Growing Older

“Globally the number of older persons (aged 60 or over) is expected to more than double from 2013 to 2050 to reach 2 billion people – 21% of the global population. This demographic shift will create challenges and opportunities.”

Growing older faster

Aging populations result from a reduction in mortality coupled with a reduction in fertility. Together, these lead to a smaller number of children relative to older adults. In developed countries, this trend has been happening for several decades, but the rate of aging population growth is in fact significantly higher in developing nations according to a 2013 report by the United Nations Department of Economic and Social Affairs Population Division. As a result of high birth rates during the early and mid-twentieth century, there are globally a large number of people now classified as “old” and the size of this group is increasing rapidly.

China in particular will see its proportion of people aged 60 or over grow from 12.4 per cent to 28.1 per cent during the next 30 years. The old are growing older too. The segment of people over 80 years within the older population increased from 7 per cent in 1940 to 14 per cent in 2013 and is expected to reach 19 per cent by 2050.

Population aged 60 or over by region, 1950-2050 Distribution of population over 60 years, 1950-2050
graph3 graph4

The new dependents

Typically, when we think of supporting dependents, children come to mind and in the 1950s 87 per cent of dependents were children, but the mix is changing. The dependency ratio is defined as a measure of children under 15 years plus adults over 65 years relative to the number of “working age” adults. This ratio gives a quick measure of how many “dependents” need to be supported by each individual of working age. The dependency ratio was particularly high in the 1950s and 1960s due to the high global fertility rates and has been falling for several decades. These ratios are starting to turn as the number of “old dependents” rises; particularly in developed countries. The mix of the older population is also changing – as women typically outlive men, the proportion of older women relative to older men increases. Your mother-in-law (and wife) are here to stay!

Dependency ratio by region, 1950-2050 Men per 100 Women aged 60 and 80 years and over by region, 2013
graph1 graph-2

Changing healthcare needs

Historically, most deaths in the global population were in children due predominantly to infectious diseases. Now, as the demographics shift, it is non-communicable diseases (heart disease, cancer, stroke, diabetes, osteoporosis, Alzheimer’s disease, and cataracts) that are the key cause of deaths. Health care expenditure globally will have to rise to cope with the more specialised and complex requirements of the elderly. This will place increasing demands on social security systems as the pool of tax-generating adults declines. The nature of research and development carried out by the pharmaceutical industry will also shift as “big pharma” will have real incentive to seek its next blockbuster drug success in catering to the old.

Early retirement?

As the healthcare burden increases, governments globally are going to be forced to review statutory retirement ages, particularly in developing markets where it tends to be set at 60 years rather than 65 as found in most developed nations. Old people tend to consume more than they produce within society but they fund their consumption differently. Consumption spending post-working age needs to be generated from assets or savings accumulated over working life or from transfers from family and government. The extent to which the elderly fund themselves through accumulated assets is inversely related to the level of public transfer; however, irrespective of the level of government support, economic security among the elderly remains a key issue globally.

These trends underscore the importance of ensuring an asset base to fund lifestyle and healthcare requirements for far longer than one might imagine.