Many countries today have five times as many working-age people as elderly people. By 2050, that proportion will fall to just 2.9. In many of the nations, older people typically live into their 80s and 90s. Societies now must ensure that their aging members remain healthy as they live longer.
Demographers divide populations into three broad categories: “Advanced economies” have fewer young people and an increasing proportion of old people. “Emerging economies” have large numbers of people of working age sandwiched between the young and old. The “least developed economies” have a large proportion of children, adolescents and young people.
Disease and Mortality
In the 19th century, diseases like cholera and typhoid caused more than 80% of all mortality in England. Europe then experienced a great shift in which death rates fell, and then fertility rates fell. Starting in the mid-19th century, governments and society realized the importance of public health. England, France and Sweden increased life expectancy by one month a year between 1750 and 1850. The gain grew to two months a year between 1850 and 1900 due to improved sanitation and living standards.
“Public spending on health care now accounts on average for 14.6% of total government spending in the European Union, ranging from 7.2% in Cyprus to 18.8% in Slovakia.”
Increased availability of wholesome food reduced disease as trade and distribution systems grew in sophistication. The introduction of sulfonamide drugs and penicillin in the 20th century further lowered mortality rates.
The Impact of Chronic Diseases
The world has undergone a four-phase “epidemiological transition”:
- A phase when most people die before age 40 due to pestilence and famine.
- A phase dominated by epidemics in which people live into their 50s.
- A phase characterized by chronic diseases, with life expectancy peaking at more than 70 years.
- A phase in which people live longer but suffer degenerative diseases.
“Migration has a potentially strong and long-lasting impact on population growth and structure through the interaction [among] the number of migrants, their relatively young age structure and their higher fertility.”
From today through 2026, more people worldwide will die of cardiac disease, cancer and diabetes than from infectious diseases. Life expectancy in developed and less developed countries will converge. Some advanced economies are already experiencing a later fifth stage in which the age of death is advancing, and people die after they are 80 years old or older.
European fertility rates fell gradually and dropped below the replacement level only in the 20th century. Asia experienced a transition in fertility much faster than Europe; now fertility remains low in both Europe and Asia. In Asia and Latin America, fertility declined to 2.5 births per woman between 1950 and 2005. In about 75% of the world’s countries, total fertility rates have fallen below the replacement level.
“The challenge for advanced economies is that not only are individuals living longer, they are doing so within a population which is itself growing older.”
Sub-Saharan Africa is the only region with fertility rates of between four and seven births per woman. Least developed countries, including those in Sub-Saharan Africa, suffer disease and high death rates.
“The Gray Burden”
In both developed and emerging economies, the population of old people is anticipated to increase sharply. By 2030, 50% of Western Europe’s population will be older than 50, about 25% older than 65 and 12.7% older than 75. Babies born in Europe today could live more than a century. By the end of the 21st century, the world population could include five million people older than 100 years. National health systems could collapse from supporting so many elderly people.
“The large number of child and adolescent dependents in Africa is holding back growth and reducing the potential impact of the demographic dividend.”
Japan’s fertility rate fell sharply after World War II. Its social security system’s revenues have fallen as its working age population has declined. As its aging population increases, Japan has to pay to support more beneficiaries.
The United States faces significant budget deficits because its Social Security and health programs have increased their pending costs. The deficits could increase to between 8% and 20% of GDP by 2050.
Transfer of Resources
Individuals engage in four types of economic activities during their lifetime. During their working lives, most people produce more than they consume. They buy goods and services, and they share resources by paying taxes. Their governments use these fund transfers to pay for education, health care, services and pensions. Individuals fund the creation of assets or pensions by saving money that they can use at later stages of their lives.
For a society to remain prosperous, it must meet certain conditions. The members of its workforce must produce enough resources to take care of their needs and the needs of their younger and older dependents. They must build resources to provide for their own needs after retirement.
The dependency ratio is the ratio of active workers to young and old dependents. The “elderly dependency ratio” assesses the number of working-age people in relation to the number of people age 65 or older. The “youth dependency ratio” consists of the proportion of people of working age vis-à-vis that of people age 15 and younger. The “total dependency ratio” is the number of working people in relation to those outside working age.
“Even though there is awareness of the importance of investing in children in Africa, young people are among the poorest and most vulnerable individuals on the continent.”
Demographers use a shift from youth dependency to elderly dependency in a society to evaluate when it has reached “demographic majority.” By 2026, most industrialized countries will see a sharp increase in elderly dependency ratios. European Union member states will experience a marked increase.
Demographers base their concerns about the burdens an aging population imposes on societies on two sets of assumptions. One is that 20th-century institutions may be inadequate to cope with the way societies evolve in the 21st century. The other is that productivity and innovation will decline with an aging workforce.
“Most countries of the developed world are now in the late stages of the demographic transition, resulting in the decrease in both mortality and fertility rates, which typically is associated with economic development.”
Most affluent countries have established health care and pension systems, but these institutions may promote higher dependency ratios. Public pension systems often follow liberal payout policies. They allow healthy individuals to retire with the understanding they can expect the system to support them for up to 40 years. People retire later in the United States than, for example, in Germany and France, where larger financial incentives spur workers to retire earlier.
“The Youth Bulge”
Demography is an important factor that contributes to the unrest in the Middle East. Organizations must promote initiatives to ensure that young people find work and societal involvement to prevent future discord. The bulge in the youth population was a factor in the so-called Arab Spring that began in 2010.
A youth bulge is a cluster of people between ages 15 and 24 that is outsized in proportion to a nation’s total population. The probability of unrest increases if unemployment and poverty coincide with a significant youth bulge. As of 2016, about 50% of the global population consists of people younger than age 25, which represents history’s largest cohort of young people transitioning into adulthood. Young people now make up 25% of the worldwide working population. Yet they also account for 40% of global unemployment. Young people face intense competition for a finite number of jobs. As jobs in rural areas decline, many young people are moving to urban centers.
“Most advanced economies have aged continually over the past century. By 2030, nearly half the population of Western Europe (44.7%) will be over 50, one-quarter over 65, and 12.7% over 75.”
Countries such as South Korea, Taiwan, Hong Kong [though published in 2019, the book predates the summer demonstrations in Hong Kong] and Singapore have sustained youth bulges without political discord. China managed something similar, and Indonesia, Malaysia, the Philippines and Thailand seem likely to follow suit.
“But there will also be changes in the type of ill health arising from the shift from acute infectious disease to complex, chronic, long-term ill health and disability: the so-called chronic disease burden.”
Countries in the Middle East and North Africa (MENA) region have among the world’s largest clusters of young people. Through 2036, Iraq, Yemen and the Palestine territories will see a sharp increase in 15 to 29-year-olds. This particular youth bulge presents opportunities to boost economic growth. Yet young people in the region face unemployment rates as high as 40%. They must cope with inadequate educational opportunities, high real estate prices and dependencies on their families that preclude early marriage.
A sharp increase in people entering the labor pool, the skills of potential employees and the quality of institutions – including financial and governmental institutions – are driving youth unemployment. The total MENA labor force increased by 40% in the 2000s and could ultimately show an overall increase of 80% in the two decades between 2000 and 2020. More women seeking employment adds pressure to an already critical situation.
MENA Countries Need Jobs
Countries in the MENA region need to create 18 million jobs to absorb new job seekers. Yet foreign investors require countries to promise good governance and an impartial legal system before they invest. Here, the region falls short. Its failure to integrate with the global economy is a barrier to growth. And, its educational institutions don’t give students the skills that employers require.
“There is a strong association between those countries with a high level of educated women and those with below replacement fertility levels.”
A youth bulge doesn’t necessarily lead to societal unrest and economic distress. Both Tunisia and Hong Kong saw a youth bulge between 1975 and 1985 with quite different outcomes. Hong Kong experienced high rates of growth similar to those in Singapore, South Korea and Taiwan in the 1960s and 1970s. Hong Kong’s economy can respond to global demands. It offers citizens low taxes and subsidized public housing. Its labor market can shift from the requirements of the textile industry to the needs of the technology sector and then to the demands of a financial center. Hong Kong’s administration invests in infrastructure, including housing, seaports and airports. By the 1970s, Hong Kong’s total fertility rates had fallen from 2.3 to 1.7.
“Two-thirds of the world’s countries are now at or below replacement level – crudely defined as 2.1 children per woman of childbearing age.”
By contrast, Tunisia’s fertility rate remained as high as 4.9 to 5.7. Large numbers of dependent children constrained its economic growth. At present, Hong Kong’s total fertility rate hovers just above 1.0, while in Tunisia, it has fallen to 2.0.
The “Demographic Dividend” and Economic Growth
Demographers argue about the link between population and economic growth. Some suggest that a rapid increase in population negatively affects economic growth. Others maintain that population growth boosts economic growth by creating larger markets. The structure of a country’s population plays a more important role than its size. As the total fertility ratio falls, the number of dependent children declines in proportion to the population of working-age workers.
Countries can boost their savings as the requirements of dependent children fall. Individuals and societies both can then focus their investment on physical and social infrastructure rather than on children. A country could capitalize on greater economic output and enjoy the demographic dividend.
Societies can enjoy the youth dividend if the youth dependency ratio continues to fall or remains low. This gives countries time to boost incomes before their populations mature. As the number of elderly dependents rises, the initial demographic dividend begins to decline and can end.