Which of the following explains how data from the population pyramid for Spain would be useful for government policy makers?

Abstract

Population aging is the 21st century's dominant demographic phenomenon. Declining fertility, increasing longevity, and the progression of large-sized cohorts to the older ages are causing elder shares to rise throughout the world. The phenomenon of population aging, which is unprecedented in human history, brings with it sweeping changes in population needs and capacities, with potentially significant implications for employment, savings, consumption, economic growth, asset values, and fiscal balance. This chapter provides a broad overview of the global demography of aging. It reviews patterns, trends, and projections involving various indicators of population aging and their demographic antecedents and sequelae. The chapter also reviews theories economists use to explain the behavioral changes driving the most prominent demographic shifts. Finally, it discusses the changing nature of aging, the future of longevity, and associated policy implications, highlighting some key research issues that require further examination.

17.4 Global Perspective

Population aging is coming all over the world, but with uneven timing. Treating an economy as closed would capture some important implications of population aging while missing the consequences of demographic change elsewhere. It would exaggerate capital intensification and falling rates of return on capital in the older rich countries, by ignoring the possibilities of investing abroad. It would understate capital intensification in a country like the United States with moderate aging, but with open financial markets. Treating an aging economy as financially open would minimize the effects on its factor prices, while maximizing the changes in assets and asset income. Both perspectives are useful.

Population Aging

Population aging refers to changes in the age composition of a population such that there is an increase in the proportion of older persons. Demographers use age/sex pyramids to illustrate the distribution of populations across all age groups. Figure 2 presents age/sex pyramids for 2000 and projected to 2025 and 2050 for Brazil and Italy. Each bar represents the percent of total population in 5-year age groups for males (left) and females (right). In 2000, Brazil has a large portion of the population in the younger ages. By 2025 and 2050, the proportion of the younger population has decreased dramatically, and the proportion in the oldest group, 85 years and older, has increased dramatically. In contrast, in 2000 Italy's young population already constitutes a smaller portion of the total population. By 2050, persons under the age of 20 will constitute only 16.5% of the total Italian population, whereas those 60 and older will make up almost 40%.

Epidemiologic transition theory highlights how changes in the causes of mortality, from infectious and parasitic diseases to chronic and degenerative diseases, result in longer life expectation for populations. Thus, the changing process of mortality is one factor affecting population aging. A second important factor is changes in the rates of fertility or births. The changing age/sex structure of Brazil is due, in part, to reductions in the average number of children born per female. Italy is among the more developed countries that already have low birth rates in 2000, as represented by the small proportion of the population in the younger age groups.

A third factor affecting population aging is migration; however, the effect of migration on population aging is not as influential as that of changes in trends in population mortality and fertility. Patterns of migration into and out of nations can affect the age structure of populations. Immigrants tend to be younger, and first-generation immigrants tend to follow marriage and fertility patterns typical of their original country. Thus, a large flow of immigrants into a country can potentially shift the age structure to younger ages. A country that experiences significant out-migration may also shift to an older population structure if those migrating out are young adults and their children.

All regions of the world are experiencing population aging, although the rates of increase differ across regions, as shown in Figure 3. Europe is the oldest region, with 21% of its population aged 60 years and over in 2006, and the rate is expected to rise to 34% in 2050. The youngest region is Africa, with only 5% of the population over the age of 60 in 2006, which will double to 10% in 2050. The proportion of older persons in both Asia and Latin America and the Caribbean regions are expected to increase from 9% to 24% between 2006 and 2050, due to both reductions in rates of fertility and increases in life expectancy.

A United Nations report, World Population Aging: 1950–2050 (2002), set forth four important conclusions regarding the trend of population aging. First, population aging is unprecedented in the history of humanity. By 2050, it is predicted the worldwide number of persons aged 60 years and older will be larger than the number of persons aged 15 years and under. Second, population aging is a global phenomenon that affects persons of all ages in all nations. Third, population aging has serious implications for economic, political, social, and other areas of human life. Fourth, population aging is enduring. The trend will continue through the twenty-first century, and it is unlikely any nation will return to younger populations of the past.

4 Mental Incapacity and the Law

Aging populations force nations to confront the problem of an increasing number of mentally incapacitated elderly. Neurologic disorders such as dementia, depression, and strokes are common for the elderly and often cause loss of mental capacity (Beers and Berkow 2000). Because the legal world operates on the assumption that adults can make rational decisions, the legal system allows the creation of substitute decision makers, known as guardians, for individuals who lack sufficient mental capacity. Laws specify the process for establishing guardianship and the decisions that guardians may make for an incapacitated person.

3 Conclusions

Population aging is undoubtedly one of the most transformative social phenomena of our century. Due primarily to the simultaneous decline in mortality and fertility present in most countries around the world, it is currently producing large fractions of populations over 60 years old and a significant world-wide fall in the number of workers supporting these old cohorts. In doing so, it is also effectively changing the micro- and macrolandscape of the world.

In response to the worldwide aging of populations, international HRS-harmonized surveys have been developed in 31 countries across five continents to provide scientific and policy guidance on how to deal with population aging at affordable budgets. In this chapter, we first summarize the most salient facts about the existing data network and then propose new ways in which the information it contains can be employed to tackle various population aging issues.

In relation to the first point, it is worth mentioning that from its very beginning, these surveys have implemented a number of relevant innovations, such as collecting data on a nationally representative basis, integrating the most relevant life domains (e.g., health, labor force, economic resources, cognition, and family) into a unique scientific platform, and ensuring a coherent longitudinal dimension. Over the years, they have also incorporated new scientific innovations including biomarkers, genetics, subjective well-being, links to administrative health and income retirement records, and measurement of cognition and dementia at older ages. Today, this network is an important scientific and policy support infrastructure, producing thousands of studies on key topics, and informing policy on key aspects of population aging.

The political and socioeconomic transformations induced by this global phenomenon and the breadth of information contained in the HRS data network allows us to identify many unexplored opportunities for research going forward. They range from cross-national studies of the impact of social and institutional norms on well-being to financial abuse and frailty, and from evaluating the postcrisis changes in the societal fabric to reciprocity, community support, and migration. We close by discussing a number of potential innovations—both at the level of the life domains investigated via these surveys and of new countries joining the network—in an attempt to illustrate that the future value and potential for research within this data framework is only likely to increase over the years to come.

Abstract

Population aging will impact on the labor market in at least two ways. First, the number of people in the standard working ages (20–64) will fall. This is generally accepted as being a cause for concern because, all else equal, a smaller pool of workers will have to support a larger number of dependents. Second, the proportion of older workers will rise. This is often thought to be a concern based on the assumption that older people are less productive. The evidence for this turns out to be weak. The relative importance of the two effects suggests that policy should focus on extending work lives.

Demographic Change

Population aging is a worldwide phenomenon. The challenge that this generates can be illustrated for some European countries (Table 1). Countries such as Germany and Italy, for example, are expected to see decreases in total population between 2004 and 2050, whereas the Irish population is expected to grow by more than a third, and the population of Sweden by 13%. Generally, high-income countries will see decreases in the population aged 15–64, conventionally the most productive ages in terms of contributions to national economies. Projected changes in the older population (age 65 and above) will be pronounced. For example, in the UK there were 9.5 million older people in 2004, projected to almost double to 17 million by 2050. Of more interest for long-term care systems is the expected growth in the old old age group. For example, again looking at the UK, there is a projected increase of 150% in the number of people aged 80 or above, but this pales by comparison to Ireland, Spain, the Netherlands, and Germany.

Table 1. Overview of the projected changes in the size and age structure of some European populations, in millions

FromECFIN (2006)The impact of ageing on public expenditure: Projections for the EU25 Member States on pensions, health care, long-term care, education and unemployment transfers (2004–2050). European Economy Special Report.http://ec.europa.eu/economy_finance/publications/european_economy/2006/eespecialreport0106_en.htm

Central to many concerns about future long-term care arrangements is the demographic balance between dependent older people and the labor force. The ratio of the population aged 65 or older to those aged 15–64 is already quite high in Italy, Germany, France, and Spain, and by 2020 will be much higher (Table 2).

Table 2. Ratio of the population aged 65 and older to population aged 15–64

From OECD (2006)OECD Factbook 2006: Economic Environmental and Social Statistics. Paris: Organisation for Economic Co-operation and Development.

Why are these demographic patterns important? Use of long-term care and medical services is high among older people, and an aging population will inevitably put growing pressure on care services. This can be illustrated by projections of needs and expenditure for England using the Personal Social Services Research Unit (PSSRU) model (Wittenberg et al., 2006). The model has projected that the number of occupied residential places (in residential care homes, nursing homes, hospitals) would need to expand by 115% between 2002 and 2041 just to keep pace with demographic change, while care support for older people in their own homes would need to increase by 103%. But these needs could be much higher if the proportion of older people who are dependent increases (perhaps because people with high care needs survive into old age as a result of improvements in medical technology), or if quality of care improvements are demanded by future cohorts of service users, or family members are less able or willing to provide unpaid care for dependent older relatives (perhaps because of changing labor force participation patterns and geographical mobility).

The PSSRU model estimates that long-term care expenditure would need to increase by 325% in real terms between 2002 and 2041 to meet demographic pressures and allow for expected real rises in unit costs. Projections of this kind are subject to uncertainty, of course, but they vividly illustrate why there is so much discussion of population aging and its implications.

2.1 Demographic Transition in Long-Term Care

Population aging has profound effects on the demand for long-term care. As life expectancy increases, the overall value of health increases (Murphy and Topel, 2006). Although the increase in longevity has ambiguous theoretical effects on the demand for long-term care (if age-adjusted morbidity improves rapidly, for instance, then demand could decrease), overall there has been a strong increase in demand. There are more people who reach elderly ages. Elderly people live longer, spending more time in retirement. Not only does total demand increase, but the range of needs grow. Some elderly persons live relatively free from chronic illness (Manton et al., 1997), but others can live for years with chronic illnesses that once proved fatal. Medical devices improve mobility. The result is not only increased demand but a wider range of needs.

In the past, long-term care was a problem for the extended family. Elderly persons moved in with their children. Children cared for their parents. The government had no formal role. But the extent of the changes in demand for long-term care wrought by population aging has changed this dynamic. Extended families cannot provide the range of options needed.

One way to look at the broad changes over time is that in developed countries there is a wide range of options for long-term care (Norton, 2000). At one end of the spectrum are nursing homes and skilled nursing facilities. These are the most expensive options and provide the most medical care. Lower cost alternatives include a range of housing and care that gives elderly persons more independence. These include board and care homes. Services like meals on wheels and home health care assist elderly people so that they can remain in their homes. And for the terminally ill, hospice care is increasingly available. The diversity of long-term care providers is in response to the demand for different levels of care at different prices. Yet, looking at the trend as simply a flowering of a multitude of choices misses the point. The larger forces here are the trade-offs between family and government, between self-reliance and social insurance.

To understand this, consider how the demographic transition affects birth and death rates. The demographic transition is the transition that countries go through, from high birth and death rates to low birth and death rates. The reasons for this include improved sanitation and water supply, improved nutrition, advances in medicine and infectious disease control, and education—especially education of women. Women not only acquire more education, but also they tend to marry later and work more. As is well documented, countries that go through the demographic transition end up with lower birth and death rates. In some countries, like Italy and Japan, the fertility rate is well below replacement, meaning that without further changes the population will eventually shrink.

The demographic transition affects the supply of long-term care as well as the demand. In developed countries, women give birth to fewer children. Because children are traditionally the primary providers of long-term care through informal care, this leads to an eventual reduction in the supply of informal caregivers. In addition, with more women working in the labor force, there are fewer adult women to provide care to their elderly parents (unless they quit their job or reduce their hours in the labor force). With greater economic and professional opportunities outside of the home, many women are less inclined to seek the opportunity to be a caregiver.

An Aging Society: A Burden?

Because population aging is equated to individual aging all too often, one tends to highlight problems for aging societies, in particular problems related to the costs of health and pension programs for the elderly. On this subject some issues need to be clarified and some myths should be dispelled.

First, the situation of old people in most countries has improved greatly largely as a result of post–World War II social programs. There have even been hard economic times when their situation has deteriorated less than that of younger people.

Second, health and pension costs will certainly continue to increase in aging societies, but at what rate will this happen? With regard to health Zweifel et al. (2004) have shown that increases in medical costs are more closely linked to the number of old-age deaths than to the size of the elderly population, and the number of old-age deaths is increasing much less rapidly than the size of the elderly population (Légaré et al., 2006). The same is not true for pensions, whose costs are linked directly to the number of old people. However, one should not forget that retired people also pay taxes, both on their income and on consumption. As people age, their material needs (other than those related to health) decrease, however, and this might be reflected in their pension requirements.

Third, although incomes are on average lower at old age than at other ages, the elderly often hold a large share of the collective wealth through their assets, in particular by owning of their dwellings (see Intergenerational Solidarity).

In brief, far from being an impediment to economic development, elderly people in aging societies can sometimes serve as an important actor if not the engine of such development (Dirn and Mendras, 1984).

POPULATION AGING, ELDER CARE AND WORK-FAMILY INTEGRATION

Population aging has been described as one of the most important demographic factors that will shape policy and influence workers’ lives during this century (Wilmoth & Longino, 2006). Projections of growth in the population aged 65 and older and aged 80 or 85 or older are common and quite significant across most developed countries including the EU, the US, and Canada. Growth estimates in the proportion of seniors result from the aging of the baby boom generation born between 1946 and 1964, lower fertility rates, and longer life expectancy. Fortunately, in most countries, seniors are living healthier lives, with increased opportunities for living more years independently without serious disability or impairment. The number of working-age adults will shrink, however, even if retirement is delayed for a few years, and consequently a higher proportion of workers will simultaneously and/or sequentially be involved in combining paid employment with providing care and support to a child, ailing spouse or partner, parent, in-law or other older relative, or a close friend.

The implications for workplaces and workers are two-fold: first, many workplaces are or will be adapting to the need to retain older workers. In areas where labor is in short supply or skills are specialized, the retention of older workers will be a significant concern. Many older workers have a preference for part-time work or will find flexible hours an attractive option.

Secondly, more workplaces will experience firsthand the concerns of employees with eldercare responsibilities and will need to adapt appropriate practices and policies to support these workers. According to the most recent figures available, in 2002 more than 1.7 million Canadians aged 45–64 provided some care on a regular basis to an elderly person with long-term disabilities or physical limitations, and 7 out of 10 of these caregivers were also employed. This works out to about 16% of the workforce in this age group (Pyper, 2006). As the population ages, this proportion will grow. Moreover, a national survey of over 31,000 employees in large and medium-sized workplaces in 2000–2001 indicated that slightly more than 1 in 4 employees reported experiencing a high level of caregiver strain (physical, financial, and mental stress attributable to caregiving demands along with feelings of being overwhelmed) that were most directly predicted by the number of hours spent providing eldercare per week (Duxbury & Higgins, 2005). While approximately equal numbers of employed men and women provide at least some level of eldercare, women provide considerably more hours of care, more personal care (assistance with bathing, feeding, dressing, etc.) and report higher levels of caregiver strain.

In 1998, Marks studied the effects of caregiving for children, spouses, parents, and other kin and non-kin among employed midlife workers. Caregiving was a strong predictor of high family to work spillover and stress for both men and women. In turn, the amount of work-family conflict employees experienced affected the extent to which caregiving resulted in distress, hostility, and poorer health. How do employed caregivers cope with significant care responsibilities for a senior or a chronically-ill family member? According to Statistics Canada data, many employees adapt their work schedules, while others take a period of unpaid leave, which can be quite problematic, especially for low-wage workers. Caregiving for an older family member is more likely to be a reason for withdrawal from the labor force among women than men. In 2002 more than 21% of retired women aged 45–64 who provided eldercare but only 8% of men caregivers who retired said that the need to provide care was one of the reasons they retired. Among currently employed caregivers, it is estimated that as many as 1 in 5 women and 1 in 10 men could retire sooner than planned because of caregiving responsibilities. These statistics are important early warning signals that policy makers’ interests in extending the number of years individuals work may be on a collision course with the realities of trying to maintain employment while providing eldercare. Pavalko and Henderson (2006) report that women are more likely to quit their jobs than to cut back or try to work things out with their employer, unless their employer has made it clear that flexibility is possible. In such cases, “women who report access to flexible hours had 50% greater odds of still being employed two years later than those who did not have access to this benefit” (Pavalko & Henderson, p. 366).

In addition to providing flexibility to workers, other supportive measures that will need to be in place in countries which have not yet developed such initiatives, are provisions for paid caregiving leave similar to parental leave policies, homecare, respite services, financial assistance (especially for low-income caregivers and those who incur significant financial costs), and information and supports to enable employees to plan ahead and to access information and support in a timely fashion. Carers’ leave already exists in the UK and in a number of other European countries, but careful analysis of these policies, their take-up, and use is not available. Major studies in Canada and the US have begun to identify good business practices and appropriate policy supports to help ease the pressures of combining work and eldercare, which are also applicable to providing care supports for individuals with a seriously or acutely ill spouse/partner. Given current population trends and the number of employees already experiencing eldercare and family care concerns, further development of policies and practices should not be delayed. Care should also be taken to reduce the costs to women as primary caregivers and to low-income earners who are not covered under policies that could otherwise be more effective in promoting the integration of work and care responsibilities.