What’s the challenge?
Britain is facing a dramatic shift in its population age structure, caused by both a declining fertility rate and a rising life expectancy rate. The consequences of this will be an ageing population. The impacts will include pressures on economic development, retirement, health and welfare provision. In light of this, how should Britain move forward?
Britain’s population is ageing. Adapting to this trend poses economic, social and political challenges and increases the dependency of older citizens on those of working age. What challenges and opportunities does this create for society? What should our response be?
Many countries including Britain, are experiencing a rapid ageing of their populations. There are two megatrends causing these demographic changes:
1. Rising longevity – people are living longer thanks to improvements in health, diet and preventative health care. During the 20th century the average life expectancy in Britain increased by 30 years.
2. Lower/declining birth rates – over the last 40 years women have been having fewer children, however in the last decade birth rates have risen slightly. Women in UK are currently having 1.9 children, the highest figure since 1973, but far lower than 2.93 in 1964.
Facts
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Around a third of children born in 2012 are expected to survive to celebrate their one hundredth birthday.
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1% of those born in 1908 lived to 100
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In the UK in 1901 life expectancy at birth was around 45 for men and 49 for women
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Between 1901 and 2010, the number of people aged 40 and older trebled from 9.7m to 30.8m
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In 2012 the number of over 65’s and older in the UK surpassed 10 million for the first time
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In 2007 the number of people in Britain aged over 65 outnumbered the number of people under 16 for the first time.
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Baby Boomers: born during a period of rapid population growth and social change between 1946-64, with 17m births recorded in Britain alone during this period
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Dependency ratio: The number of people of working age in relation to retirees
Sources: UK Government, ONS
Challenges of an ageing population:
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Gaps in the job market, with businesses and public services lacking workforce and skills
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Pressure on healthcare and social services
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Funding public services and social housing: particularly in time of recession
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How to harness the experience, expertise and creativity of a large number of older people.
Suggested responses:
1 Raise the age of retirement
2 Sustain or increase levels of migration to help fill labour /skills gaps
3 Encourage the working, taxpaying population to save more through pension schemes
4. Encourage people to remain active, engage in regular exercise and refrain from behaviours that could have a detrimental effect on their health
UK Labour force: Source Office of National Statistics (ONS), January 2009
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Full-time employment 13.84m men 7.89m women
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Part-time employment 1.87m men 5.68m women
How will Britain deal with an ageing population?
With widespread fall in fertility rates and significant rises in life expectancy, the median age of Britain’s population is rising. Today, for the first time in history, Britain’s over-65s now outnumber people under the age of 16.
This ageing population trend is being made worse by the inevitable retirement of the so-called baby boom generation over the coming decades. The baby boomers were born during a period of rapid population growth and social change between 1946-64, with 17m births recorded in Britain alone during this period. Those born at this time are now beginning to reach retirement age and are set to have a dramatic effect on the people, society and the economy of Britain.
There are currently 4 people of working age supporting each pensioner in Britain, by 2035 this number is expected to fall to 2.5, and by 2050 to just 2. The number of people of working age in relation to retirees is known as the ‘dependency ratio’.
This ageing of populations is a global phenomenon, being witnessed not only in Britain but in such developed countries as Italy, Spain, Germany and Japan.
How will the NHS deal with the rapid growth of older people in Britain?
A main concern is that with the retirement of the baby boomers, the number of people of a working, taxable age will shrink or become stagnant. This could result in gaps in the jobs market, with businesses and public services lacking the workforce required.
With the elderly being the fastest growing age group in Britain, increasing pressure is being put on healthcare and social services. A report in 2005 said a key aim of government policy should be to encourage people to remain active, engage in regular exercise and refrain from behaviours that could have a detrimental effect on their health.
In a speech on NHS reforms in January 2008, the Prime Minister Gordon Brown discussed a change of emphasis to prevention rather than cure, and the need to ensure the NHS benefits from new and innovative technologies.
Personal savings is another potential dilemma; societies must save to be able to allocate funds for investment for the future, in such things as factories, offices, transportation, schools, energy and hospitals.
If older people don’t save or run down their savings while a smaller working age population does not save enough to compensate for the shortfall, then a shortage of savings could seriously affect economic performance.
The effect of the global economic crisis
The recent economic crisis and the downturn in the global economy has come at a particularly difficult time, affecting older citizens dependent on their own resources. It also risks delaying a comprehensive policy to managing the ageing of our society.
For individuals, the issues focus on the shortfall of retirement savings; the financial crisis is damaging equity and house values, and the collapse of interest rates in Britain is affecting those who had chosen to save over the past decades.
For society, a main concern is the provision of health and social care services, the nature of work and the workplace, and the investment made in education and lifetime skill formation. These all require further funding, whether from the tax system, other public expenditure savings, public-private initiatives or economic growth. The next few years are expected to be very difficult following the downturn in the global economy, and public spending in 2010/11 will be a challenge for the government.
For the economy, the challenge is to generate growth and financial resources needed to meet age-related spending needs. The rescue of the banking system has dramatically increased public debt. The question now is how will we cope with paying the bill for age-related spending?
Options / Solutions
The ‘maturing’ of global societies is certainly a major achievement, with people today living far longer and healthier lives than previous generations. This demographic change offers opportunities to harness the experience, expertise and creativity of such an historically large number of older people.
There are various options available to both government and private companies to deal with the ageing of Britain’s population. It is however, essential that now the best economic, social and political structures are developed to avoid a catastrophe.
The Age and Employment Network (TAEN) – say that this change in demographics provides great opportunity for businesses. Tapping into a wider pool of talent, experience and skills enables businesses to increase productivity, build competitive advantage and improve the bottom line.
Increasing the age of retirement is a politically and socially controversial policy. The UK government looks set to introduce this in the near future. Under current government policy, the state pension age for women will gradually rise from 60 to 65 between 2010 and 2020. For both men and women it will rise further, from 65 to 68, between 2024 and 2046.
Forcing people to save a proportion of their income has been suggested as a way of solving the UK’s pension crisis. Many people seem to favour this option, provided that their employers contribute as well.
Another option is to encourage higher labour force participation. In developed economies, a high percentage of men of working age tend to work, however participation rates are relatively lower for women and older workers aged 55-64.
Special efforts will be required to make it more attractive for both women and older workers to stay on at work or to find economically useful and personally challenging work once they approach or pass the age of retirement.
A further option is the immigration of skilled labour, which can help boost the labour market in general or specific types of skilled labour. But Britain would be required to drastically increase its current level of immigration of economically active workers to offset the impact of demographic change. This could certainly add further stress to an already controversial area of political debate
21st Century Challenges held a panel discussion on 16 June 2009 to discuss this issue.
Hear about this challenge from:
Samira Ahmed, Channel 4 newsreader and correspondent
Samira Ahmed, Presenter and Correspondent for Channel 4 News. Samira joined Channel 4 News after several years as a correspondent and presenter at the BBC. She was the BBC’s Los Angeles correspondent, before working as an anchor and political correspondent in Berlin for Deutsche Welle TV.
Samira has covered a range of issues since joining Channel 4 News as a reporter and presenter. She travelled across the world for a Channel 4 documentary series, Islam Unveiled, examining the status of Muslim women. She has lectured on terrorism, feminism and crime reporting at the London School of Economics and has chaired discussions for the Royal Shakespeare Company on English identity.
Angela Eagle MP, Former minister for Pensions and the Ageing society
Angela previously served as Exchequer Secretary to the Treasury from July 2007. Prior to this she has been Parliamentary Under-Secretary of State for the Home Office (2001-02); the Department of Social Security (1998-01); the Department of the Environment, Transport and the Regions (Minister for Green Issues and Regeneration) (1997-98); and was an Opposition Whip (1996-97).
She has been on a number of Commons Select Committees, including the Members Interests Employment Select Committee, the Public Accounts Committee (twice); and Treasury Select Committee, and the Treasury Sub-Committee 2002-2007. Angela has been Vice-chair of the All-Party Equalities Group and in 2005 was elected Vice Chair of the Parliamentary Labour Party. She is also a member of Labour’s Ruling National Executive Committee (NEC).
She was elected as the first ever Labour MP for Wallasey in 1992, after holding a number of posts within the Labour Party. Angela was educated at Formby High School, and then gained a BA (Hons) in Politics, Philosophy and Economics and St John’s College Oxford. She worked for CoHSE (now UNISON) as a Researcher, the Press Officer, and then Parliamentary Liaison Officer, before being elected to Parliament.
Angela’s political interests include Economic Policy, the NHS, and the politics of sport.
George Magnus, Author and Senior Economic Adviser at UBS Investment Bank
George Magnus is the Senior Economic Adviser at UBS Investment Bank. Previously he had served as the Chief Economist with effect from the merger of UBS and Swiss Bank Corporation (SBC). Having chaired the Investment Committee of the Trustee Board of UBS’ UK pension and life assurance fund for several years, he continues to serve on the Committee.
Mr. Magnus’ previous positions included that of Chief International Economist at UBS before the merger with SBC, Head of Fixed Income Research and then Chief Economist at S.G. Warburg (1987-95), Chief International Economist at Chase Securities (1985-87, previously Laurie Milbank), Senior Financial Economist and then Head of Economics (EMEA region) at Bank of America (1977-85), European Economist at Lloyds bank International (1974-77) and Economics Writer at the Central Office of Information (1972-74).
Mr. Magnus received an MSc Econ from the School of Oriental and African Studies and taught economics at both the University of Westminster and the University of Illinois, where he was engaged in research on employment creation issues in less developed countries at the Institute of Labour and Industrial Relations.
Mr. Magnus’ role is to investigate and analyse global economic topics and engage with clients and the media. He has been working on several thematic issues, including demographic change, the economic causes and consequences of globalization, the creation and deployment of petrodollars and sovereign wealth funds, the implications of a the re-emergence of a new Silk Road in Asia and the credit cycle in the global economy.
In 2007, Mr. Magnus predicted in March that the US sub prime mortgage finance crisis would become a Minsky Moment – or a full-blown credit crunch, named after the US economist Hyman Minsky – and he has written a series of illuminating research papers as to the nature and implications of this event. In October 2008, Mr. Magnus’ book – The Age of Aging – a study of how demographics are changing the world and what the economic and social implications might be, as well as those for globalization, religion in the world, immigration and global security – was published by John Wiley in Asia, Europe and North America.