Sunday, 22 June 2014

The changing age-structure of Western populations

The most commonly cited measure of a population's agedness is the old-age dependency ratio, namely the number of people aged 65+ for every person aged 16-64. In previous posts, I have examined how this measure is expected to change in the US and UK, respectively. However, changes in ratios can often be difficult to interpret. An alternative measure of agedness is simply the percentage of the population aged 65+. This is plotted below for eight major Western countries over the the period 1950-2050. Data are from the UN World Population Prospects; figures for 2015-2050 are based on the medium fertility scenario.

Overall, the percentage age 65+ is projected to rise by approximately 10 percentage points between now and 2050, meaning that, by 2050, more than one in four adults will be older than age 65. In Germany and Italy, as many as one in three adults will be older than age 65. Some have argued that these changes will place an increasing burden on social welfare systems, particularly healthcare and pensions. However, an interesting countervailing perspective has been advanced by two demographers in the BMJ. They suggest looking not at the number of people aged 65+ but at the number of people with life expectancy less than or equal to 15 years. Their suggestion follows from the idea that healthcare costs are accrued mainly in the last 10-15 years of life, rather than simply the years of life after aged 65.

Using data from the ONS, they show that the percentage of people in England and Wales with life expectancy less than or equal to 15 years is projected to be more or less flat up to 2050. This implies that the increasing agedness of Western populations may not present such a burden for social welfare systems after all. As at least one commenter on the article has pointed out, however, state pensions ages will still need to be raised considerably in order for pension systems not to be overwhelmed. Indeed, the ONS recently reported unfunded pension liabilities in the UK of at least £4.7 trillion (over 320% of GDP).

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