Good News: We Will Grow Old
OPINION |

Good News: We Will Grow Old

THE SHARE OF THE POPULATION OVER 65 IS CONSTANTLY INCREASING ACROSS THE WORLD, WITH JAPAN, ITALY AND GERMANY ACTING AS TRAILBLAZERS AND INNOVATION LABORATORIES. BECAUSE THIS PHENOMENON CAN ALSO BE SEEN AS AN OPPORTUNITY, BUT ONE WE CAN ONLY SEIZE IF RADICAL CHANGES ARE MADE

by Francesco Billari, Department of Social and Political Sciences

There is one alternative to ageing. And it is rather simple: dying. Because we start to age at the very moment we are born.
The fact that individuals all over the world, and populations in general, are ageing, is one of the tangible consequences of the magnificent progress of humanity. We should not forget, therefore, that population ageing, in addition to being a core challenge for our economies and societies, provides important opportunities that require innovative action.
 
What do we mean by population ageing? To put it simply, the increase of the share of the population aged over a specific age, conventionally put at 65. The United Nations estimate that over 680 million people, or 9% of the world’s population, is 65+. The current ‘silver’ group is overwhelmingly concentrated in rich countries, where 18% of the population is aged 65+. Moreover, women are the majority of this group, about 55%. But the megatrend here is global ageing, which will come fast: by 2050 the number of people aged 65+ is projected to have more than doubled, to over 1.5 billion at the global level.
 
How did we get there?  First, thanks to the fight against early death and disease. Global life expectancy at birth has reached about 72 years, up from about 56 years half a century ago, with longer lives for women. This is a remarkable progress, at the pace of almost one additional year of life expectancy every third year, or eight hours per day. Second, thanks to the ability to control human reproduction. At the global level, we have reached an average of less than 2.5 children per couple, where 2.1 is the “special” level that in the long-term would create a stationary population. By having fewer children, we can invest more resources, both parental and societal, on them. This general process of mortality and fertility decline is known as the “demographic transition”, and population ageing is a mechanical consequence of this process.
 
We tend to hear population ageing depicted as a threat, with increasing healthcare costs, the difficulty to support social security systems, perhaps a lower propensity to innovate and lower productivity. Alvin Hansen coined the term “secular stagnation” during his 1938 presidential address to the American Economic Association, an idea that has been more recently revived by Lawrence Summers, who defined the situation in rich countries, with an excess of savings over desired investments, as “the age of secular stagnation”. However, as ageing is a completly new phenomenon, past historical examples are of relatively limited use.

Can we turn population ageing into an opportunity, rather than a threat? Some positive evidence is already available: in a study, Daron Acemoglu and Pascual Restrepo have shown that countries that experienced rapid population ageing have grown more in recent decades. This counterintuitive finding can be explained by the faster adoption of automation technologies – we could call it Industry 4.0 – in countries that are ageing more rapidly.

Who are the forerunners in this global megatrend, and therefore the potential innovators? Japan is the country with the highest share of population aged 65 and over, followed by Italy (Germany is also a close competitor). While for sure these countries will be the first to face the challenges of population ageing, they have the unique opportunity to be the living laboratories for innovative responses. However, we need a cultural shift that points towards the chances offered by ageing, rather than towards a knee-jerk conservative response: only radical innovation will allow us to take advantage the potential “demographic dividend” of population ageing.

Read more about this topic:
Demographic Trends Suggest that Interest Rates Will Increase
Why Over 65s Don’t Like Supermarket Offers for the Elderly
Retirement Flexibility: Not Just for Workers, But Also for Companies
Long Term Care in Italy Involves Ten Million People and Will Double
How to Help Generations Coexist at Work and Save Pensions

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