Challenges of Aging

Pensions, Retirement and Generational Justice

C. Torp, C. Torp

• Publisher: Palgrave Macmillan
• Year: 2015
• ISBN:
  9781137283177
• Topic: Social Sciences
• Subtopic: Marriage & Family Sociology
• Index: Social Sciences

Population ageing is among the most important developments of our time. This book explores the profound challenges faced by an aging world. Leading experts from diverse disciplines describe the fundamental impact demographic aging has on pension systems, on the concepts of retirement and old age, and on the balance of generational justice.

Part I

The Multiple Facets of Population Aging

1

The Challenges of Twenty-First-Century Demography1

Sarah Harper

1.

Introduction

In the second half of the twentieth century the overwhelming demographic question was how world population might be prevented from reaching over 20 billion during the coming century. Now the defining demographic characteristics of the twenty-first century are likely to be declining births, stabilization in size, and the aging of the global population. The notion that most OECD countries are now experiencing a growth in their older populations is well accepted by researchers, governments, and policy makers alike. What is less well understood, however, is that this is not just a North American/European phenomenon, but is now occurring in both Asia and Latin America, and even in some parts of Africa. It is also not well understood that the aging of populations arises not so much due to increased longevity, though that is an important influence, but more through falling fertility, and that as a result the twenty-first century is likely to see not a population explosion but a cessation of population growth altogether.

2.

Demographics

These changes in the demography of human populations have arisen due to demographic transition. This started in Europe sometime after 1750, in Asia and Latin America during the twentieth century, and now there are indications that Africa will transition during the twenty-first century. Why the demographic transition occurred when it did, where it did, and how it did is strongly debated. However, as humans develop economically, mortality falls, sometime later fertility falls, and in the gap between the two trends population grows. As the transition develops, low fertility and low mortality lead to a shift in the age composition of the population – resulting in population aging.

The twenty-first century is predicted to see an overall increase in population size, accompanied by a change in distribution and age composition. World population is predicted to increase from its current 7 billion to around 11 billion by the middle of the century (UN 2012 Revision). The global distribution of people will change, with an overall increase in those living in Asia and Africa, and a fall in European and North American populations. The countries in less and least developed regions will account for 97% of the growth up to 2050. Asia will comprise 55% of the world’s population by 2050 at 5 billion; Africa is projected to double in size by 2050 from 1 to 2 billion, while Europe will decline from 740 to 709 million. The age composition of the population will also alter as median ages rise, and there is a proportionate shift from younger to older people across the globe. Europe reached maturity at the turn of the millennium, by the measure of more people over 60 than under 15. It is predicted that Asia will become mature by 2040, with over 1 billion people over 60, some 20% of the population, compared to under 1 billion under 15, 19% of the population. Similarly, in 2040 Latin America and the Caribbean will reach 20% with age 60 and over, while those under 15 will fall to 19%. By 2050 there will for the first time be the same number of old as young in the world – with 2 billion of each – each accounting for 21% of the world’s population. Nearly 10% of the developed world will be over 80.

Taking an age-structural transition perspective, understanding the proportion of older and younger dependents within a population and the relationship of this to non-dependents, allows consideration of the cohort composition and how this will alter over time. The reason why this is seen as important is that generally productive capacity varies across the life course flowing from a period of youth dependency, through high productive potential in adulthood, returning to a decrease in productive capacity in old age. When we are young adults we produce, consume, and save, and when we are older we reduce our production and consumption and begin to draw up on our investments. The macro-economic effects will differ depending upon the age composition of the population.

This perspective also allows us to view population change in terms of a shift between providers and dependents – the dependency ratio – and how this will typically move from a large percentage of young to a large percentage of old dependents during the demographic transition. Three broad groupings are currently defined by the UN Population Division: youth dependents aged under 15, working-age population aged 15–64, and elderly dependents aged 65 and over. The ratios thus comprise Elderly Dependency Ratios (EDR), the number of persons of working age (as currently defined by the UN as 15–64) per person aged 65 or over; Youth Dependency Ratios (YDR), the number of persons of working age per person aged 15 or under; and Total Dependency Ratios (TDR), the number of those 15–64 with those outside this age range. The shift in TDR from YDR to EDR may be another useful measure in determining when a population reaches demographic maturity.

Under these measures, the next decade will see a rapid shift toward increased EDRs in most industrialized countries. The EU25 EDR, for example, is set to double as the working-age population decreases by 48 million between now and 2050. The EU25 will change from having four to only two persons of working age for each citizen aged 65 and above. Italy, for example, will see its EDR double between now and 2050 to reach 70:100 workers. In contrast the UK will increase only slightly, reaching 67:100. By 2050, the EDR will also exceed 70:100 in Spain and Japan, while remaining below 40:100 in Denmark, Iceland, Luxembourg, Mexico, Turkey, and the US.

However, behind these statistics defining dependency and productivity lie the complexity of social and economic behaviors, and the ability of societies and individuals to adapt to changing circumstances. In particular, new cohorts enter adulthood with different characteristics, and this is reflected in their ability to remain healthy and productive over their life courses. Much of the concern over population aging is based on assumptions developed from the characteristics of current older populations. It is highly likely, however, that future generations of older adults will have higher levels of human capital – in terms of education, skills, and abilities – and better health profiles, and this will enable them to remain active, productive, and contributory for far longer. In addition, the significant contribution made by older adults in the informal sector providing family and community support and care in particular is now widely recognized. Many now question the relevance of EDRs as currently defined.

2.1.

Demographic drivers

The greater challenge going forward, however, maybe around the question as to how low fertility and mortality rates will fall. While it is widely believed that population aging is driven by falling mortality rates and increasing longevity, the major driver is falling fertility, which fundamentally alters the subsequent age structure of a population, and if sustained leads to increasing median ages, and demographic aging.

Two thirds of the world’s countries now have childbearing rates or Total Fertility Rates (TFR) which are near or below replacement level – crudely defined as 2.1. These are diverse and drawn from most world regions: including Asia, for example Hong Kong, Singapore, Korea, Japan, Thailand, Myanmar, and Vietnam; the Americas, for example Argentina, Chile, Canada, and the US; the Middle East and Africa, for example Mauritius, Iran, and Tunisia; and in Europe every EU27 country, with an EU average of 1.6 (Eurostat, 2013). The drivers behind such falls in the rates of childbearing are complex, but arise through such factors as technological advances and changes in the labor market which have altered the costs and rewards of marriage and child rearing (Blossfeld et al., 2005; Kreyenfeld, 2010; Sobotka et al., 2011). It is also argued that there have been ideational changes accompanying economic development which have led to individual autonomy and self-realization (Caldwell, 1980; Mills et al., 2011), so that reproduction is now a function of individual preferences and culturally determined norms (Morgan and Rackin, 2010; Iacovou and Tavares, 2011).

Indeed some demographers now argue that low fertility countries are in the midst of a second demographic transition which is keeping fertility well below replacement. Some countries may well be in a so-called low fertility trap which arises both through demographic factors, the fact that fewer potential mothers in the future will result in fewer births, and sociological ones in that ideal family size for the younger generations is declining as a consequence of the lower childbearing they see in previous generations. Such low childbearing will impact upon future population structures. For example, by the end of the century the percentage of children in most countries will have fallen to 15% or below, and those of working age, will have fallen to just over half. The caveat here is that of course 15–64 is an unrealistic proxy for working age even today, and it is highly improbable that it will define working life by the middle of the century. But this is one of the key messages, and unless policies support a change in behavior this will be the scenario by the middle of the century.

2.2.

Mortality rates

However, while population aging is primarily driven by falling childbearing, mortality rates have also been falling and this also has significant impacts. As the bio-demographer Carnes has pointed out (Carnes, 2014) humans have been designed to live long enough to reproduce and ensure the survival of their offspring. This is the “essential life span.” But in an aging population most of us live well beyond this “essential life span” – the twenty-first century will see life extension being the common experience for most people alive today. There appear three particularly pertinent questions.

• Will increases in both life expectancy and in life extension or longevity continue? In other words will...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright
• Contents
• List of Tables
• List of Figures
• Acknowledgments
• Notes on Contributors
• List of Abbreviations
• Demographic Aging as a Challenge to Modern Societies
• Part I: The Multiple Facets of Population Aging
• Part II: Pension Systems under Pressure
• Part III: Retirement and the Changing Images of Old Age
• Part IV: The Problem of Generational Justice
• Name Index
• Subject Index