDS pandemic. This wide range of progress in development and stage comes with very different benefits and issues associated with an aging population.

Countries that have recently transitioned out of stage two have an opportunity to experience what is known as a demographic dividend. This is when the rapidly growing population from stage two enters the work force, causing a huge influx of human capital for the economy, while also having less young dependents to draw away from the work force due to decreased birth rates. This phenomenon has been credited as one of the keys to the incredible economic growth experienced by countries such as China and the growth that Thailand and Brazil are still reaping the benefits of. For developing countries still in stage two or countries that have just transitioned into stage three, their aging population provides an amazing opportunity to achieve rapid economic growth if smart policies are implemented. Grasping this opportunity could be instrumental in the future of many African and Latin American countries that are further behind in their development.

The further along in the transition one goes, however, the more issues arise with the aging population. When age distribution of a country shifts to a high proportion of elderly people as a large population of working age people born in the second stage grow old, the younger working population has fewer workers to produce and care for the elderly. Outdated social security and health systems become overburdened by the increased demand for geriatric care, which is the most expensive time to treat a person due to high prevalence of chronic diseases. Very developed nations with very low fertility rates such as Japan (1.42 births per woman), Italy (1.42 births per woman), and South Korea (1.25) are experiencing decreases in total population while still having to address the growing elderly population. Japan has one of the best healthcare systems in the world but it is struggling to compensate for 20% of its population being over 65 years old. Public welfare programs in Japan, including pensions and health, cost 5.77% of national income in 1970. In 2012 they cost 31.34% of the national income and are on course to continue rising. China’s one child policy greatly reduced the fertility rate and aided in its economic growth. However, the growth from its demographic dividend is believed to have already peaked and the country is projected to become the most aged society in the world by 2030. China’s pension fund is extremely small, accounting for a mere 2% of its GDP. The United States has a higher fertility rate and pension reserves accounting for 15% of its GDP while Japan has 25% of its GDP devoted to pensions. Yet, even they are having trouble covering their elderly populations.

In the race to prepare for the impending increase of the elderly population, no definitive solutions have been implemented. However, there have been some interesting cases. For example, Russia had a very low fertility rate during and after the collapse of the Soviet Union in the 1990s. Due to government influences during this time, Russia managed to increase its total fertility rate from under 1.2 to 1.7 over the past 15 years. The government used public campaigns and instituted incentives such as a program that pays mothers $10,000 dollars for having a second child. There have also been interesting comparisons between countries such as the US and Germany. The United States currently has a total fertility rate of 1.8 children per woman while Germany has a total fertility rate of 1.4; it is possible that without the minority and immigrant populations higher fertility rates, the demographic trends of the United States would look closer to Germany’s. Following this line of logic, Germany is currently utilizing immigration policies to fuel the economy and counter its aging population, low birth rate and declining workforce. Discussion around policies on the subject can be very controversial in some countries, and the addition of other factors such immigration only add more points for disagreement. But something must be done to avoid the potential collapse of health care and social security systems, to avoid the economic losses of a shrinking workforce and growing cohort of dependents, and to ensure the welfare of our world’s elderly.