Autumn Speakers Series: Ageing and economic growth – not all doom and gloom
Baroness Sally Greengross is Chief Executive of the International Longevity Centre – UK and has been a crossbench (independent) member of the House of Lords since 2000. She Co-Chairs four All-Party Parliamentary Groups: Dementia, Corporate Social Responsibility, Continence Care and Ageing and Older People. She was awarded a Special Lifetime Achievement Award at the BGS 70th Anniversary Reception on 6 March 2017. She will be speaking at the upcoming BGS Autumn Meeting in London.
What are the economic and societal effects of a global ageing society and the increasing need for a healthy older population who will be employed into their seventies?
Firstly it is worth saying that ageing and economic growth is not all doom and gloom. Population ageing is a global phenomenon. The rate of growth in older people (people aged over 65) is expected to far outpace the rise of the working age population (people age 15-64). The old age population will grow by more than 300 per cent over the course of this century by comparison with the working age population which will grow by less than 50 per cent.
Developing countries will age most rapidly of all seeing a dramatic increase in the numbers of older people. Less developed countries will, for instance, see their older populations rise by nearly 4.5 times by the end of this century. By contrast, developed countries are likely to see more subdued growth in their older age populations, rising by around 70 per cent.
What does this mean for the dependency ratio?
Rapid population ageing in developing countries will result in sharp changes in the old age dependency ratio – which, in this context, is taken as the number of working age people for every older person.
According to ILC-UK calculations based on UN population projections, the world’s least developed countries will go from having around 16 working age people for every older person to around four by the end of this century.
The developed world, including the UK, by contrast, will not experience such significant change. The developed world currently has 3.7 people of working age for every older person and this is expected to fall to 1.9 by the end of the period.
Why ageing matters to public finances and the economy
Longer lives are leading to longer periods of time in retirement, but governments may not be able to afford to pay pensions, and provide adequate health and social care for a growing older population, particularly with growth in the working age population stagnating or in some cases falling. This will have implications for economic activity as evidence suggests that a rising elderly share of the population is associated with lower productivity per person, reduced investment and lower inflation.
A slowdown or fall in the numbers of working age people will slow or reduce employment levels, curtailing economic potential and the ability of working age people to pay for their elders through reasonable taxation, without being over-taxed to the point of stifling disposable incomes and economic growth.
We are arguably already in a “new normal” of slower global growth across the developed world. Based on recent IMF forecasts, economic output per person across advanced economies may be as much as 40 per cent lower in 2021 than we would have expected. The main reason is that workforce productivity growth has stagnated since the financial crisis. Indeed, in a UK context, we are experiencing the slowest period of productivity growth in the last 100 years (see chart).
Source: ILC-UK calculations based on Bank of England, Three Centuries of Macroeconomic Data
What can we do about it?
One way to increase economic output is to support employment beyond what has traditionally been considered “working age” – 16-64. This means that the total size of the labour force can continue rising even if the average age of the population is also increasing. The Nordic countries have employment rates amongst the over 70s in excess of 20 per cent so it is reasonable to assume that other countries can deliver similar gains in employment at older ages. But for this to happen there needs to be political will to invest in longer, healthier lives and provide support for those who may have health problems in the workplace.
Geriatricians and all clinicians working to deliver age-appropriate health services have a role to play here. A key part of the prevention agenda is ensuring that older people are treated with dignity and respect, live healthy, independent lives, and where possible continue to make a full social contribution, including occupation if desired.
Continuing to work may be important financially but occupation is also a major source of wellbeing and social connections. Fulfilling work that suits the individual can give a sense of purpose, and keep people physically and mentally active. As well as maintaining general health, creating and maintaining more age-friendly workplaces by providing more flexibility in terms of working hours, conditions and adaptations and adjustments where necessary, are a key element of maintaining that contribution. Geriatricians could play a central role in working with employers to bring those circumstances about, where the positivity of older age, in terms of wisdom, experience and maturity, is allowed to outshine the negativity of burden and decline.