Transcript Challenge of Global Aging - National Press Foundation
The Challenge of Global Aging
Richard Jackson Center for Strategic and International Studies National Press Foundation May 22, 2011
Part I The Demographic Transformation
The world is on the cusp of a stunning demographic transformation.
Elderly (Aged 65 and Over), as a Percent of the Population in 2010 and 2050
India Mexico Brazil US Australia UK Sweden France 0% 4,9% 13,5% 6,3% 16,9% 7,0% 20,8% 13,1% 21,3% 13,4% 23,5% 16,6% 24,4% 18,2% 25,2% 10% 16,8% 25,3% 20% 30% 40% 2010 2050 50% China Russia Canada Germany Spain Italy S.Korea
Japan 0% 8,2% 25,4% 12,8% 25,6% 14,1% 26,0% 20,4% 33,7% 17,0% 35,1% 20,4% 35,4% 11,1% 36,1% 22,7% 10% 20% 30% 38,7% 40% 50% Source: UN (2011)
Behind the Global Age Wave: Falling Fertility Total Fertility Rate Canada France Germany Italy 1960-65 1980-85
3.7
1.6
2005-10
1.7
Brazil
2.8
2.5
2.5
G-7 Countries
1.9
1.5
1.5
2.0
1.4
1.4
China India Indonesia Major Emerging Markets 1960-65 1980-85
6.2
3.8
2005-10
1.9
5.6
5.8
5.6
2.6
4.5
4.1
1.6
2.7
2.2
Japan UK US
2.0
2.8
3.3
1.8
1.8
1.8
1.3
1.8
2.1
Mexico Russia S. Korea
6.8
2.6
5.6
4.3
2.0
2.2
2.4
1.4
1.3
Source: UN (2011)
Behind the Global Age Wave: Rising Life Expectancy Life Expectancy at Birth Canada France Germany Italy 1950-55 1980-85
69.0
75.8
2005-10
80.5
Brazil
67.3
67.5
66.3
G-7 Countries
74.8
73.8
74.8
81.0
79.8
81.4
China India Indonesia Major Emerging Markets 1950-55 1980-85
50.9
63.4
2005-10
72.2
44.6
37.9
38.8
67.7
56.2
58.8
72.7
64.2
67.9
Japan UK US
62.2
69.3
68.6
76.9
74.1
74.3
82.7
79.6
78.0
Mexico Russia S. Korea
50.7
64.5
47.9
67.7
67.4
67.4
76.2
67.7
80.0
Source: UN (2011)
Part II The Broad Economic, Social, and Geopolitical Implications
Fiscal Burden CSIS “Current Deal” Projection: Government Old-Age Benefits, as a Percent of GDP, 2007 –2050 Public Pensions Health Benefits Total Canada France Germany 2007
3.9% 11.2% 10.0%
2030
7.0% 17.8% 17.0%
2050
8.4% 19.6% 20.4%
2007
3.6% 4.5% 4.1%
2030
6.1% 7.8% 6.3%
2050
8.9% 10.2% 8.5%
2007
7.5% 15.6% 14.1%
2030
13.1% 25.6% 23.3%
2050
17.3% 29.8% 28.9%
Italy Japan
12.3% 9.1% 18.9% 13.9% 24.6% 19.3% 3.4% 4.0% 5.5% 6.0% 7.5% 8.0% 15.7% 13.2% 24.4% 19.9% 32.1% 27.3%
UK United States
5.8% 4.1% 7.9% 6.6% 8.5% 7.0% 4.0% 4.2% 6.3% 8.0% 8.8% 10.2% 9.8% 8.3% 14.2% 14.6% 17.3% 17.2%
Developed World
8.8% 13.7% 16.6% 3.8% 6.3% 8.6% 11.2% 17.9% 22.5% Note: Old-age benefits are benefits to persons aged 60 and over. Pension projections assume retirement ages remain unchanged and benefits continue to replace the same share of wages they do today.
Source:
The Global Aging Preparedness Index
(CSIS, 2010)
Fiscal Burden
Few countries will be able to raise taxes enough to cover more than a fraction of the age wave’s cost.
Most will have to cut benefits —but the required adjustments are large and are likely to meet growing political resistance from aging electorates.
The alternatives: cannibalize other public spending or let fiscal deficits grow.
Public Benefits in 2007, as a Percent of Total Elderly Cash Income Canada France Germany Italy Japan UK Average 31% 59% 47% 55% 39% 42% 3rd Quintile 47% 72% 76% 77% 61% 69% US 22%
Note: The elderly are persons aged 60 and over.
Source:
The Global Aging Preparedness Index
(CSIS, 2010)
38%
Fiscal Burden Projected Growth in Major U.S. Entitlement Programs* versus Current Discretionary Spending and Individual Income Taxes, as a Percent of GDP
20% 16% 12% 8% 4%
Growth 2010-40: 7.8%
10,3% 18,1% 7,6% 7,8% 0% 2010 2040
Major Entitlement Programs*
2000-2010 Average
Discretionary Spending
2000-2010 Average
Individual Income Taxes
* CBO “Alternative Fiscal Scenario.” Includes Social Security, Medicaid, Medicare, Exchange Subsidies, and CHIP outlays. Source: CBO (2010) 9
Economic Growth
The slowdown in workforce growth in the developed world will translate into slower growth in GDP.
Japan and some faster-aging European countries face a future of secular stagnation.
Productivity and living standard growth may also slow as rates of saving and investment decline.
Aging workforces may be less flexible, less mobile, and less entrepreneurial —putting a further drag on economic growth.
Stagnant or contracting markets will increase the risk of “beggar thy neighbor” protectionism.
Average Annual Growth Rate in the Working-Age Population (Aged 20-64), by Decade Canada France Germany
1.1% 0.2% -0.2% -0.3% -1.2% -1.2% -0.9%
Italy Japan UK US 1980s 1990s 2000s 2010s 2020s 2030s 2040s
1.7% 1.1% 1.2% 0.5% 0.0% 0.2% 0.1% 1.0% 0.4% 0.6% -0.2% -0.1% -0.2% 0.0% 0.9% 0.2% 0.3% -0.3% -0.6% -1.2% -0.9% 0.7% 0.4% -0.4% -1.0% -0.7% -1.5% -1.5% 0.6% 0.4% 0.6% 0.3% 0.0% 0.1% 0.3% 1.4% 1.2% 1.1% 0.6% 0.3% 0.6% 0.6% Source: UN (2009)
Social Mood
As societies age, the overall social mood may become more risk averse and “small c” conservative.
35% 30%
Smaller families may find it more difficult to socialize the young —and care for the old.
25%
Elder-dominated electorates may lock in current public spending commitments at the
20%
expense of new priorities.
15%
Even as societies age, they will also become more diverse —challenging social cohesion in some countries.
10% 1950 Share of Population with Less than 20 Years of Life Remaining, by Country, 1950-2050 1970 1990 2010 2030 2050 Japan Italy Germany UK Canada France US Source: CSIS calculations based on UN (2007) and Human Mortality Database, University of California, Berkeley and Max Planck Institute for Demographic Research
Geopolitics The Developed World: A shrinking share of global population
25%
Developed World Population by Region, as a Share of World Total, 1950-2050
20%
Population as a Share of World Total
US Western Europe Japan Other English-Speaking Countries
1950 2005 2050
6.2% 4.6% 4.1% 9.6% 5.0% 3.1% 3.3% 2 .0% 1.0% 3.1% 1.9% 1.4% 15% 10% Japan Other English-Speaking Countries Western Europe US 5% 0% 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source:
The Graying of the Great Powers
(CSIS, 2008)
Geopolitics
70% 60%
The Developed World: A shrinking share of global GDP Developed World GDP (in 2005 PPP Dollars), as a Percent of World Total, 1950-2050 GDP as a Share of World Total 1950 2005 2050
US Western Europe Japan Other English-Speaking Countries 29.1% 22.3% 16.9% 22.7% 17.4% 7.1% 3.2% 6.9% 2.5% 9.2% 7.0% 4.5% 50% 40% 30% 20% 10% 0% 1950 Japan Other English-Speaking Countries Western Europe US 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source:
The Graying of the Great Powers
(CSIS, 2008)
Geopolitics 12 Largest Countries Ranked by Population
1 2 3 4 5 6 7 8 9 10 11 12
Ranking 1950
China India
US
Russian Federation
Japan
Indonesia
Germany
Brazil
UK Italy
Bangladesh
France
2010
China India
US
Indonesia Brazil Pakistan Bangladesh Nigeria Russian Federation
Japan
Mexico Philippines
Germany
(16)
France
(21)
UK
(22)
Italy
(23) Source: UN (2009) Note: Rankings for developed countries that have fallen below 12 are in parentheses.
2050
India China
US
Pakistan Nigeria Indonesia Bangladesh Brazil Ethiopia Philippines Dem. Rep. Congo Egypt Russian Federation (16)
Japan
(19)
UK
(27)
France
(29)
Germany
(30)
Italy
(37)
The United States is better positioned to confront the age wave than most developed countries.
The United States is now the youngest of the developed countries —and thanks to its relatively high fertility rate and substantial net immigration it is projected to remain the youngest.
60% 50%
U.S. Population and GDP (in 2005 PPP Dollars), as a Share of Developed World Total, 1950-2050 America’s flexible labor markets, broad and deep capital markets, and entrepreneurial culture also constitute important advantages.
40% 30%
To be sure, the United States labors under some notable handicaps, including a low savings rate, an extraordinarily expensive health system, and a political culture that finds it difficult to make trade-offs.
20% 10%
But among today’s developed countries, it alone will have the demographic and economic resources to play a major geopolitical role.
0% 1950 1970 1990 2010 GDP Population 2030 Source:
The Graying of the Great Powers
(CSIS, 2008) 2050
Part III Aging and Health
The Age-Related Health-Care Multiplier The elderly consume more per capita in health care services than the nonelderly.
Ratio of Per Capita Health-Care Spending on the Elderly to Spending on the Nonelderly in Most Recent Year Available* Canada 4.9
France Germany Italy Japan Netherlands Spain Sweden UK US 3.0
2.7
3.2
4.9
3.9
3.2
2.8
3.4
3.7
•Data refer to public health-care spending, except for the United States, where they refer to total personal health-care spending. Source: OECD (2002); and Centers for Medicare & Medicaid Services (2007)
The Age-Related Health-Care Multiplier The older the elderly are the more health care they consume.
15 10 5 0 35 30 25 20
Ratio of Per Capita U.S. Personal Health-Care Spending on the Elderly to Spending on the Nonelderly in 2004, by Elderly Age Group
2,7 Age 65 & Over Age 65-74 Age 75-84 Age 85 & Over 2,3 3,1 3,5 Acute Care Source: Centers for Medicare & Medicaid Services (2007) 9,9 3,7 10,4 Long-Term Care 31,8
The Age-Related Health-Care Multiplier
600%
The oldest elderly age brackets will be the fastest growing of all.
Cumulative Percentage Change in the Elderly Population by Age Group, 2010 –2050
526% 500% 400% Age 65-74 Age 75-84 Age 85 & Over 300% 300% 225% 200% 124% 114% 100% 78% 0% US China Source: UN (2011)
Other Drivers: “Excess Cost Growth”
Per capita health-care costs for everyone are rising faster than per capita GDP.
Behind excess cost growth: new technologies create new demand for medical services.
Behind excess cost growth: “Good health” is a subjective standard that rises over time.
Behind excess cost growth: As people become more knowledgeable about treatment options, limits are harder to set.
Other Drivers: The changing shape of the family.
Average Number of Surviving Children of the Elderly: 2007, 2040, and Change from 2007 to 2040 1 2 3 4 5 6
Sweden Japan UK France Germany Russia
2007 2040 Change
2.1
2.0
2.0
1.5
-0.2
-0.5
2.4
2.5
2.1
2.2
1.9
1.9
1.4
1.5
-0.6
-0.6
-0.7
-0.7
9 10 11 12 13 14
US Australia Spain Canada China Brazil
7
India
8
Italy 3.5
2.3
2.6
1.4
-0.9
-0.9
Note: The elderly are persons aged 60 and over. Source:
The Global Aging Preparedness Index
(CSIS, 2010).
15
Korea
16
Mexico
2007 2040 Change
2.9
3.0
1.9
2.0
-1.0
-1.0
2.7
3.2
3.5
3.8
3.6
5.0
1.4
1.7
2.0
2.1
1.8
2.6
-1.2
-1.5
-1.6
-1.7
-1.8
-2.5
Two Models of Aging and Health
The “compression of morbidity” model predicts that health spans will rise along with life spans.
The “failure of success” model predicts that rising life spans will mean a rising incidence of chronic morbidity among the elderly.
The Good News: Rates of elderly disability are declining.
Percent of U.S Elderly with a Disability or in an Institution With a Disability
Age 65-74 Age 75-85 Age 85+
1982
14.2
30.7
62.1
1989
11.9
29.9
61.4
1999
10.7
23.4
55.6
2005
8.9
21.9
49.7
In an Institution
Age 65-74 Age 75-85 Age 85+
1982
2 8.1
27.2
1989
1.9
7.0
26.1
1999
1.4
4.3
19.5
2005
0.9
4.1
15.6
Source: Manton, Gu & Vicki (2006)
The Bad News: Rates of elderly morbidity are flat or rising. Percent of U.S. Elderly with Selected Medical Conditions 1998-2000 2004-2006 2007-2009 Heart Disease
Age 65-74 Age 75-84 Age 85+
Stroke
Age 65-74 Age 75-84 Age 85+ 17.6
22.2
24.0
6.5
10.1
10.4
18.6
24.8
28.6
6.9
11.0
15.1
17.4
24.6
27.2
6.3
11.2
13.8
Cancer
Age 65-74 Age 75-84 Age 85+
Diabetes
Age 65-74 Age 75-84 Age 85+ 17.0
21.8
21.4
14.5
13.4
9.3
18.3
25 25 18.4
17.6
12.6
20.5
25.9
27.7
19.9
19.0
13.7
Source: NHIS (various years)
We live in an era defined by many challenges, from global warming to global terrorism.
None is as certain as global aging.
And none is likely to have such a large and enduring effect on the shape of national economies and the world order.
CSIS.ORG GAPINDEX.CSIS.ORG