The Truth About Aging Populations

It has become fashionable to issue dire projections of declining prosperity based on demographic aging. But is that really such a problem? There is no doubt that all the countries of the world are getting older, but they are at very different stages of the process. The median age in the United States—with half the population older and half younger—is currently 36. In Ethiopia it’s 18, owing to a higher birthrate and a lower life expectancy. In other African countries it’s even lower. The world’s oldest country is Germany, where the median age is 45. The pattern is very clear: The young countries are poor, and the old countries are rich. So why do people fear population aging? I see two reasons. The first is psychological: The analogy to individual aging suggests that as populations get older, they grow frail and lose mental acuity. The second comes from economists and an indicator called the dependency ratio, which assumes that every adult below age 65 contributes to society, and everybody above 65 is a burden. And the proportion of people older than 65 is bound to increase. Yet we also know that the productivity of some individuals is much higher than that of others, independent of age. Nothing is inherently special about the age of 65. Many people live longer and do so mostly in good health. The saying “Seventy is the new 60” has a sound scientific basis. Meanwhile, education has been shown to be a key determinant of better health, longer life, and higher productivity (not to mention open-mindedness). The active aging of better-educated populations can be an asset rather than a problem. To appreciate how projections based on the simplistic dependency ratio can be misleading, consider the two population billionaires, China and India. In 2050 China’s population will be older than India’s because of its more rapid fertility decline. But so what? China’s population is much better educated and therefore much more productive. Furthermore, only a minority of Chinese will retire at age 65. (The majority have no pension entitlements.) We can expect most Chinese to make meaningful contributions through work as long as they are in good health, particularly if they find their jobs interesting and satisfying. Again, this is largely a question of education. In India today, one out of three adults has never seen a school from the inside. In China only 8%, mostly elderly, have no schooling. In India 50% of young women have less than a junior secondary education; in China the figure is only 15%. Knowing how important education is to economic performance, who would seriously claim that India’s future is brighter than China’s owing to slower aging? Population aging is not irrelevant, but it should be seen in conjunction with other dimensions of human capital, especially education and health. Here the prospects are good. In most countries of the world—with the notable exception of the United States—the young are clearly better educated than the old and may thus compensate for their smaller numbers through higher productivity. Viewing the quality of human capital as resting on a collection of elements, many of them manageable, is something that the private sector has been doing for a long time. Every sizable business pays attention to human resource management. For governments, the equivalent would be a form of national human resource management that considered education, migration, family, labor, health, and retirement as components that interact richly—and together drive the richness of the future.

The Truth About Aging Populations

Partner Center