A growing ageing population presents new economic challenges—but offers opportunities, tooby David Willetts / April 2, 2019 / Leave a comment
The most profound change that any society goes through is the demographic transition: it is the route to modernity. In pre-modern societies there are high birth rates and high mortality rates. Any surges in population are usually reversed by epidemics and famine, since such societies lack the means to feed the extra mouths.
In the late 18th century, Malthus analysed all this with brutal clarity, ironically just at the point when the Industrial Revolution was, for the first time, giving societies the opportunity to escape this miserable cycle. First, improvements in food supply, living conditions, hygiene and medicine mean many more children survive into adulthood so the population surges. Then with other changes, not least contraception, birth rates start to fall and the population reaches a new equilibrium at a much higher level. First we stop dying like flies and then we stop breeding like rabbits.
The early stages of the Industrial Revolution involved enormous human misery; but soon England and other western countries showed how to escape the resource constraints Malthus thought were fixed. He had thought resources could not grow as fast as the population, but with technological and scientific advances they could. The power released by coal massively exceeded the old wood-burning economy, for example. The classic refutation of Malthusianism is that the Stone Age did not end because we ran out of stones. The neo-Malthusian pessimists such as the Club of Rome authors of The Limits to Growth (1972) were also wrong—the world has fed a growing population.
In The Human Tide, Paul Morland offers us a good and reliable new account of the different forms of demographic transition over the past 200 years. It is a staging post on the path to development. But it is also a profound test for any society and many cannot cope with the pressure. It first shows up as a surge in the number of young people. In England this was true in spades: Morland points out that England did not just go through it first but, most unusually, actually had an increase in its birth rate early on: with relatively delayed marriage, pre-industrial England had comparatively low birth rates, so there was scope to rise.
If the extra young people can be educated and then set to productive work, then a society is on its way to prosperity and modernity. That is what has been achieved across much of Asia. But if these young people have their paths blocked by poor education or patronage systems, limiting access to jobs, or there is a failure to invest, then their rage drives revolution. That is the story of the Arab Spring. The youngest countries today have a median age of 20—the “middle person” in Congo is under 20. Such places tend to be the world’s trouble-spots. By contrast Britain’s middle person has just turned 40 and in the world’s oldest countries, Japan and Italy, that person is 48.
Both Morland—and the authors of another new book, Darrell Bricker and John Ibbitson—recognise that Africa is a crucial test for the demographic transition. In sub-Saharan Africa mortality is improving and birth rates are beginning to fall. Bricker and Ibbitson are wonderfully optimistic that African nations can get through the transition successfully. They have been to Kenya and seen falling birth rates and entrepreneurial young people creating businesses. Urbanisation and education are powerful contraceptives and they believe these two forces will ease the pressure.
But there is a more pessimistic view. Across a swathe of central Africa birth rates are not falling fast enough. Women are not getting access to education or birth control: instead they are still having babies at a shockingly young age. Africa’s population boom may go too far, too fast. The continent is a long way off from a stable population level. Moreover, the classic economic model for modernisation has been low-cost manufacturing; but robotics and automation may stymie this route. Some societies won’t be able to absorb so many people of working age.
The UN Population Division plays a big role in these debates: it is the respected custodian of the world’s demographic data and also forecasts demographic trends. Its middle case scenario shows the world’s population rising from 7.6bn now to 8.6bn in 2030 and 9.8bn by 2050, peaking at 11bn by the end of the century. Much of this growth will be concentrated in Africa, where it is almost bound to be disruptive to both that continent and to us, especially if it unleashes large-scale migration. Adding in the global disruption from climate change makes it even harder.
However, Bricker and Ibbitson believe the UN is exaggerating. They expect the world’s population to peak sooner at about 8bn, not 11bn. The demographers are generating alternative forecasts of population with a gap six times the size of the entire EU population. This is a difference that truly matters. Bricker and Ibbitson’s optimistic belief that African population growth will slow sharply is crucial but part of a wider story.
They also believe that China is stuck at a low birth rate. Here the evidence is more on their side: it does not look as if the reversal of the official one-child policy has led to any significant increase in the birth rate. Flats are too small, childcare too limited, and the 120 to 100 gender imbalance too high. China will indeed grow old before it grows rich and find itself older than many western countries. We will soon go through the point when China’s total GDP overtakes America’s but then its median age will also overtake America’s—and that might be the more significant comparison between the two countries.
To get to this lower global population western birth rates also have to fall. In demography, as in economics, there is a Goldilocks scenario in which birth rates end up roughly at a replacement rate of about 2.1 babies per woman. But that may be much too neat and tidy. From Italy and Germany to Japan there are advanced economies where it has gone down to about 1.5 or even lower. That tends to happen when there are inflexible labour markets, which make it hard for women to combine work with raising children. A busy modern family also needs flexible services, public and private, from school hours matching the working day to long shop opening hours and organised care for elderly relatives. Morland’s more balanced account offers the bleakest image of the future for these low-fertility societies—elderly Japanese dying alone and a new industry dealing with the removal of bodies found weeks after death.
From Sweden to the UK to the US the fertility rate is staying close to two. Many families aspire to have two children and if the labour market is flexible enough and childcare is available that is what they go on to do. I doubt that we will end up with quite such as dramatic a slow down as Bricker and Ibbitson suggest.
There is another debate about the balance of these populations. One gap is the balance of old and young. How old will we get? Several western countries have had a slowdown in life expectancy over the last few years. America is the most conspicuous example with big increases in what Morland identifies as the “diseases of despair” such as opioid addiction. In Britain and some other European countries longevity has not grown as much in the past few years as was previously expected, and in March the Institute and Faculty of Actuaries knocked several months off its figures for life expectancy at 65 for both men and women. The left has already rushed to point the finger at austerity and the fraying of social care. This can’t be dismissed but is not the only possibility. Another reason could be that we have failed accurately to forecast the mutations of the flu virus so our winter flu jabs have not been very effective. That would suggest that, as science advances, we could get back on track. Early figures indicate that excess winter mortality, heavily driven by flu deaths among the old, fell back sharply this winter. That is why we did not have a winter NHS crisis. So I expect that we will see a bounce back in life expectancy forecasts in the UK.
There are different ways in which a society can age. It can be that life expectancy rises. It can also happen as a big generation, such as the baby boomers, works its way through the life-course: as they grow older, the average age of the population as a whole would increase even if individual life expectancy stood still. Bring these together and many western societies will age a lot. The Resolution Foundation’s Intergenerational Commission shows one powerful effect of this. Older people pushing up public spending on health care and on pensions. That means taxes have to go up.
It is a stark contrast to the demographic sweet spot in the era of Margaret Thatcher when the post-war boomers were younger and paying taxes, while not needing much public spending. The debate now is which taxes need to go up to pay for an ageing population. As the Boomers have so much of the wealth there is a good argument for them to pay well-designed capital taxes rather than increasing the tax burden on the working population. And no amount of radical pruning of the NHS or state pensions now escapes this dilemma as it is hard to see any government expecting retired people to make “alternative arrangements” in these sensitive areas.
These old people are not just a cost though; they are also a resource. Grandparents are giving up time and money to their children’s children on an unprecedented scale. In my 2010 book The Pinch, I demonstrated that the decline in the number of children and the improvements in life expectancy mean that the family changes shape: instead of having a horizontal network of siblings and cousins, the family becomes a tall, thin bamboo pole linking different generations vertically. As our working and social lives are increasingly segregated by age, the family actually becomes more important as the main form of inter-generational contact, exchange and—where they can afford it—the handing down of resources too. No wonder it is hard to make progress on improving social mobility.
Bricker and Ibbitson argue eloquently for more migration as the solution. They say that, relative to total population, there are many countries where migration has fallen. They offer a picture of a history of restless and relentless human mobility. They argue that ageing societies should be able to absorb migrants. But the paradox is that it is easier for flexible growing societies to absorb migrants. That is much harder in heavily regulated economies with low birth rates. The authors’ view of society—a bland inclusive universalism absorbing people from a range of different cultures—is, ironically, just what one would expect from authors who come from Canada, famously described as “the greatest hotel on earth.”