TOPIC: AGEING POPULATION

The Decline in the Working-Age Population

A rapidly aging population means there are fewer working-age people in the economy. This leads to a
supply shortage of qualified workers, making it more difficult for businesses to fill in-demand roles. An
economy that cannot fill in-demand occupations faces adverse consequences, including declining
productivity, higher labor costs, delayed business expansion, and reduced international competitiveness. In
some instances, a supply shortage may push up wages, thereby causing wage inflation and creating a
vicious cycle of price/wage spiral.

To compensate, many countries look to immigration to keep their labor forces well supplied. While countries
such as Australia, Canada, and the United Kingdom are attracting more highly skilled immigrants,
integrating them into the workforce can be a challenge because domestic employers may not recognize
immigrant credentials and work experience, especially if they were obtained in countries outside of North
America, Western Europe, and Australia.

Increase in Health Care Costs

Given that demand for healthcare rises with age, countries with rapidly aging populations must allocate
more money and resources to their health care systems. Healthcare spending as a share of gross domestic
product (GDP) is already high in most advanced economies; one challenge that advanced economies face
is to ensure that when they increase spending, healthcare outcomes actually improve.2

Additionally, the healthcare sector in many advanced economies faces similar issues, including labor and
skills shortages and increased demand for at-home care. All of these cost escalators can make it more
difficult for existing systems to handle the increased prevalence of chronic diseases, while also addressing
the needs of large and growing populations of older adults.3
Increase in Dependency Ratio
Countries with large populations of older adults depend on smaller pools of workers from which to collect
taxes to pay for higher health costs, pension benefits, and other publicly funded programs. This is
becoming more common in advanced economies where retirees live on fixed incomes with much smaller
tax brackets than workers. The combination of lower tax revenue and higher spending commitments on
health care, pensions, and other benefits is a major concern for advanced industrialized nations.

Changes to the Economy

An economy with a significant share of older adults and retirees has different demand drivers than an
economy with a higher birth rate and a larger working-age population. For example, rapidly aging
populations tend to have greater demands for health care services and retirement homes. Although this is
not necessarily negative, economies may face challenges transitioning to markets that are increasingly
driven by goods and services linked to older people. As advanced economies become older over the next
15 years, it remains to be seen whether immigration will fill the voids in sectors left by aging populations or
whether the broader economies will have to adjust to changing demographics.

Which countries have the largest percentage of older adults?

Japan is the country with the highest proportion of its population composed of older adults, with 28.2% of
people being 65 or older. Other countries with large percentages of older adults include Italy, with 22.8% of
its population 65 or older, and Finland, with 21.9%.4

What is the youngest population in the world?

The world's youngest countries are mostly in Africa, with Niger having the lowest median age of just 15.2
years. Having a young population can be both an opportunity and challenge for nations.5
How can countries deal with aging populations?
Countries are currently exploring a number of different policies to adapt to economic shifts due to aging
populations. A common proposal set forth includes delaying the age of retirement, which effectively
lengthens the amount of time that individuals spend working. Other possibilities include decreasing social
security benefits, in cases where there are potential deficits, and increase taxes to pay for them.

The Bottom Line

Many industrialized nations are grappling with aging populations, which often correspond with a decline in
working-age adults and a rise in health care costs. These issues can cause economic strains, particularly
when it means that a smaller proportion of the total population has to bear significant social safety net
costs. Countries with aging economies are currently exploring a number of possible paths to adapt to these
and other economic shifts.

The pros and cons of an ageing population

POPULATION AGEING is a term used to describe the situation where the average age (median age) of the citizens
of a country increases as a result of longer life expectancy of its citizens or a reduction in the number of births per
annum.

The concept of an ageing population is a global phenomenon. Developed and developing countries are experiencing
an increase in the average age of its citizens associated with a growing proportion of elders in the population.
Data collected from the Statistical Institute of Jamaica have indicated that the proportion of people age 65 and over in
Jamaica increased from 11.3 per cent in 2011 to 11.9 per cent in 2013 and is expected to be greater than 20 per cent
by 2050.
What are the disadvantages of an ageing population?

The main disadvantages of an ageing population include increase in pension and health-care costs. An increase in
the proportion of elderly in the population opens questions as to how best to finance them after retirement. An
increasing number of elderly persons means more pension requirements, resulting in an increase in the cost to the
Government and, therefore, taxpayers. If most of these elders were pension contributors, then the additional cost to
the Government would be less. However, the fewer the pension contributors in the country, the more the cost to the
citizens to facilitate them after retirement. Only 22 per cent of the total number of people in Jamaica's labour force
made pension contributions in 2012, the remaining 78 per cent must be saving to compensate their financial needs if
and when they reach retirement age.

Older people are more prone to illnesses and ailments; as such, an increasing number of sick persons will put
pressure on health-care facilities, which might not be able to cope with the demand. Diabetes, hypertension and
cancer increase in likelihood with age.

Furthermore, an ageing population also increases competition for jobs, especially if the retirement age is extended.
By so doing, the supply of labour increases and young people find it harder to access jobs because older members
of the population have a longer time to retire. In this case, less innovation and change take place in organisations as
firms are confined to old ways of doing things, which makes the business less dynamic and absorb technology at a
slower pace.

What are the advantages of an ageing population?

An increase in the proportion of elderly persons in the population leads to a growing pool of volunteers in the
economy. This has been identified as a global advantage where the elderly contribute free labour to community and
government projects after retirement. These elders are more comfortable financially and find pleasure in giving back
to their communities and countries. However, the numbers might be less in developing countries like Jamaica, where
some elders are still competing with young people for legitimate paid jobs due to insufficient pension to cover their
expenses. Some simply cannot retire or they risk dying of hunger due to no source of income.

Older people have lived longer, hence are more experienced than younger people. An ageing population can be
advantageous in this case, using their experience to help uphold morals and values in a country. They also are more
familiar with the culture and way of life of a group of people than their younger counterpart, and therefore, are
necessary to help instill tradition and way of life conducive to longevity.

An ageing population is associated with fewer children. Another advantage highlighted as a result, is cost savings
associated with having to cater to fewer children and young people in the economy. This would result in lower public
education cost, lower health-care cost and other social programmes provided for children by the Government.
How can Jamaica cope with an ageing population?

Careful long-term strategic planning is required to address the issues associated with an ageing population. For
Jamaica, stronger welfare systems and social safety-net programmes are needed to help cushion the elderly after
retirement. However, the real issue is to balance youth with experience. The elderly are important and must not be
marginalized, they have much to offer to help the young understand their purpose in life, help them to find motivation
and drive to complete tasks started by the elders themselves or to take on new venture. An increase in social
enterprises has been the trend to help engage the elderly with young people. Issues related to expanding retirement
age, etc, are welcome; however, they must be associated with issues related to increasing the availability of jobs to
absorb new labour market entrants if there is a delay in retirement.