Question

Please provide an overview of the consequences of the global aging phenomenon that we discussed in the class. Specifically, which countries appear to be most affected (at this point) by this phenomenon and what policy implications (particularly with respect to immigration) that this may have for those states? In addition, what “solutions” have been proposed for dealing with this issue?

Answer 1

For most of human history, the elderly only comprised a tiny fraction of the population, never more than 5 percent in any country until well into the Industrial Revolution of the nineteenth century. In the developed world today, the elderly comprise roughly 15 percent of the population. By mid-century, this share is on track to reach 25 percent—and that is just the average. In some fast-aging European countries the share could climb to 35 percent and in Japan it may approach 40 percent. Most developed countries will not only have aging populations, but also stagnant or declining one. In fact, by the 2020s the United States will be the only major developed country that still has a growing workforce and a growing population.

There are two forces behind global aging. The first force is falling fertility. People are having fewer babies, and this decreases the relative number of young. As recently as the mid-1960s, every developed country was at or above the 2.1 replacement rate needed to maintain a stable population from one generation to the next. Today, every developed country is at or below it—and most are far below it. In Germany, Italy, and Spain the fertility rate is 1.4 and in Japan it is 1.3. The trend toward lower birthrates began in the rich world, but it has now overtaken most emerging markets as well. Fertility rates are well beneath replacement in all of East Asia. They are near, at, or beneath replacement in almost every major economy in Latin America. And they are falling rapidly in South Asia and much of the Greater Middle East.

The second force is rising life expectancy. People are living longer, and this increases the relative number of old. Over the postwar era, life expectancy in the developed countries has risen by about ten years, and is now in the late seventies to early eighties in every country. The gains in emerging markets have been even more stunning. Life expectancy today is 76 in China (up from 41 in 1950), 78 in Mexico (up from 51 in 1950), and 83 in South Korea (up from 48 in 1950).

Most of the direct consequences of global aging are equally certain. Government budgets will come under intense pressure from rising expenditures on pensions and health care. Aging electorates will lock in current spending priorities at the expense of future-oriented investments. Businesses will have to cope with a dearth of young workers, while families will have to cope with a surplus of frail elders. Economic growth will slow as rates of savings and investment fall and workforces gray and stagnate or decline. The global balance of power will shift as the developed world contracts demographically and economically relative to the emerging world. All of these developments, driven in large part by global aging, are either already happening or are looming in our immediate future. They are not the contingent outcomes of complex computer models; they are projections that are already coming alive in our daily news headlines.

The rapid aging of populations around the world presents an unprecedented set of challenges: shifting disease burden, increased expenditure on health and long-term care, labor-force shortages, dissaving, and potential problems with old-age income security. We view longer life spans, particularly longer healthy life spans, as an enormous gain for human welfare. The challenges come from the fact that our current institutional and social arrangements are unsuited for aging populations and shifting demographics; our proposed solution is therefore to change our institutions and social arrangements.