As the planet continues down a path of increasing globalization and international interdependence that has persisted throughout roughly the past century, the world has undergone radical and fundamental shifts. Deforestation, the climate crisis, and an increase in the prevalence and emergence of infectious diseases are just a few examples of how the globalized human network has pushed the planet nearer and nearer to its limits. However, it is not only the planet itself that faces the impending consequences of unsustainable practices. In an unprecedented period of growth, the human population doubled from 2.5 billion in 1950 to 5 billion in 1987 (Roser 2013), a mere 37-year timespan. What’s more, while the rate at which this population explosion does appear to be slowing since 1987 the population has reached nearly 8 billion people in the year 2022.
This extreme growth, much like our current environmental and economic practices, is largely unsustainable and as a result, the world is faced with a new threat—aging. As the generation born roughly within the explosive period of population growth in the mid-20th century continues to age through their mid-life and into old age, our society must prepare to respond to the impending consequences. Such consequences are furthered by the fact that they will not be confined to specific countries or regions of the planet, as all countries are either currently facing or fast approaching these challenges. But what exactly are the implications of an increasingly aged population for our society, economy, and health? In this paper, I will first delve into the numerous challenges posed to global society by aging populations, followed by an exploration of the potential opportunities aging may provide. Finally, I will propose some solutions to the aforementioned challenges based on real-world policy examples from across the globe as well as my own knowledge.
Beginning with reference to the economy, aging societies pose numerous challenges to the success of economic growth both regionally as well as internationally. According to data compiled by the United Nations, roughly 9% of people worldwide were aged sixty-five or over in the year 2019. The organization, however, projects that as early as 2050 the percentage could jump to 16% worldwide, with estimations for the same metric in North America and Europe as high as 25% (“Aging”). These increases in the percent of the population at or above the age of sixty-five are worrying for myriad reasons. First, it is important to keep in mind that percentages are relative to the total population; therefore, a drastic increase in the percentage of the population over the age of sixty-five also implies a drastic decrease in the percentage of the population under the age of sixty-five in order to account for this shift. Most importantly, the percentage of the population between the ages of eighteen and sixty-five will shrink to account for this shift, and herein lies the problem. A shrink in the percentage of the population within this age range translates directly to a diminishing labor force relative to the total population. As a result, economic output faces a decline. Such is the case for Japan’s “hyper-aged society,” with a 2020 European Union report asserting that “Japan's economic crisis is essentially a demographic crisis. The declining numbers of young people in the labor force have led to a shortage of workers in manufacturing and the aging of the workforce has provoked a decline in production and innovation, and therefore a drop in Japan's manufacturing exports as a share of global exports.” (D’Ambrogio 2020). Moreover, this economic downturn may result in a lack of confidence for international investors, inspiring disinvestment and resulting in a vicious cycle of economic downturn.
Further, an increase in the percentage of the population at or above the age of sixty-five invariably results in an increase in the dependency ratio of a nation and the planet at large. The dependency ratio is a metric by which to measure the proportion of people within a society who are economically dependent upon the working population, with dependents tending to be the elderly and the young. The higher the ratio is within a given context, the greater reliance on the workforce that the population will require. In Germany’s case, the dependency ratio was 26.5 in the year 2000, roughly 37.5 in the year 2015, and is projected to reach 41.4 by the year 2025 (“Parts” 2021). A ratio above 50 is considered to be unsustainable as this would imply a workforce consisting of a minority of the population in a given country. Therefore, while not yet unsustainable, the trajectory of the German population is worrisome in that it appears to be fast approaching this problematic benchmark.
Finally, as wealth and health are directly related, an aging population is further problematic. According to the demographic transition model of populations, societies generally move from one in which the birth and death rates are both high and the average lifespan is short to a society in which birth and death rates are both very low and the average lifespan is relatively long. The epidemiological transition model is yet another theory that asserts that just as the structure of society changes with development, so too does the nature and prevalence of disease. According to the model, earlier societies are subject to far more infectious and natural diseases such as tuberculosis or smallpox, while later societies tend to suffer more from man-made or chronic diseases like diabetes, cancer, or Alzheimer’s. As a result of prolonged lifespans and greater chronic illness, not only does the quality of life deteriorate for aged societies as people struggle more with such maladies, but this too results in economic strain as governments are forced to spend more to ensure the health and wellbeing of their citizens who rely on welfare programs. Again, looking to Japan, the nation’s “health expenditure reached 10.9 % of gross domestic product (GDP) in 2018 and, according to the International Monetary Fund (IMF), is projected to reach 12.1 % by 2030” (D’Ambrogio 2020). This increase in healthcare expenditure is yet another result of an aging population that is subject to greater medical costs in managing and treating long-term illness.
However, while the aging of a population may signify an litany of impending socioeconomic challenges both nationally and globally, the natural age progression of a society also goes hand in hand with numerous opportunities upon which nations may capitalize in the hopes of allowing their economies further flourish. Much like the challenges posed to societies as a result of aging populations, the natural transition of the age structure of society itself may allow for massive economic gains in a given country. Referring back to the theories of the demographic and epidemiological transitions, the concept of a “demographic dividend” emerges. According to the Gates Institute for Population and Reproductive Health, a demographic dividend is “the accelerated economic growth that may result from a decline in a country’s mortality and fertility and the subsequent change in the age structure of the population” (Gaith 2019). In other words, a demographic dividend is not so much a guarantee of economic prosperity as much as it is a mere window of time within which a society may capitalize upon the changing structure of it’s population as the percentage of working age individuals within that society grows relative to all other demographics. What’s more, it is know that there are at least two separate demographic dividends that occur along the demographic transition of which society may make use of.
The first demographic dividend, as previously mentioned, is the result of a rapid decrease in death rates and an increase in the longevity of lifespan within a nation, resulting in a sudden and radical restructuring of the demographics of that country. This restructuring is such that the previously high proportion of young people in a nation will go on to capitalize on their extended lifespan as they age into the labor force, greatly increasing the proportion of the population of working-age relative to all other age groups. The time when this transition occurs is the time window within which a nation can make use of the population of working-age by integrating them into the labor force. This integration of an expanded labor force allows for greater production, exportation, and productivity, resulting in a radical explosion of such economic markers. In this way, the first demographic dividend allows for major economic gains, however it is important to reiterate that such gains only occur if good policy and governance enable the people to capitalize upon the dividend before they age out of the labor force. According to the Population Reference Bureau, “investments in family planning stimulate the fertility decline required for age structure change and can also contribute to increased female labor force participation and economic growth” (Gaith 2021). Taking China as an example, the implementation of the One-Child Policy from 1980 through 2015, while ethically questionable, forced fertility rates to an all-time low. This would later result in a bulge in the working-age population’s representation among the total population, ultimately lowering the dependency ratio and allowing China to capitalize on the first dividend.
The second demographic dividend is less time-sensitive than the first in that it can be sustained much longer. While the first demographic dividend tends to persist roughly between thirty and sixty years with relatively few exceptions (Mason 2005), the second demographic dividend is far more dependent upon long-term wealth. This is because the second demographic dividend occurs as a result of the increase in lifespan within a country. When lifespan increases, citizens are far more secure in their assumption that they will reach old age, and thus far more inclined to save money for their retirement. Consequently, working-age citizens tend to invest their money in stocks and savings accounts which ultimately boost national economic benchmarks.
The question arises, however, of what happens when the generation responsible for the first and second demographic dividends enters old age and eventually dies off? With low birth rates established for decades at that point, who will replace them? This is where the benefits of migration come into play. While migration often has negative consequences for the country from which migrants are leaving, the country to which migrants immigrate reaps innumerable benefits from their arrival. Such is the case in the United States, which has long held some of the most open borders globally and whose foreign-born resident population surpasses fifty-million, more than three times that of the country with the second most foreign-born residents (“Immigration” 2022). Relatively open borders like those of the United States allow for high replacement rates of workers, while keeping fertility rates low and thus maintaining the bulge in the working-age demographic and keeping the dependency rate low. In this way, aging societies may reap potential benefits in opening their borders to greater numbers of immigrants. What’s more, it is often the case that foreign-born immigrants to the United States have completed a college-level education in their country of origin. Especially in nations were education is public and paid for, the United States simply absorbs the workers who were trained at the expense of their country of origin, which essentially boils down to free laborers—in that their training is at the expense of a foreign nation—for American industry.
Given the potential benefits as well as the likely risks of an aging population, one question remains: How can the implementation of policy mitigate the risks while ensuring the greatest possible social and economic outcomes for societies across the globe? The answer to such a question is not simple and requires a multifaceted approach. The first and arguably most important prerequisite to capitalizing on potential gains such as the demographic dividends is the reinvestment of economic gains back into social programs and welfare. Take the case of the United States against the case of Germany. Economic gains made in Germany during their demographic dividend were capitalized upon by widespread investment of social programs and education (“Parts” 2021). In Germany, all public schools from kindergarten through college are tuition-free as a result of investments made by the government on behalf of the people. The system of economic redistribution of gains in the United States, however, differs drastically. While a portion of all economic gains in the United States are reinvested into social welfare programs like medicare and the infrastructure bill passed under the Biden administration, generally economic gains in the America take the form of wealth redistribution by way of wage increases. However, it is hardly the case that wages in the United States rise at a level proportional to that of the gains earned or even simply the cost of living. Therefore, investment in social welfare and education specifically allow for the mitigation of the economic rebound of an aging society.
Beyond education, investments in healthcare are paramount in reaping the benefits of an aging society while mitigating risks. Investing in a publicly funded healthcare program ensures equal access to healthcare for all citizens. This essentially forces down the fertility and death rates of a country by ensuring citizens the right to a long and healthy life, and in turn conveying that mothers need not have more than two or three children as they are all likely to survive to adulthood. This time, take the case of the United States against the case of Canada. While the United States does not provide a fully public and universal healthcare plan for its citizens, Canada employs the use of a “decentralized, universal, publicly funded health system called Canadian Medicare” (Allin 2020). Such programs ensure the right of citizens to their health, as opposed to the commodification of healthcare in the United States. By ensuring all citizens have access to publicly-funded healthcare and education, as in Canada, governments can raise the earning potential of each of their citizens, and in turn the earning and production potential of the country as a whole. Moreover, investments in public health should also take the form of preventative health as opposed to retroactive treatment. Sweden, a prime example of one such country employing the use of preventative healthcare, has a publicly funded healthcare system much akin to that of Canada. In Sweden, preventative medical practices are available to all citizens, free of co-pays, and can take the form of cancer screenings, maternity care, and immunizations (Glenngård 2020). The employment of preventative care not only ensures a greater quality of life for the citizens of Sweden, but further reduces the economic burden placed upon the healthcare system by an aging population. Finally, investment in family planning is paramount to lowering fertility rates and allowing for nations to capitalize upon the demographic dividend. Failure to invest in such programs and institutions is largely to blame for numerous sub-Saharan African nations’ failure to reap the benefits of the first dividend (Gribble 2012).
A third and final policy recommendation to mitigate the damaging effects of an aging population while also capitalizing on the potential benefits is job creation. Specifically, as it relates to the first demographic dividend, the creation of jobs to meet the rising demand for labor in societies with aging populations is paramount to capitalizing on such potential gains. More specifically, however, investments in job creation should be largely confined to sustainable industries. Investing in job creation in the renewable energy sector would have myriad benefits in an aging society. Not only would job creation in this sector allow for a society to meet the increasing demand for jobs, but it will do so in a way that further alleviates future health consequences and thus government spending on chronic illness. By way of the implementation of solar and wind energy, production of electric-powered cars and appliances, and job creation in the sector of nature-restoration and preservation, aging societies will be able to capitalize on the window of demographic dividends while also increasing the quality of life by reducing overall pollution and the consequent negative mental and physical health effects of a poor environment.
The effects of population aging are varied in both their potential benefits, as well as likely risks. Aging populations tend to be less economically productive and further tend to have higher dependency ratios than those of younger nations. Further, the economic toll chronic disease associated with aging takes on personal and governmental spending not only damages economic gains, but lowers quality of life overall. On the other hand, the potential economic benefits of the first and second demographic dividends as a result of population aging would prove extremely beneficial for governments wise enough to capitalize on them. It is my recommendation that wide-scale investment into public heath, education, and sustainable industry will not only mitigate the negative consequences of an aging society, but rather allow for an economic and social flourishing of societies who adopt such a model.
Works Cited
“Ageing.” Peace, Dignity, and Equality on a Healthy Planet, United Nations, https://www.un.org/en/global-issues/ageing.
Allin, Sara, et al. “International Health Care System Profiles: Canada.” The Commonwealth Fund, The Commonwealth
Fund, 5 June 2020, https://www.commonwealthfund.org/international-health-policy-center/countries/canada.
D'Ambrogio, Enrico. Japan's Ageing Society . European Parliament, Dec. 2020,
https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/659419/EPRS_BRI(2020)659419_EN.pdf.
Gaith, Smita, et al. “PRB.” Which Policies Promote a Demographic Dividend?, Population Reference Bureau, Oct. 2019,
https://www.prb.org/.
Glenngård, Anna H. “International Health Care System Profiles: Sweden.” The Commonwealth Fund, The Commonwealth
Fund, 5 June 2020, https://www.commonwealthfund.org/international-health-policy-center/countries/sweden.
Gribble, James, and Jason Bremner. The Challenge of Attaining the Demographic Dividend. Sept. 2012,
https://scorecard.prb.org/wp-content/uploads/2013/11/demographic-dividend.pdf.
“Immigration by Country.” Immigration by Country 2022, World Population Review, https://
worldpopulationreview.com/country-rankings/immigration-by-country.
Mason, Andrew. 2005. “Demographic Transition and Demographic Dividends in Developed and Developing Countries.”
United Nations Expert Group Meeting on Social and Economic Implications of Changing Population Age Structures
31(August): 80 101.
“Parts of Germany Are Desperate for More People.” The Economist, The Economist Newspaper, 25 Sept. 2021,
https://www.economist.com/special-report/2021/09/20/parts-of-the-country-are-desperate-for-more-people.
Roser, Max, et al. “World Population Growth.” Our World in Data, University of Oxford, 9 May
2013, https://ourworldindata.org/world-population-growth.