Ageing

OECD

• Publisher: OECD
• Year: 2015
• eBook ISBN: 9789264250031
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

Introduction

Our societies are ageing

The Aeon Mall in the Japanese city of Funabashi offers pretty much everything you’d want in a mall – groceries, clothes, electronics and more. But it has a few extras, too – large-print signs, clinics offering diabetes tests, 5% discounts on pension day, slow-moving escalators, same-day deliveries of bifocal spectacles.

If you haven’t guessed already, this is a mall with a mission – to sell to the elderly. Why? “These are the wealthiest, most active, healthiest and longest-living retirement generation in the history of the world”, Aeon’s Jerry Black told the Financial Times.

Welcome to your future...

Across the world, societies are ageing – there are fewer younger people and more older people. The numbers are striking: In Japan in 1963 only around 1 in 16 people was aged 65 or over; a half century later, in 2013, the proportion was 1 in 4. Over the same period, Italy saw its elderly population double from less than 1 in 10 to more than 1 in 5. These countries are not alone: Today, there are over 900 million people in the world over the age of 60. By 2050, that number is forecast to rise to 2.4 billion.

The ageing of our societies is a slow and gradual process and not one most of us really notice. But make no mistake, we will all feel its impact.

This edition of OECD Insights: Debate the Issues examines how this great demographic shift will be felt in almost every aspect of our lives – in jobs, in healthcare, in pensions and personal finances, in economic growth, in transport and in rich countries and developing countries.

We’re having fewer children…

There are two main reasons why our societies are ageing – fewer children are being born and people are living longer.

Birth rates have been falling across much of the world in recent years, and OECD countries are no exception. In 1970, the average woman in an OECD country had 2.7 children in her lifetime. Today, the figure is around 1.7. That number is significant because it now means that in all but one OECD country (Israel), birth rates have dipped below the replacement rate of 2.1 children that’s needed to maintain a stable population size (excluding any impact from migration).

Birth rates are falling for numerous reasons – people are marrying later; women are waiting until they’re older to start having children; and families are opting to have fewer children. All this, in turn, reflect broader social trends, in particular the fact that women in developed countries now typically match – and sometimes exceed – men when it comes to education and are making fast strides in the workforce. Other factors can also play a role, including the availability of childcare, the chances of well-paid work and whether or not families can find affordable housing.

Falling birth rates are not just a feature of life in rich countries – they’re evident in many developing countries, too. In India in 1970, the average woman had 5.5 children; by 2012, this was down to 2.5 children. The reasons for these declines can mirror those found in developed countries, but other factors also play a part. These include the decline of subsistence agriculture, where a family’s chances of survival can depend on having enough hands to work the fields. Some academics also argue that TV has played a role: Popular soap operas, they believe, may popularise a “modern” image of the family, where women work and are more involved in making decisions.

… and we’re living longer

The second key reason why our societies are ageing is simply that more of us are living for longer.

Average life expectancy at birth in Japan is now just over 83 years, rising to just over 86 for women (who live longer than men on average). Japan is a world leader in longevity, but it’s by no means exceptional – in well over half of OECD countries, life expectancy is now above 80. The improvement over the past half century is striking. In 1960, Japanese average life expectancy was just over 68 years.

Look further back and the rise in life expectancies is even more striking. In France, for example, it’s estimated that a child born in the middle of the 18th century could expect to live to only the age of 25. By the start of the 21st century, she could expect to live to over 80. However, it’s easy to misread these figures. Even back in the 18th century, many people would have lived well into their 60s and even 70s. The reason the average figure is so low is that very high numbers of children died in birth or in the first five years of their life.

Indeed, much of the major rise in life expectancy in the early and middle 20th century in wealthy countries reflected the fact that more and more children were surviving birth and living into adulthood. But that wasn’t – and isn’t – the only factor in rising longevity. Major improvements in nutrition and access to clean water as well as in healthcare, such as mass vaccination, now mean that many people alive today can expect to live well into their 90s, and even beyond.

Ageing means we may need to work for longer…

There’s much to be said for people living longer. For individuals, it offers the prospect of pursuing multiple careers followed by a long retirement with time to travel, opportunities to pursue pastimes, and more time with the grandkids.

Societies benefit, too: Many older people are willing volunteers and can also be a great resource for their families, offering wise advice, stability – and free childcare. And they contribute to the economy, both as workers and consumers – according to one estimate, the over-50s account for over 60% of consumer spending in the United States.

But there are downsides. Even though more elderly people are continuing to work past 65, the coming decades will still see a significant shift in “dependency ratios”, the balance between people of working age and people of non-working age – i.e. young people and, increasingly, retirees. For example, in Spain in 2010, there were about two workers for every dependent person; by 2050, the OECD forecasts that the ratio will fall to one for one. Similar trends are forecast for all OECD countries and many emerging economies.

That shift has implications for the funding of pensions and our own personal finances. It’s also likely to create intergenerational stresses. These will be felt at the family level – who will care for grandma? – and across societies: If a shrinking workforce is supporting a growing elderly population, will there be enough left to invest in young people?

In response, many governments are raising the retirement age. Some countries have room for manoeuvre to encourage more people to work longer. For example, between the age of 25 and 54, roughly equal numbers of people are working in Japan and France – about 8 out of 10 people. But above the age of 55, a sharp gap emerges: In Japan, just under 7 out of 10 are still working, but in France the proportion falls to below 5 out of 10.

… and may raise health spending.

Even if they may complain of occasional aches and pains, around 2 out of 5 older people in OECD countries (65 and over) report being in good health, a proportion that rises to an impressive 4 out of 5 in New Zealand. Still, there’s no doubt that as people age, health problems loom larger. According to data from Europe, while women at the age of 65 can on average expect to live around another 20 years, only around half of that period will be lived in good health.

In the coming decades, the impact of this will be at least partly reflected in rising healthcare costs. Spending on health is already substantial in OECD countries, accounting for at least 8% of GDP in most countries and rising to almost double that in the United States. Spending has been rising steadily in recent decades and is likely to continue growing.

Of course, ageing will be only one factor in driving up health costs. Costly new medical technologies and the spread of lifestyle diseases like diabetes will also play a role. Still, ageing, and associated conditions like Alzheimer’s, will certainly add to the burden of funding healthcare and long-term care. The challenges go beyond funding – health systems will need to be rethought to better serve the needs of an ageing population, focusing more on treatment of chronic conditions rather than medical emergencies.

But there will be a powerful upside to health spending, too. Thanks to new forms of treatment, more and more older people will continue to lead active lives well into their 70s and beyond. Innovations in other areas, including transport, will also go some way to ensuring that population ageing is not just a challenge but also an opportunity.

References

Cohen, N. (2014), “The Silver Economy: Healthier and wealthier”, The Financial Times, www.ft.com/cms/s/2/08bff556-52c7-11e4-a236-00144feab7de.html#slide0.

Economist, The (2009), “Falling fertility: Astonishing falls in the fertility rate are bringing with them big benefits”, The Economist, www.economist.com/node/14744915.

INED (2006), “Life expectancy in France”, Graph of the month [sic], Institut national d’études démographiques, No. 5, www.ined.fr/en/everything_about_population/data/france/deaths-causes-mortality/life-expectancy/.

Japan Times, The (2012), “Aeon opens...

Table of contents

• Title page
• Legal and rights
• OECD Insights: Debate the Issues
• Introduction
• Ageing in numbers
• The new demography of death
• The future of development is ageing
• Senescence in the city
• Health systems are still not prepared for an ageing population
• When you are old and grey and full of sleep
• Using big data in the fight against dementia
• Smarter, greener, healthier and more productive: The new old
• Work longer for a healthy economy and a happy home
• Ageing and pensions
• How can capital markets serve pension systems in the European Union?
• No old person left behind?
• How’s life in old age?
• About the OECD