Technology | 2009.02.11
George Magnus: The time-bomb of Britain's rapidly ageing population
The Spanish film-maker Luis Buñuel reportedly once quipped that age is not important unless you\'re a cheese. Quite right, and who would not see longer and healthier life expectancy as something to celebrate? But beyond this, a darker side to the issue of a rapidly ageing population also looms.
For the first time, Britain\'s over-65s outnumber people aged under 16. By 2035, these two age groups will have grown by 4 million (or nearly 50%), and 500,000, respectively. The working age group in between will be a little smaller. These developments capture the economic essence of ageing populations, namely the sharp rise in economic dependency of older citizens on those of working age. For the UK, this means that while there are now four people of working age supporting each pensioner, by 2035 it will be just two and a half, and by 2050 only two. The financial and economic crisis is accentuating the urgency of addressing these demographic trends, not least because several hundred million baby boomers (17 million in the UK, 78 million in the US) played a critical part in the economic boom of the last 20 years - and are now spearheading the march towards an ageing society.
The UK, note, is one of the better-positioned advanced nations when it comes to rapid ageing. Japan, Germany, Italy, Spain, Russia and all of eastern Europe are in a far worse situation. Even China is ageing more rapidly than almost anywhere else. Its working-age population will start to decline next year - at about the same moment as in Germany. This is a global phenomenon. It may lack the drama of the current economic crisis, and the visual imagery of the risks in climate change, but it is no less important or urgent.
The unique shifts in age structure have enormous implications for people, society and the economy. For individuals, the key question concerns the inadequacy of retirement savings - being destroyed by the financial crisis as equity and house values plummet, and because of the collapse in interest rates.
For society, the main issues concern the provision of health and social care services, the nature of work and the workplace, and the investment made in human capital, or education and lifetime skill formation. These all require more funding, whether from the tax system, other public expenditure savings, public-private initiatives, or economic growth. The prospects for the next few years are not propitious, comprising anaemic growth and a very tough public spending round in 2010-11.
For the economy, the challenge is to generate the growth and financial resources needed to meet age-related spending needs. Because of the measures needed to stop the banking system from collapsing, public borrowing and public debt are already rising steeply. By 2010, UK public debt as a share of national income may have doubled to about 70%. While scary, this is by no means unprecedented or irreversible, but how will we then be able to afford to pay the bill for age-related spending?
Someone needs to give some serious thought to ageing society policies. This must include higher participation rates of women, and people aged over 64 in the labour force; realistic ways in which immigration might help to boost the labour force; the rigorous pursuit of better educational attainment standards and lifetime learning facilities; a long-term programme designed to assure adequate financing for pensions and other age-related spending; and public education about the rapidly ageing population.
None of this is to suggest that the government and local authorities in the UK, for example, have been idle. In the last two years we have had new programmes in the form of Putting People First, the establishment of the Care Quality Commission, and the Carers\' strategy. The LinkAge Plus initiative, designed to deliver integrated goods and services to older citizens, has been under way in eight pilot areas for a few years. The government has introduced age-discrimination legislation, sought to encourage local authorities to use new technologies to strengthen health and social care, introduced housing programmes for the elderly, and emphasised the need for engagement with older people that gives them a voice in the delivery of care.
These initiatives address mainly quality of life issues. What they do not do is constitute a coherent strategy that addresses the adverse economic and social effects of a rapidly ageing population, or the policies that can be put into place to avert them. The economic crisis has come at an especially bad time. It is having a shocking impact on older citizens who depend on their own meagre and battered resources. And it risks deferring still further a comprehensive approach to the management of our ageing societies.
• George Magnus is senior economic adviser for UBS investment bank and author of The Age of Aging
george.magnus@ubs.com
For more information, please visit
http://www.guardian.co.uk/commentisfree/2009/feb/04/ageing-population-care
