How can a smaller working age population care for an increasingly large elderly population?
The Rabbit No Longer Sits In The Middle Of The Python But At Its End.
During the 1980s and 1990s the European economies were blessed by an increased number of people of working age and a relatively steady number of retirees. This caused a population bulge in the middle of the age spectrum – a bit like a rabbit swallowed by a python. But the population bulge of baby-boomers is now getting close to retirement age and it isn’t being replaced by a similar number of younger workers.
Declining birth rates plus increased life expectancy mean that the developed regions of the world are facing a demographic timebomb. This timebomb will mean a smaller workforce will have to care and pay for a larger and larger retired population.
OECD predictions suggest that the European Union [and Japan] is going to be much more badly affected by this timebomb than the USA. Although the number of people aged 65 and over as a proportion of those aged 20 to 64 will jump from 22% to 37% in the USA by 2050, it will double to 52% - from 26% in the EU. The European Commission estimates that Germany will be particularly badly affected by these population trends. 10.3% of German national income already goes on pensions. By 2040 pensions will be consuming 15.4% of GDP. Taxes will have to rise to pay for this pensions bill and when taxes rise economies tend to slow down. The Commission estimates that the EU’s underlying average growth rate might fall from 2.1% to a meagre 1.3%.
Within the UK, Scotland faces the most dangerous timebomb. Official estimates point to a population drop of 10% by 2043. Furthermore, a much larger proportion of the 4.5 million people expected to live in ‘Scotland 2043’ will be retired – requiring pensions, extra medical treatment and more residential care from a much smaller working age population.
Can we defuse the timebomb?
For policymakers wanting to defuse the demographic timebomb there are a variety of options:
A HIGHER BIRTH RATE. The average age for motherhood in Britain is 29.3 years. Twenty years ago the average British mother gave birth to her first child two-and-a-half years earlier. This delayed start to childbearing is one of the factors that has seen the number of annual births fall to under 600,000 in Britain and the number of abortions rise to nearly 200,000. Many explanations have been posited for ‘the empty cradle’. Some say that the modern career woman doesn’t want to give up her salary for motherhood. Others echo that materialist couples are preferring a better home and a better car (etc) to expensive children. Jill Kirby, for the Centre for Policy Studies, points to a family unfriendly tax and benefits system. David Willetts has argued that higher birth rates will not be delivered by trying to return women to the home. Instead, he says, governments need to help women to more easily combine work and motherhood. Some conservatives worry, however, that children who don’t have full-time mums or dads* can suffer a range of problems.
HIGHER LABOUR MARKET PARTICIPATION RATES. One way of increasing the size of the workforce is to raise the retirement age. This simultaneously increases the number of workers and reduces the number of dependent retirees. Politicians tend to be reluctant to upset people looking forward to nearing retirements, however. Two other ways of increasing the workforce are presented by technology and smaller government. Technological advances often allow greater economic product to be created by smaller numbers of workers. Technological innovations in healthcare can be doubled-edged, however. They can ensure cheaper medical treatment of pensioners but further increase longevity. Increased longevity is only going to further increase pension bills. Smaller government – achieved by eliminating the fat within the bloated state apparatus – could divert workers from less productive bureaucratic employment to more productive private sector activities.
GREATER IMMIGRATION. One way of increasing the workforce is to encourage immigration of young workers. This can be ethically problematical if rich western nations ‘steal’ healthcare or other vital professionals from developing nations. In addition, Europe, in particular, has not always found it easy to integrate large numbers of people of different religions and skin colours. Immigration may not even be an option soon, anyhow. Reducing birth rates in the developing world mean that the number of people that will be available to emigrate to ‘the developed world’ is falling fast.
EUTHANASIA. No mainstream politician will say that euthanasia is being seriously considered as an option for the western world’s underpopulation crisis. But many countries will follow Holland’s deadly example if the right-to-die movement grows in power – as it probably will. The combination of this right-to-die movement and constant talk of ‘the burdensome old’ will convince many people that they have a duty-to-die. Britain’s monstrous Baroness Warnock has already told elderly people that – like ageing elephants – it might be right for them to choose an early death.
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