Population ageing refers to an increase in median age in a population due to declining fertility rates and rising life expectancy. Countries around the world are experiencing this phenomenon which is unprecedented in history and brings with it sweeping changes in population needs and capacities. Therefore, the first time in history when there will be more older people than young is fast approaching(Ageing: Global population, 2022). It may also have significant implications for employment, savings, consumption, economic growth, asset values, and fiscal balance. It may also lead to a fall in labour productivity since older people have lower labour force participation.
What exactly is an ageing population?
UN classifies the population based on the percentage of people aged 65 and above in the country. A young population has 4% or less of the population aged 65 and above. In a mature population, it is between 4 to 7 percent. Whereas, in an aged population the number of people aged 65 or above is over 7%. Most industrialised countries are classified as aged populations. (2020)
What are its implications in an economy?
FEWER WORKING-AGE PEOPLE
An increase in the older population leads to fewer working-age people. This in turn leads to a supply shortage of qualified workers who cannot fill in the demanded roles. A fall in the number of workers leads to declining productivity, high labour costs, delayed business expansion, reduced international competitiveness. (4 Global Economic Issues of an Aging Population, 2021)
INCREASING FOCUS ON HEALTHCARE SECTOR
Demand for healthcare rises with age. Countries with rapidly ageing populations allocate more money and resources to their health care systems. They are focusing on areas such as long-term care and disease prevention, with changes in the demography of the country. This leads to an increase in health care costs, which is already quite high in most advanced countries with healthcare spending being a major share of gross domestic product(GDP). Furthermore, it may also create a problem of labour and skill shortages. (4 Global Economic Issues of an Aging Population, 2021)
INCREASE IN DEPENDENCY RATIO
A rise in the older population also leads to a small pool of workers from whom taxes can be collected since retirees live on a fixed income with much smaller tax brackets. Therefore, lower tax revenue combined with more spending on healthcare, pension, and other such policies are of major concern and can put stress on government revenue. (4 Global Economic Issues of an Aging Population, 2021)
CHANGE IN DEMAND PATTERN
Changes in the demographic reality also lead to changes in demand drivers in an economy with more senior citizens. For example, an increase in the population of senior citizens leads to an increase in the demand for facilities such as healthcare and nursing homes instead of facilities that are more youth-oriented. (4 Global Economic Issues of an Aging Population, 2021)
What are some of the policy measures in response to the ageing population?
Policy measures in response to the ageing population are essential to achieve the Sustainable Development Goals(SDGs), in particular for ending poverty in all its forms everywhere(SDG1), ensuring life and well being for all of all ages(SDG3), achieving gender equality and empowering
all women and girls(SDG5), promoting full and productive employment and decent work for all(SDG8) and reducing inequalities within and among countries(SDG10).
Countries with an 11% aged population have adopted 9 or more policy measures, whereas, countries with 6% or less aged population have adopted at most 6 measures. Places, such as Australia, New Zealand, Europe, and Northern America, where independent living among the older population is widespread have focused on care and living arrangements and expansion of opportunity for assisted living and age-friendly communities. (2020)
There are approximately 728 million persons aged 65 years or above in the world and in the next 30 years, it has been predicted to nearly double by 2050. (2020) The burden of providing both physical and economic security will fall upon a small population. There might be a stress on the pension and healthcare system, leading to a reassessment of various policies and refocusing on issues-oriented towards the older population, in response to the new reality. These policy measures, combined with behavioral adaptations by individuals and businesses will establish whether an ageing population will lead to major macroeconomic difficulties. (Bloom et al.,2015)
By:-
Vanshika Ahuja
(1st year)
REFERENCES:
Bloom, D., Chatterji, S., Kowal, P., Lloyd-Sherlock, P., McKee, M., Rechel, B., Rosenberg, L. and Smith, J., 2015. Macroeconomic implications of population ageing and selected policy responses.
Investopedia. 2021. 4 Global Economic Issues of an Aging Population. [online] Available at: <https://www.investopedia.com/articles/investing/011216/4-global-economic-issues-aging-population.asp> [Accessed 29 January 2022].
(2020). Available at:<https://www.un.org/development/desa/pd/sites/ www.un.org.development.desa.pd/files/undesa_pd_2020_pf_government_policies_population_ageing.pdf >
Who.int. 2022. Ageing: Global population. [online] Available at: <https://www.who.int/news-room/questions-and-answers/item/population-ageing>
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