Transcript seminar 060606

Development in an
Ageing World
Canadian Institute of Actuaries
Montreal 15 April 2008
http://www.un.org/policy
Rob Vos
Director
Department of Economic and Social Affairs
United Nations
World Economic and Social Survey 2007
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The world population is ageing at an accelerating rate
… and by 2050, 80% of older persons will live in developing countries
Size and distribution of world population aged 60 years or over
2,500
(Millions)
2,000
Developing countries
Economies in transition
Developed countries
1,500
79
1,000
70
500
0
63
52
39
1950
53
9
38
1975
10
2
4
5
30
25
18
2005
2025
2050
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Ageing reflects human progress:
• Increased longevity and lower mortality
• An opportunity through the active participation of the
older persons in the society
… but it also poses challenges:
• Smaller labour force may affect economic growth
• Sustainability of old age pension and health care systems
may come under pressure
• Adjustments in living arrangements, long-term care
systems and participation in society needed to ensure
wellbeing of older persons
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Dependency ratios will increase, but ...
Developing countries
Developed countries
100
100
Estimates
Estimates
Projections
Projections
90
90
80
70
70
60
Percentage
Percentage
Total
80
Old-age
50
40
Total
60
50
Child
40
30
30
Old-age
Child
20
20
10
10
0
1950
1975
2000
2025
2050
0
1950
1975
2000
2025
Year
Year
... there is an asymmetric transition: Challenges
differ for developed and developing countries
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2050
Economic challenges for ageing societies
Growth of labour force will decelerate or even turn negative. This
may potentially affect economic growth and welfare
Possible responses:
1.
2.
3.
4.
5.
Population policies: fertility and family planning, migration
Outsourcing
Increased female labour participation
Remove incentives to early retirement
Improve working environment for older workers
6. Increase labour productivity
 Measures 3-6 are most important
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Economic challenges for ageing societies
Making people stay longer in the labour force
•
Removing incentives for early retirement




•
Improving working environment



•
Reducing fiscal incentives to early retirement
Increasing statutory retirement age
Create a closer link between contribution and benefits (e.g., introducing “notional
accounts”)
Removing public “pre-retirement” benefits
Change the tasks in order to reduce the risk of injuries
Improve the medical assistance in job places (e.g., provide adequate medical
supplies)
Change the work loads for older workers
Removing aged-based discriminatory practices
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Productivity growth required to counter balance
demographic change
Required productivity growth (percentage per year)
Impact of population ageing on required labour productivity growth,
Germany, Italy, United States of America and Japan, 2000-2050
3
Ageing
effect
2
1
0
Germany
Italy
United States
Other labour supply factors
Japan
Ageing effect
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Economic opportunities for more slowly
ageing societies
Labour force is still growing and could provide a window of
opportunity for economic growth, but only if …
Policy Actions:
- Boost employment rate
- Improve economy wide productivity
- Increase investment in human and physical capital
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Ensuring old age income security
Inadequate coverage:
80% of world population lacks social security coverage
currently.
Without policy change: 1.2 billion older persons may face
income insecurity by 2050!!!
There is a clear connection between social security
coverage and old age poverty
Unsustainable pension systems:
• Weak growth and employment creation
• Early retirement practices: short working life
• Mismanagement, bad governance, poor design
• Demographic pressures
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Close link income per capita
and contributions to public pensions
Contributors to public pension schemes
Contributors as percent of labour force (latest obs. between 1988
and 1998)
100
Belarus
90
Georgia
80
Ukraine
70
Armenia
60
50
Kyrgyz Republic
40
30
20
10
Gabon
0
2
2.5
3
3.5
4
4.5
5
Income per capita (Log)
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Ensuring old age income security:
Comprehensive reforms are needed
No “one size fits all” but guiding principles
should be:
•
•
•
Universal access
Solidarity
Equity (horizontal, gender)
•
Adequacy of benefits to avoid poverty
•
Financial sustainability
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Ensuring old age income security:
Comprehensive reforms are needed
Multi-layered old age income security systems (tailored to country
conditions and preferences):
Non-contributory Pillar: universal social pension scheme
- Also feasible for developing countries (Figure)
Contributory Pillar: targeting certain wage replacement level
- Parametric reforms (raising retirement age!) with labour reform
(increasing participation rates)
- Structural reforms (elements of fully funding, assuring economic
security)
Other Pillars:
employer-related, private schemes, individual savings and/or asset
accumulation
Any system requires growth to be sustainable
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Ensuring long-term health care for older persons
Population ageing is accompanied by an epidemiological
transition
Due to faster transition, developing countries are not
experiencing compression of morbidity
Moreover Population ageing implies:
- Increased demand for health services
- Change in the type of services needed (long-term care)
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Ensuring long-term health care for older persons
Challenge for developed countries: maintaining the level
and quality of health services while containing the costs
Challenge for developing countries (double health cost
burden): ensuring basic health needs to vast part of
population while deal with the increase demand for health
services due to ageing
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Ageing and health expenditures
Health costs will increase,
but ageing is NOT the major cost driver:
• Changes in health seeking behaviour
• Rising wage costs of medical personnel
• Inefficiency in delivery
• New (costly) medical technology
• Pharmaceuticals
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Ageing and health expenditures: Australia
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Ensuring long-term health care onto old age
Adapting health policies
- Combination of private and public insurance to
improve risk pooling
- Limit the cost of drugs
- Better training of medical personnel and incentives to
attract workers
- Home-based long term care (ageing in place)
- Preventive health care and health education
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Population ageing is inevitable...,
so what can be done?
• Fertility and migration policies are not enough
• Increase labour productivity and participation rates!
• Extend working life (improving working conditions)
• Reform of pension systems: Multi-Pillar systems with
universal social scheme at its basis!
• Reform of health care systems: preventive action, homebased care and limit cost of drugs
All these challenges seem surmountable!
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