Keynote 2 How Global Aging Will Transform the Economy and Society of the 21 st Century Richard Jackson President Global Aging Institute
The world stands on the threshold of a stunning demographic transformation called global aging. Elderly (65 & Over), as a Percent of the Population, 2010 and 2050 5% India 8% China 13% 25% 2010 5% Indonesia 17% France 16% 26% 2050 6% 14% Mexico Canada 20% 26% 13% 9% US Thailand 21% 30% 13% 14% Australia Poland 22% 32% 13% 21% Russia Germany 22% 34% 7% 20% Brazil Italy 23% 35% 9% 11% Chile S. Korea 25% 38% 17% 23% UK Japan 25% 39% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% Source: UN Population Division (2013)
Developed World Outlook
A Future of Rising Fiscal Burdens Graying means paying more for “Current Deal” Projection: Total Government Benefits to pensions, more for health care, and Persons Aged 60 & Over, as a Percent of GDP, 2010 and 2040 * more for long-term care for the elderly. 40% Few countries will be able to raise taxes 37% 2010 Current Deal 2040 enough to cover more than a fraction of 31% 29% 30% the age wave’s total fiscal cost. 26% 21% 20% 20% 19% 18% Most countries will have to cut old-age 20% 17% 15% 15% 14% benefits — but the required reductions are 11% 9% 9% large and are likely to meet with growing 10% resistance from aging electorates. 0% The alternatives: Let old-age benefits Australia Canada US UK Japan France Germany Italy crowd out other government spending * Projections assume that program eligibility ages and benefit levels remain unchanged in the future. and/or run widening budget deficits. Source: The Global Aging Preparedness Index, Second Edition (CSIS, 2013)
A Future of Slower Economic Growth Average Annual Growth Rate in the Working-Age Slowly growing or contracting working-age Population (20-64), by Decade populations will translate into slower GDP growth. Japan and some European countries 1980s 1990s 2000s 2010s 2020s 2030s 2040s may face a future of “secular stagnation.” 2.0% 1.4% 1.7% 0.8% 0.6% 0.8% 0.7% Australia Higher rates of labor-force participation, Canada 1.9% 1.2% 1.4% -0.1% -0.1% 0.4% 0.2% especially at older ages, could partially offset the demographic drag on potential GDP. France 1.1% 0.4% 0.8% 0.0% 0.0% 0.0% 0.3% Productivity growth, however, is more likely to Germany 1.2% 0.2% -0.3% -0.3% -1.1% -1.1% -0.9% fall than to rise as societies age, both because Italy 0.9% 0.2% 0.4% -0.2% -0.6% -1.1% -0.8% savings and investment are likely to decline and because aging workforces may be less flexible, Japan 0.8% 0.4% -0.4% -0.9% -0.7% -1.3% -1.3% less mobile, and less entrepreneurial. UK 0.7% 0.4% 0.6% 0.2% 0.0% 0.1% 0.2% As domestic markets stagnate, the danger of “beggar -thy- neighbor” protectionism will grow. US 1.4% 1.3% 1.1% 0.4% 0.1% 0.5% 0.5% Source: UN Population Division (2013)
A Future of Relative Economic Decline — and Diminished Geopolitical Stature GDP by Country or Country Group, as a Percent of G-20 Total, 2009-2050 100% 2009 2050 28% Canada 3% 2% Emerging 80% 50% Markets France 59% 6% 3% 60% Germany Other G-7 7% 3% 38% Italy 4% 2% 40% 24% 16% US Japan 12% 4% 20% 34% UK 6% 3% 26% 24% US 34% 24% 0% 2009 2030 2050 Source: Carnegie Endowment for International Peace (2010)
A Widening Generation Gap and Growth Gap within the Developed World Median Age, 2010 and 2050 Australia and the United States are now the 60 56 youngest of the major developed countries — 2010 2050 48 and, thanks to their relatively high fertility 50 45 41 rates and substantial net immigration, they 40 40 37 37 40 will remain the youngest for the foreseeable future. 30 US Australia Europe Japan Cumulative Percentage Change in the Working-Age Population (20-64), 2010 to 2050 Elderly (65 & Over), as a Percent of the 50% Population, 2010 and 2050 34% 39% 40% 30% 18% 2010 2050 30% 30% 23% 10% 22% 21% 18% 15% 20% 13% -10% 10% -15% -30% 0% -36% -50% US Australia Europe Japan Australia US Europe Japan Source: UN Population Division (2013)
Developing World Outlook
The Promise of the “Demographic Dividend” Median Age, 1975 – 2050 As life expectancy rises and fertility 1975 1990 2010 2030 2050 rates fall, the slowdown in population East Asia 20.4 24.9 34.7 42.7 48.3 Eastern Europe 31.0 33.5 38.5 44.0 46.9 growth and upward shift in age Greater Middle East 18.3 19.1 23.7 29.8 35.1 structures may push the developing Latin America 19.3 21.9 27.4 34.2 40.8 world toward greater peaceand prosperity. South Asia 19.1 21.1 25.9 32.0 37.6 Sub-Saharan Africa 17.6 17.2 18.1 20.3 23.8 The social argument: Fading youth Source: UN Population Division (2013) bulges and rising median ages will Working-Age Population (20-64), as a Percent of the foster social and political stability. Total Population, 1975 – 2050 1975 1990 2010 2030 2050 The economic argument: Declining East Asia 47% 55% 64% 63% 56% dependency burdens and growing Eastern Europe 58% 60% 65% 59% 55% working-age populations create a Greater Middle East 42% 44% 53% 58% 58% “demographic dividend” and open up a Latin America 44% 49% 56% 59% 58% window of opportunity for development. South Asia 45% 48% 55% 60% 60% Sub-Saharan Africa 42% 41% 44% 48% 53% Source: UN Population Division (2013)
Caveat One: Averages Can Be Deceiving In some regions of the developing world, Youth Bulge (15-24) as a Percent of the Adult including sub-Saharan Africa and parts of the Population, 2010 and 2030 Greater Middle East, the demographic 36% 35% 40% 33% transition has stalled in its early stages. 30% 26% 30% 21% 2010 2030 20% In others, especially East Asia and Eastern 2010 10% 2030 Europe, the demographic transition is proceeding 0% at a breathtaking pace, leaving countries at risk of Developing-World High-Fertility Greater Sub-Saharan Africa growing old before they grow rich. Average Middle East* *Includes Afghanistan, Iraq, Mauritania, Palestine, Sudan, Somalia, and Yemen Percentage Change in the Russian Population, 30% 2010-2050 Elderly (65 & Over), as a Percent 2010-2030 2010-2050 25% of the Population, 1970-2050 0% 20% -10% -7% 15% China -20% -15% 10% -20% Total Population US -30% 5% Working-Age (20-64) -32% 0% -40% 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: UN Population Division (2011 and 2013)
Caveat Two: Missed Economic Opportunities Average Annual Growth Rate The demographic dividend opens up a in Real GDP Per Capita 1975-95 window of opportunity, but does not 1975-95 1995-2011 1975-2011 8.0% 7.4% 6.8% guarantee economic success. 7.0% 1995-2011 1.1% 1.8% 1.4% Brazil 7.8% 9.1% 8.4% China 6.0% 2.5% 5.3% 3.8% India Leveraging the demographic dividend 5.0% -0.8% 4.0% 1.3% 4.2% Russia 4.1% requires sound macro management, the 4.0% 3.1% rule of law, policies that promote export- 2.5% 3.0% 2.0% led growth, and massive investments in 1.9% 2.0% infrastructure and human capital. 0.8% 1.0% 0.0% Only East Asia has been fully successful -1.0% at leveraging its demographic dividend. -0.8% -0.9% -2.0% -1.4% Although economic growth has begun to East Asia South Asia Eastern Greater Sub-Saharan Latin accelerate in many other emerging Europe Middle East Africa America markets, none are on track to replicate East Asia’s economic performance. Source: World Development Indicators (World Bank, 2012); Angus Maddison, Historical Statistics of the World Economy: 1-2008 A.D. (Groningen Growth and Development Center, February 2010); and UN Population Division (2011).
Caveat Three: Journeys Can Be More Dangerous Than Destinations The "Inverted U" Relationship Societies are subject to tremendous stresses as they move from the traditional to the modern. When plotted against development, most of the Level of Stress & Risk of Violence stresses describe an inverted-U — meaning they become most dangerous midway through the demographic transition and the development process. These stresses include: Contact with the global marketplace and culture Urbanization Environmental degradation Growing income inequality Growing ethnic competition Religious extremism Stage of Demographic Transition & Development
Conclusion
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