An Ageing Population: How Prepared are we for a demographic shift?
It is no surprise that humans are living longer, thanks to numerous technological and medical advancements in the recent decades. Around the world, life expectancy rates are rising – the 2019 global average was 72.6 years, higher than the life expectancy of any country in the 1950s. Australians born today can expect to live an average of 82.8 years, higher than the OECD average of 80.7 years. And in Africa, life expectancy jumped from 41 years in 1950 to around 63 years today.
Whilst this trend of longer lifespans is undeniably positive, it brings with it a host of economic and logistical challenges that need to be tackled urgently. By 2030, nearly 1 in every 8 people on Earth are projected to be 65 or over. The consequences of an ageing population, combined with declining fertility rates, are already being felt around the world in developed countries such as Japan, and even in emerging economies like China.
The most pressing issue is that ageing populations put a strain on a country’s labour market and hamper economic growth. As the proportion of a country’s population in retirement increases, the workforce size decreases. In countries like Greece, Latvia, South Korea and Poland, the working-age population will reduce by more than 35% by 2060, posing grave concerns about the future of their economies.
An ageing population also has higher demands for pension benefits, meaning the shrinking working-age population is required to pay more tax per person to support the ageing population. Children may grow up supporting not just their parents, but possibly also their grandparents. To put it in perspective, South Korea is currently projected to expect 9 seniors for every 10 working-age people by 2060. That’s almost a 1:1 ratio.
Up north in Russia, the fertility rate is just 1.4 births per woman, which is far below the needed replenishment rate of 2.1. Population growth is on a decline and the number of people aged 60 and over has doubled between 1959 and 1990. It is only expected to increase further. According to NIA’s report on ‘Why Population Ageing Matters’, it seems probable that the need to establish more aged care facilities in Russia will surpass the need to build extra schools in the future. This may seem bizarre and atypical, but many countries around the world are facing a similar situation.
Did you know that more than 25% of Japan’s population is currently over 65? Japan has one of the world’s oldest populations, with the longest life expectancy in the world - 84 years. By 2050, it is expected that 40% of Japanese people will be over 65. In other words, almost half of Japan’s entire population will be nearing retirement age by 2050. To tackle this demographic shift, the Japanese government has come up with innovative ways to keep its economy afloat.
Investing in MedTech to improve its health care facilities (e.g., VR headsets to allow homebound patients to enjoy travel, mechanical care aids for caregivers)
Investing in the design of robotic seals that provide the same benefits as animal therapy
Increasing the retirement age from 65 to 70 so that people can work for longer and earn more for their retirement
A comprehensive long-term care insurance that is provided to all Japanese aged 65+ (funded by working-age people 40+)
Only time will tell whether these measures will be enough to tackle the economic issues brought by an ageing population. But as a global powerhouse in technology and advanced manufacturing, Japan is well-positioned to undergo a smooth shift in its population demographic without major hiccups. Many large Japanese corporations are following suit and also investing in MedTech and healthcare technology. Hopefully, the country becomes an example for others to follow in the coming decades.
Here in Australia, the situation is slightly different. While our population is also ageing, we have one advantage - our high migration rates allow skilled employees to migrate to Australia and contribute to our economy. In fact, while the global population will see a decline of around 10% in the number of working-age people by 2060, Australia’s working age population (along with Mexico and Israel) will actually increase by more than 20%.
But this does not change the fact that the entire world’s population is slowly ageing. Relying on migration to fill the gaps created by an ageing population is only a short-term measure and cannot sustain a long-term future. It might be time for Australia to re-think its strategies when it comes to the facilities and funding provided to older Australians. Will we need to follow the example set by the likes of Japan and divert an economic crisis before it is created?
Are we going to wait until the demographic shift is upon us, or start investing in Australia’s future now?