Business and the demographic time bomb

Whilst the richer economies of the world are preparing to meet the demands of an increasingly ageing population (something that has been known and planned for), there has been little discussion about the implications of a greying population in the poorer emerging markets of East Asia, South Asia, the Middle East, Eastern Europe and Latin America -- all of which have childbearing patterns indicative of population decline.

by Policy Review
Last Updated: 23 Jul 2013

It is noteworthy that the only areas of the globe where the median age is likely to remain just over 20 during the next twenty years is either sub-saharan Africa or countries such as Yemen, Oman and Afghanistan.

China is predicted to account for one fourth of the world's senior citizens by 2025 and the greatest proportion of older people are likely to live in the poorest parts of China, making it even more difficult to cope with. Worse still, China is not by current trends going to be ready to offer a secure pensions safety net, meaning that the over-65s will have to depend on their sons for survival or continue to work.

The problem with the former is that birthrate trends are likely to create a dearth of sons and therefore the older Chinese will have to fight for their son-in-laws’ support, and the difficulty with the latter is that most over-65s are poorly educated and come from manual working backgrounds, largely in the agricultural sector. The only work they will be able to get will be physically demanding, which is clearly not always going to be an option for this age group.

The outlook in Russia is also grim but for different reasons. The likely ratio of working age population to retirement age people will be in the order of 3.3:1 in 2025, which is not out of the ordinary if you consider the trends for other European countries. However, the health and mortality rate of Russia’s working age generation has been getting worse, which is a trend that is out of kilter with the rest of Europe. In Switzerland, a 20-year-old man has a five-out-of-six chance of making it to 65 years of age; in Russia he has less than even odds.

The poor health and mortality of Russia’s working-age population will have a negative effect on national productivity as well as reducing the ROI on all of the public money spent on training and education. Also, the large number of ageing people dependent on an unhealthy and diminishing population of low-income workers "suggests some particularly unattractive trade-offs between welfare and growth".

Will the impact of the ageing of populations in emerging markets - even including India, where there is a youthful population in certain parts and ageing population in others - have a detrimental effect on the global economy? The answer is unclear but this is a question that needs to be debated now.

Source:
Growing old the hard way: China, Russia, India
Nicholas Eberstadt
Policy Review, April & May 2006
Review by Morice Mendoza


 

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