A century ago, children outnumbered the elderlyby as much as ten to one in most European countries. Today, there are as manypeople over the age of 65 as there are under the age of 16. In the UnitedKingdom, roughly one in six people is 65 or older, compared to one in eightAmericans, and one in four Japanese.
This shift has been powered by decliningbirth and infant-mortality rates in the first half of the twentieth century,together with rising life expectancy in recent decades. Whatever the causes,many are concerned that, in the coming decades, rapidly aging populations willincreasingly strain health, welfare, and social-insurance systems, puttingunsustainable pressure on public budgets.
But, while such fears are not entirelyunfounded, discussions about population aging tend to exaggerate the trend’sscale, speed, and impact, owing to a fundamental misperception about howpopulations grow older. Unlike people, populations do not follow the life cycleof birth, aging, and death. And, while a population’s age distribution maychange, age becomes an unreliable way to measure a population’s productivity aslifespans increase.
Age has two components: the number of years aperson has lived (which is easy to measure for individuals and populations) andthe number of years a person has left to live (which is unknown forindividuals, but possible to predict for populations). As mortality declines,remaining life expectancy (RLE) increases for people of all ages. Thisdistinction is crucial, because many behaviors and attitudes (including thosethat are health-related) may be linked more strongly to RLE than to age.
The standard indicator of population aging isthe old-age dependency ratio (OADR), which divides the number of people whohave reached the state pension age by the number of working-age adults. Butthis approach fails to distinguish between being of working age and actuallyworking, while classifying all people above the statutory pension age as“dependents.”
In fact, social and economic shifts havebroken the link between age and dependency. Young people spend an increasingnumber of years in education, while many older workers retire early, implyingthat they have sufficient personal savings. In the UK, the 9.5 millionworking-age dependents (those who are not in paid employment) outnumber thosewho are above the state pension age and do not work.
Moreover, the OADR disregards how, over time,rising life expectancies effectively make people of the same chronological ageyounger. In 1950, a 65-year-old British woman had an average life expectancy of14 years; today, she can expect to live another 21 years (the figures are 12and 18 years, respectively, for men).
Many other countries, especially in thedeveloped world, have experienced similar shifts, with life expectancy havingincreased the most in Japan. Meanwhile, some Eastern European countries stilllag behind, with no increase having been observed in Russia since 1950 (seetable).
A better measure of population aging’s impactis the real elderlydependency ratio (REDR), which divides the total number of people with aRLE of 15 years or less by the number of people actually in employment,regardless of their age. This measure accounts for the real impact of changesin mortality, by allowing the “old age” boundary to shift as advances in healthprolong people’s productive lifespans.
In recent decades, as the OADR has risen inadvanced countries, the REDR has declined. It has, however, stabilized, and islikely to increase gradually over the next couple of decades (see graph). InGermany and Italy, the REDR has been almost flat for two decades, owing toslower employment growth and lower birth rates than elsewhere in the developedworld.
Immigration has played an important role indepressing many countries’ REDR by raising employment rates. Increasedlabor-force participation among women – who spend a significantly higher shareof their lives in paid employment than they did 50 years ago, when most womenwithdrew from it after marriage or childbirth – has also helped to lower REDRs.
Of course, failure to support these trendshas the opposite effect. Japan – where opposition to immigration and failure toembrace gender equality have led to a rapidly rising REDR – is a case in point.A low female-employment rate has also raised India’s REDR, albeit lessdrastically. Russia, too, has experienced a substantial increase in its REDR,owing to post-communist economic dislocation. But the rest of the majoremerging economies still have relatively low REDRs.
In short, the REDR tells a very differentstory from the OADR, with at least three important policy implications. First,population aging is no excuse for trimming the welfare state or treatingpension arrangements as unsustainable. After all, the phenomenon has beenunderway for more than a century, and, in some respects, its social andeconomic impact has been declining in recent decades.
Moreover, the REDR underscores that risingdemand for health care and social services is not a function of having a largershare of people above a specific age. Factors like progress in medicalknowledge and technology, and the increasing complexity of age-related comorbidconditions, are far more relevant.
In fact, while age-specific disability ratesseem to be falling, recent generations have a worse risk-factor profile thanolder ones, owing to trends such as rising obesity rates. The capacity ofhealth-care systems to cope with increasing longevity will therefore depend onthe changing relationship between morbidity and RLE.
The third implication concerns highereducation. Elderly people with university degrees (a small minority of theirgeneration) enjoy a substantial longevity advantage. If the life-enhancingeffect of higher education persists, population aging can be expected toaccelerate further, as the younger, larger, and more highly educatedgenerations grow older.
Preparing for and coping with changing demographicsrequires a more nuanced understanding of what population aging really means.For that, the right indicator – the REDR – is essential.