DeseretNews.com

Sunday, August 29, 2004

Cost of aging populations will be felt around the world

By Eduardo Porter New York Times News Service

The good news is we are living longer than ever before. The bad news
is it’s going to cost us.
As global fertility rates grow more slowly and increasing prosperity
enhances life expectancy, a complicated side effect has emerged: big chunks
of the world are starting to look like geriatric wards. It is uncertain how
the world will pay for them.
A larger population of retirees, living longer, mixed with fewer young
people means that the labor force will shrink as a percentage of the total
population. With fewer people at work to support everyone else, living
standards could fall.
Aging will put stress on government finances, drawing more and more
money from budgets to pay for pensions and health care. Interest rates could
rise sharply as a result, with the old drawing down their lifelong savings,
depressing savings rates across the industrial world.
The upshot is that the bulging cohort of the elderly will probably be
forced to work well into what today is considered old age and then get
stingier pensions when they eventually retire. Moreover, their children will
have to work harder to support them.
“This is the result of desirable trends,” says Joseph Chamie, director
of the U.N. population division. “Lower mortality is very good news. But
we’ve got to adjust the system.”
Consider Japan. With half of the population over the age 41, Japan is
among the oldest countries. With one of the lowest fertility rates – 1.32
children per woman – by 2050 there will be about 110 million Japanese, down
from 127 million in 2000. And half of them will be over 53.
According to projections by economists at the Organization for
Economic Cooperation and Development, Japanese public spending on pensions
and health will increase by some 3 percent of the gross domestic product by
2050. (The total U.S. budget deficit, which is considered to be too large,
is 3.5 percent of the gross domestic product.)
Aging will also whittle away Japanese prosperity by cutting into the
work force. In 2000 there were almost three people of working age for every
person over 60. According to U.N. projections, by 2050 there will be less
than one. By 2050, Japan’s per capita income would be 23 percent lower than
it would be if the dependency ratio remained stable, according to the OECD
study.
This profile is far from unique. By 2050, half of all Italians and
Spaniards, for example, will be over 52 years old.
Even in the United States, the youngest of the wealthy nations, those
over 65 are expected to represent 19 percent of the population in 2030, from
12 percent in 2000, when the bulge of baby boomers reach the autumn of their
lives. Even by mid-century, when most boomers will be dead, 21 percent of
the population will be over 65.
The poor world might help ease the rich world’s plight. Broadly
speaking, higher fertility rates and lower life expectancies mean that
poorer nations are much younger than rich ones. In 2000, the median age in
India was 23. Half the population of Brazil was under 25. According to U.N.
estimates, virtually all of the increase in the world’s population – from
6.1 billion in 2000 to 8.9 billion in 2050 – will come from the so-called
developing world.
Developed countries are relying on some of this youth by investing in
factories in poorer nations and drawing workers by easing immigration
restrictions.
Yet such steps are likely to be only temporary palliatives, because
countries with the pool of workers are getting old, too. The median age of
China’s population in 2000 was 30, five years younger than that of the
United States. By 2050 it will be 43.8, four years older than America’s. And
in India, half the population will be over 38.
The countries that will most suffer from aging populations are in the
former Soviet bloc. Today, the 10 nations with the lowest rates of
population growth are, in order, Estonia, Latvia, Georgia, Bulgaria,
Ukraine, Lithuania, Russia, Hungary, Armenia and Belarus. Estonia’s
population will halve by 2050, to 657,000, and 42 percent of those left will
be more than 60 years old.
“We’ve gone from Pampers to Depends,” says Chamie.
The political battles of the future will be about who pays for them.