Demographic Ageing
Abstract
The world’s population is ageing significantly. Today, one in ten people is over the age of 60, but this
proportion will double to one in five by 2050. At present, 600 million people around the world are aged
60 years and over. This is projected to increase to 1 billion by 2020 and to reach almost 2 billion by
2050. Governments are going to have to make some very difficult decisions to cope with this major
trend.
Global trends
The problem of demographic ageing has been a concern of MEDCs for some time, but it is now also
beginning to alarm LEDCs. Although ageing began later in LEDCs, it is progressing at a faster rate.
This follows the pattern of previous demographic change such as declining mortality and falling
fertility, where change in LEDCs was much faster than that previously experienced by MEDCs. For
example, Figure 1 shows the significant projected decline in the support ratio for the world as a whole
and for a number of individual countries.
Figure 1 – Support ratio forecasts (ratio of 20–64 year olds to 65+).
Demographic ageing is the result of (a) increasing life expectancy and (b) declining fertility, with the
former being the most important of the two factors. Projections to 2050 show a considerable increase in
global life expectancy from 1950, with a narrowing gap between MEDCs and LEDCs over time. The
following factors have been highlighted by the United Nations:

The global average for life expectancy increased from 46 years in 1950 to nearly 65 in 2000. It
is projected to reach 74 years by 2050.

The global median age for males is currently about 26 years, but this is projected to rise to 35
years by 2050.

In LEDCs the population aged 60 years and over is expected to quadruple between 2000 and
2050. The proportion of the population over 60 years will increase from 8% to 21% by 2050.
During the same time period the proportion of children will fall from 33% to 20%.

In MEDCs the number of older people was greater than that of children for the first time in
1998. By 2050 older people in MEDCs will outnumber children by over two to one.

The population aged 80 years and over numbered 69 million in 2000. This was the fastest
growing section of the global population, and is projected to increase to 375 million by 2050.

Europe is the ‘oldest’ region in the world. Those aged 60 years and over currently form 20% of
the population. This should rise to 35% by 2050.

Japan is the ‘oldest’ nation, with a median age of 41.3 years, followed by Italy, Switzerland,
Germany and Sweden.

Africa is the ‘youngest’ region in the world, with the proportion of children accounting for 43%
of the population today. However, this is expected to decline to 28% by 2050. In contrast, the
proportion of older people is projected to increase from 5% to 10% over the same time period.

There are already over 50 nations with total fertility rates at or below 2.1 (replacement level).
By 2016 the UN predicts there will be 88 nations in this category.
Demographic ageing poses considerable problems to both MEDCs and LEDCs with regard to the
allocation of scarce resources. However, it is the LEDCs which face the greatest challenge because:

Financial, health, housing and other resources are woefully inadequate to meet the increasing
demands of the elderly.

Traditional support systems for old people are deteriorating in an era of rapid social change.

The significant decline in fertility is leaving fewer children to care for elderly parents.
Figure 2 shows how substantially the population structure of LEDCs is projected to change by 2050.
However, this is not to underestimate the considerable adjustments required in MEDCs to cope with
population ageing as illustrated by the case study of the UK which follows.
Figure 2 – Population pyramid for LEDCs (1998 and 2050 projected).
The challenge facing the UK: changing dependency ratios
Demographic ageing appears to be one of the greatest challenges facing the UK today as the
contrasting population pyramids for 2002 and 2050 show (Figure 3). This process is the product of
rapidly increasing life expectancy and low fertility. The combination of these two major demographic
trends will see almost a doubling of the population aged 65 years and over by 2050, with both men and
women expected to live, on average, 10 years longer than in 1950. The post-war baby boom has
delayed the effect of underlying long-term trends, but will now produce 30 years of significant
increases in the dependency ratio. The post-war baby boom resulted in an increase in the fertility rate
from the mid-1940s to the mid-1960s. As the children born during this period grew up and joined the
economically active population, the dependency ratio was depressed to a lower level than its long-term
trend. To a certain extent the baby boom’s impact on the dependency ratio has lulled the UK into a
false sense of security, delaying difficult decisions concerning pensions and retirement.
Figure 3 – Population pyramids for the UK (2002 and 2050 projected).
The total dependency ratio is the sum of the youth dependency ratio and the old-age dependency
ratio. While youth dependency has been falling, old-age dependency has been rising. The latter is
projected to overtake the former in around 2025 and then to increasingly exceed it (Figure 4).
Figure 4 – Old-age, youth and total dependency ratios.
The Government Actuary’s Department (GAD) in its most recent biennial review (2003) projects that:

The ratio of people 65 years and over to those in the 20–64 age range will rise from 27% today
to 48% by 2050. This marks a considerable change from the very slow increase in the last 20
years.

Average male life expectancy at 65, which has risen from 12.0 years in 1950 to 19.0 today, will
increase further to 21.0 by 2030 and 21.7 by 2050. Female life expectancy at 65 is higher,
although increasing at a slightly slower rate.

The current low fertility rate of 1.7 children per woman will increase only slightly to 1.75 by
2022, levelling off at this point.
However, it is important to note that past official projections have significantly understated subsequent
developments and that this could possibly be the case for the most recent projections. In 1981, GAD
projected that by 2004 male life expectancy at 65 would be 14.8 years as opposed to the actual figure
of 19.0 years.
Life expectancy is influenced by socio-economic class. Men in social class 1 have about four years’
higher life expectancy at 65 than men in social class 5. Thus, longevity is greater in more affluent parts
of the country.
Christchurch in Dorset is the ‘pensioners’ capital’ of the UK, with one in three residents being of
retirement age. However, it is not just coastal areas, with a perceived high quality of life, that attract
retirees. There is also clear evidence that the growing elderly population is migrating to the
countryside.
Age structure varies considerably by ethnic group. White Irish and White British have the highest
proportions of their populations aged 65 and over, with approximately 20%, while the Black African
population has the lowest proportion of older people, with approximately 2%.
Low fertility and falling child dependency
The birth rate in the UK, in common with most MEDCs, has fallen below the replacement level. The
total fertility rate in England and Wales is now 1.7 children per woman, and despite a slight increase in
2003 it shows no signs of a significant increase in the future. The ratio of children to the working age
population has fallen considerably in the last 20 years. This has been so significant that the total
dependency ratio has actually fallen and at present it is at its lowest level for 40 years. As the recent
GAD report states: ‘The working population in 2004 supports a historically very low burden of nonworking pensioners and children. The size of that burden, if average retirement ages remain unchanged,
will now rise significantly.’
In 2001 the crude birth rate for the UK was 11.4 per 1000, the lowest ever recorded. This resulted in
669,000 births during that year, 38% fewer than 100 years earlier. The particularly low number of
births in recent years is due to two factors: (a) lower fertility rates and (b) fewer women entering their
peak reproductive years than in previous decades, a result of the smaller numbers of women born in the
1970s. The total fertility rate in 2001 was 1.63, down from 1.81 in 1991.
Ageing and health
An ageing population places increasing pressure on health resources. However, it is important not to
overstate this impact. While average health care costs rise with age, the cost of this trend could be
significantly offset by people getting healthier. The trend is towards the compression of illness into the
last years of life, a process which has been termed ‘the compression of morbidity’.
Mobility data published in Living in Britain (Figure 5) show a considerable decrease in the number of
people aged over 80 facing difficulties with mobility. According to the government report Pensions:
Challenges and Choices, ‘International comparisons also suggest support for the health ageing
hypothesis’. The recently established English Longitudinal Study of Ageing (ELSA) will provide much
more comprehensive information on the relationship between ageing and health, but not for some time.
American studies show that people who are healthy at 70 and live independently for many years total
up medical costs that are similar to those people who are very ill at 70 and die earlier.
Figure 5 – Trends in immobility, by age.
The impact of immigration on the dependency ratio
Only a very high rate of immigration would have more than a very small impact on the projected
dependency ratio. It would require net inward migration at over 300,000 per year to reduce the 2040
old-age dependency ratio from 47.3 to 42.1 years. However, this would only have a temporary impact
unless even higher levels of immigration continued in later years or unless immigrants maintained a
higher birth rate than the general population. This is because immigrants themselves age and become
pensioners who require economically active people to support them.
The impact of ageing on the sex ratio
Because women have a higher life expectancy than men, as the population ages the number of women
to men (the sex ratio) increases. Eastbourne, a popular retirement centre, has the least men to women
(87:100).
Financing an ageing population
Pension systems transfer resources from the current generation of workers to the current generation of
pensioners. As the population has aged, the level of resource transfer required has increased. The
system cannot be sustained in the future without significant change. The four options available are:
1. Pensioners will become poorer relative to the rest of society.
2. Taxes/National Insurance contributions devoted to pensions must increase.
3. The savings rate must rise.
4. Average retirement ages must rise.
A government survey (Figure 6) shows the preferred public responses to the pensions issue, with the
majority of people expecting to either work beyond the current retirement age or to save much more
each month for their retirement. The option of lower pensions is the least attractive, according to the
survey. Because of increased life expectancy and thus a much higher pension bill, significant changes
have either been made or are in the pipeline for both private sector and public sector pensions.
Figure 6 – Preferred responses to the demographic challenge .
Figure 7 shows how economic activity rates decline for the over 50s. There can be little doubt that
these profiles will be significantly different in 20 years’ time with people working to a more advanced
age before they retire. Figure 8 shows the estimated distribution of retirement ages for 2004. The ‘peak
period’ for retirement, looking at men and women together, is between 59 and 66 years.
Figure 7 – Economic activity rates of men and women aged 50–75.
Figure 8 – Estimated distribution of retirement ages for 2004.
The level of the state pension in the UK is one of the lowest in MEDCs. This has a significant impact
on the incomes of elderly people (Figure 9). Within Britain, pensioner incomes vary considerably by
ethnic group, with White Britons receiving, on average, £265 per week, and Asian and Black Britons
receiving, on average, £200 per week.
Figure 9 – Median income of people aged 65+ as a percentage of median income of people aged less
than 65 (2001).
The ‘grey pound’ and the ‘grey vote’
As a population ages the total purchasing power of the older section of a population increases. This is
clearly beneficial to companies that specialise in providing goods and services to older people. For
example:

In the tourist industry, cruising is a very popular type of holiday with the older age group.

Some companies, such as Saga, provide a wide range of services for older people, in this case
the over-50s.

The housing market is adjusting to population ageing with more housing units being built
specifically for the elderly.
Political parties are also only too aware of the increasing voting power of the older age group. As aged
dependency rises the grey vote will increase further.
An alternative view
Phil Mullan, in his book The Imaginary Time Bomb: Why an Ageing Population is not a Social
Problem, argues that the demographic pessimists ignore the fact that ageing has been a feature of
MEDCs since the late nineteenth century and countries have not had a problem coping with this
process in the past. The points he makes include the following:

The so-called pension crisis is not just due to demographics but also to short-sighted policies by
government and private companies. He cites the taxing of pension funds since 1997 and
companies’ contribution holidays and/or using the funds to finance redundancies under the guise
of early retirement as examples.

The calculations of the ‘pension burden’ are based on the changing support ratio. The support
ratio ignores the fact that a considerable number of people of ‘working age’ do not work. This
makes a great difference to what is termed the real, or economic, support ratio, which compares
‘active workers’ and non-workers, as non-workers of every age require the economic support of
those who are working. Thus, the argument here is that employment rates tend to be more
influential on the economic support ratio than the pace of ageing.

The preoccupation with the support ratio ignores rising productivity which has been so
important to improving living standards in the past.

Older people are healthier than before and may not cost more in terms of health care just
because they are living longer.

Pensioners also pay income tax and most of the other taxes that the working population pay
such as VAT and council tax.

With demographic ageing there will be fewer children to educate and presumably fewer nonemployed on benefits if there is a shortage of workers. So, public spending in both of these areas
should decrease allowing resources to be switched to the elderly.
Mullan claims that ‘the real problem in the “pensions crisis” is not demographics, but our meanspirited attitude towards the elderly’.
Conclusion
For much of the post-1950 period the main demographic problem has been generally perceived as the
‘population explosion’, a result of very high fertility in LEDCs. However, greater concern is now being
expressed about demographic ageing in many countries where difficult decisions about the reallocation
of resources are having to be made.