Turbo greying

Credit ratings agency Moody’s published a report on ageing last week. Using the recently updated UN population projections, it mapped the population change in each country. It concluded that the unprecedented pace of ageing will slow down economic growth over the next two decades.

And it’s not just a problem for the rich West:

Aging is not just a developed-world problem as it is generally believed. Many emerging markets are already classified as aging. Countries like Russia, Thailand, Chile and China have rapidly deteriorating demographics. Even relatively young countries such as Brazil and Turkey are aging. Moreover, the pace of aging in some of these countries is more rapid than in developed economies.

The full report is behind a paywall but a couple of the newspapers ripped some charts from it.

These from the Daily Mail:

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City AM has some interactive maps based on the same data.

The projections to 2030 don’t really give the full story though because it’s what the UN thinks will happen in the following 2 decades that’s really interesting. Some of the countries classed as “Not aging” on these charts will age rapidly between 2030 and 2050.

Just as countries have industrialised and developed faster than the West did, their populations will age more quickly too. As a UN report explained (my emphasis):

[P]opulation ageing is taking place much more rapidly now in developing countries than it had in developed countries in the past. For example, it took France 115 years and Sweden 85 years, and it will take the United States of America 69 years, to change the proportion of the population aged 60 years or over from 7 per cent to 14 per cent. In contrast, it will take China only 26 years, Brazil 21 years and Colombia 20 years to experience the same change in population ageing. In the next 30-year period, from 2010 to 2040, fast population ageing will take place mainly in the less developed regions.

This is particularly true for the richer emerging economies, those the World Bank classes as upper-middle-income countries. The ratio of the population over 65 to the working age (15-64) population rises more rapidly for these countries than it does for the rich economies.

Ageing World Bank

As these countries become more affluent, their people become more educated and healthier, their birth rates fall and, crucially, their life expectancy rises. Their populations age for the same reasons as they did in the west but it happens over a much shorter time.

Here’s the UN projection for G7 countries:

Ageing G7

The populations in the rich nations will age over the next 35 years, though Japan already seems to be in a league of its own.

Now look at the projections for the BRICS.

Ageing BRICS

The speed at which the populations of China and Brazil age is mind-boggling. They go from African and Asian dependency ratios to European ones in the space of 40 years.

The projections for South-East Asia are just as dramatic.

Ageing S E Asia

Brunei, Singapore, Thailand and Vietnam age at a remarkable pace.

It’s a similar story in the Middle-East.

Ageing Mid-East

By 2050, Turkey, Iran and Lebanon have almost caught up with Europe.

And for North Africa.

Ageing N Africa

Tunisia and Libya leading the way.

And for the Arabian Peninsula.

Ageing Arabia

This is where the projections are most striking, with many of the Arabian countries ageing at breakneck speed after 2030.

If the UN is right, then, population ageing in the more affluent Asian and Latin American countries will run at a much faster rate than that of Europe and North America. This will speed up the ageing of the population globally.

By 2050, most countries in the world will have a higher proportion of their population aged over 60 than the UK has now.

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Source: United Nations

Last month, the OECD warned that economic growth is likely to slow down over the next few decades as the proportion of working-age people in the world declines. Without a compensating increase in productivity, reducing the proportion of workers will lead to slower growth. McKinsey estimated that advanced economies would have to increase their productivity growth rates by 60 percent to offset the effects of ageing.

That is unlikely to happen. Those born in 2000 will probably see much lower per capita GDP growth during their lifetimes than those born in 1980.

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Even if we redefine what we mean by old age and increase the labour force participation rates among those over 65 we will still find ourselves with a smaller proportion of people in the workforce and therefore a higher dependency ratio. Unless the robots deliver a huge leap in productivity, we will not see the sort of growth rates we enjoyed in the last half of the twentieth century. Just at the point when we need more wealth and tax revenues to look after the elderly, economies around the world will be slowing down.

It’s difficult to over-state the importance of global greying. We have experienced nothing like it before. For most of history, the population profile was pyramid-shaped, with a lot of young people and a small number of old people. By the middle of this century it will be beehive-shaped, with the middle-aged and elderly forming a much larger proportion.

World Population

Thanks to improvements in health and life expectancy, a lot of you reading this will still be around in 2050. By then, the proportion of the world’s population over 60 will have risen from a tenth to a fifth. This is one of the biggest things ever to happen to the human race, on a par with world wars, the industrial revolution and the development of farming. It’s going to change much of what we used to think of as normal, economically, socially and politically. And it’s happening with astonishing speed.

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10 Responses to Turbo greying

  1. John says:

    Based purely observationally on all the young women – apparently mainly from Eastern Europe – who are pushing child buggies around locally, it appears that Britain may well not be affected to the same extent by global greying.
    Our local primary schools are bulging at the seams, with added class rooms having to be added, and it is becoming rapidly apparent that the conventional level of secondary school places’ provision will also be inadequate.
    I live in Hertfordshire near London and it may be what I am describing is unique to where I live.
    Anecdotally, however, from talking to relatives in areas like Bournemouth and North Wales, it seems they have similar concerns with regard to school places locally.
    On the question of productivity, if the basic scenario you are describing is coming into being, this will require low productivity activity anyway, i.e. personal care for aging and aged people.
    It is not possible to enhance the productive efficiency of care workers to any great degree without also reducing the quality of care provided – and who would really want that?
    It may be that the world will have to draw breath for some decades while the current increased numbers of elderly people work their way through the pipeline – ending, of course, in death – and this will then leave a younger population to carry on in the future untrammeled by the former numbers of elderly people to have to cope with. Is that not a correct analysis?
    Growth is not everything. Adequate income and life style enjoyment is what most people want.
    The world is rich enough to meet the humble aspirations of all people – aged or otherwise.

  2. SK says:

    Looking at so long-term we should be hoping that basic income is part of life and society..

  3. P Hearn says:

    Will need to put things like the state pension onto a non-Ponzi basis sooner rather than later. The notion that today’s taxpayers fund next week’s pension payments clearly won’t hold out much longer.

    The post-war lie on which much of the welfare state is based is drawing to a close.

  4. rogerh says:

    The OECD numbers blame ageing for a drop from 3.6% to 2.4%, not good but not disastrous. But what of McKinsey’s claim that the developed world will have 90 to 95 million workers who’s skills are too low to be useful. So does this mean the education business is falling down on the job or does it suggest that a hunter-gatherer species was never really set up to produce sharp brained workers in bulk?

    Then suppose we focus on education – what to teach? How easy and effective is it to train and put to work an engineer – think high-end workstations, links to manufacturing plants and marketing/sales operations. But putting to work an accountant or lawyer say is a bit simpler – think laptop, office space and WiFi. So market economics will tend to push the engineers and their productivity toward low-wage regions whilst the accountants, lawyers etc will tend to accumulate in the high wage economies.

    To my mind the big issues are the limitations of human beings en-mass and the limitations of democratic politics, ageing seems pretty small beer compared with the unpleasant changes to come.

    • John says:

      However much technology marches on, there will always be working positions which do not necessarily require high levels of technical or academic skills.
      Do you need a degree to be a lollipop man or woman? Just reasonable common sense, good eye sight and an ability to get on with a mix of people should be sufficient.
      The majority of care workers will need some training but not necessarily to any particularly high standard. Compassion, empathy and decency are principally what is needed from them.
      There will also remain production line type jobs in the future and – as I know from experience – they are the kind of job which requires minimal training and just initial slight mentoring while learning what are essentially simple repetitive tasks.
      The worst that can happen is we end up consuming slightly less than before.
      Is that some sort of tragedy?
      Many people – myself included – have been going through a similar exercise over the last 4 or so years. I am still here. I am still surviving.
      My life may not be as affluent as it once was but that – as the saying goes – is how the cookie crumbles for now.
      My affluence may well continue to slowly deteriorate but there is an expectation – realistic, I think – that once us old ‘uns have shifted off this mortal coil the young ‘uns will experience a much better life after we are all gone.
      How’s that for being cheerful – and optimistic?

      • rogerh says:

        At present the mid and upper range retirees in the UK at least have fairly generous (over generous?) pensions. We can see that the next crop will not be so well provided and indeed provision looks like falling off fairly steeply. But the beehive shape will remain. The implication is more spending on State pensions and support and less wealth trickling down.

        With fewer workers able to contribute above and beyond their mere maintenance cost, the State will find itself stretched. So I agree that our affluence will decline but I don’t think the passing of the boomer generation will stop the decline at all. The idea that the West can stave off this problem by pulling in our belts a bit and providing ‘high-end’ services seems to me a recipe for unrest at home and emigration for the able.

        • John says:

          The solution – it seems to me – is for central government to introduce compulsory schemes for eventual pensioners, which ensure them an adequate – not necessarily palatial – way of life after they retire. They need to get on with it now and the trades’ union movement should be campaigning strongly on this issue on behalf of all workers – employed and self-employed.
          Without pensioners’ effective (i.e. backed by spending money) demand in future there will be far fewer jobs generated in future. It could end up with a race to the bottom for all concerned.

        • Thomas Womack says:

          Emigration for the able might well be backed up by immigration of new workers to be paid with the hoarded assets of the old people that they’re caring for. We’re not Japan, so we can believe that workers grow on aeroplanes; giving Turkey, Algeria, Egypt and Iran EU membership would probably be enough to care for the cohorts of the present EU-28.

          • John Dowdle says:

            Actually, there is merit in your suggestion.
            If older people could sell their homes and move to parts of the world where the climate is milder and the people there speak English, this would be a useful solution.
            If the places involved are nice enough, this would serve to attract younger members of their families to visit them, which would help all family members staying personally in touch.
            Skype and emails are also useful technology for this purpose to avoid feelings of loneliness.
            One thing the government would need to do – because no one else can do it – is to ensure high quality NHS healthcare services are also available there in conjunction with the local and national health services, which should serve to uplift existing services in the area.
            In essence, retirement camps – like holiday camps – could be constructed in foreign climes and staffed by a combination of local and UK (contracted) staff, which would provide extra incomes to local workers and the option of seeing and working in different world places for UK health workers.
            Parts of southern and central Africa – Commonwealth countries – could serve this purpose well.
            In selling their homes to fund their lives in retirement camps/homes elsewhere, UK pensioners would then provide all or many of the homes required for younger immigrants and their families.
            To effect this as a policy, the UK government will need to hold discussions with Commonwealth countries with regard to their immigration policies and to meet the healthcare costs involved.

  5. JoJo says:

    Who is to say that a government-sponsored maximum-allowed-lifespan will not be in operation in 50-years time?
    Another global conflict, with the nuclear option being used, should result in a significant lowering of the population (especially in Europe).
    Then there is the high probability of the global climate descending into another minor, or major, period of glaciation, which will lead to starvation (again, Europe getting it in the neck)

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