Agequake and Its Implications on Economic Growth

 

Dr. R.P. Saharia

Head Dept. of Economics, Govt. J.M.P. College Takhatpur, Bilaspur (C.G.) Pin 4950031

 

 

INTRODUCTION:                                            

The world is entering largely unfamiliar territory with respect to population ageing. Combined with the dynamic evolution of past variations in birth and death rates, recent declines in fertility rates and increases in life expectancy are causing a significant shift in the global age structure. The number of people over the age of 60 is projected to reach 1 billion by 2020 and almost 2 billion by 2050, representing 22 percent of the world’s population. The Proportion of individuals aged 80 or over is projected to rise from 1 percent  to 4 percent of the global population between today and 2050¹. The number of people aged 60 and over is growing faster than all other age groups.

 

Health care has improved, which has lengthened life expectancy further. But while people are living longer, it does not necessarily mean that they are working longer years and worse still, there are not enough younger people taking their place in the workforce. Between 1950 and 2050, the global strength of those above 60 years of age is expected to increase from 200 million to 2 billion. For the developed world, this demographics-there are far more retired persons than those working-can cause havoc. Nowhere is this demographic threat felt more acutely than in Western Europe which is likely to experience an increase in the proportion of those above age 60 from the current 18.6% to avery high 35% by 2100. The rapid ageing is virtually certain: 95% of all projection cases lie between 28% and 44% for 2050. North America’s cu8rren proportion of 16% above age 60 is likely to increase to 30% by 2050.

 

OBJECTIVES:           

The  objectives  of the paper is to examine the effects of population ageing on economine the effects of population ageing of economic growth. Keeping this view the paper is designed  in three sections. Section I depicts the drivers of ageing and the characteristics of demographic agequake. Section II deals with the perspective of ageing in India. Section III appraises the implications of population ageing on growth and final section contains concluding remarks with some suggestions.    

 

RESEARCH METHODOLOGY: 

The Present Study is based on purely secondly data  which were collected from various national, International research Journals , reports and national family family health survey (NFFHS) and census of India 2011.

 

 

THE DRIVERS OF AGEING

               Declining Fertility Rates:    

Declining fertility rates in recent decades have reduced the relative number of young people and pushed up the share of the elderly. The global total fertility rate fell from approximately 5 children per woman in 1950 to just over 2.5 in 2005, and the UN projects that it will fall to 2 children per woman by 2050 (United Nations, 2009). Most of this decline has occurred in the developing world; this will contribute to a near halving of the share of children in the population of developing countries between 1965 and 2050² .

 

Increase in Life Expectancy:           

As per calculation by David E. Bloom, David Canning, and Gunther Fink one-fifth of the rise in India’s 60+population projected between 2000 and 2050 is due to rising life expectancy during that period; the corresponding figure for China is one-seventh³ . Global life expectancy has increased from 47 years in 1950 to over 65 years today, and it is projected to reach 75 years by 2050⁴ .Developed and developing counties alike are experiencing rises in life expectancy, despite HIV/AIDS reversing the trend in some low and middle-income counties. As higher numbers of people survive into their 60s and beyond, the absolute number of elderly will soar. Combined with fertility declines, these result in a sharp increase in the share of elderly in the overall population.

 

Past Variations in Birth and Death Rates:

Past variations in birth and death rates are also responsible for the increase of elderly population For example; baby booms resulting from increased fertility in rich countries after World War II are now shifting population structure as the cohort of boomers passes the age of 60. In parts of the developing world as well, some particularly large cohorts resulting from sustained high fertility rates in the presence of rapidly declining child mortality are now moving towards the 60+age range, substantially altering population age structure.

 

CHARACTERISTICS OF DEMOGRAPHIC AGEQUAKE:

The number of births has been declining world-wide for the past 20 years. The number of babies born alive peaked at 90 million in 1989. In 2010 only 73 million babies were born the trajectory is heading steadity downward, suggesting that the human population will start to stabilize at 9 to 10 billion between 2050 and 2100 (Table1).

 

The number of people in the over-60 group has been increasing. Over-60 group population is increasing at a rate of 2.6 percent per year (faster than the current 1.2 percent annual growth in the population as a whole). Over 80 group is increasing at 4 percent per year. There were some 200 million people in the over 60 group in 1950, 600 million people in 2000 and more than 800 million people in 2010. It is projected that there will be massive increase in the over 60 group in 2050 (Table2).

 

Although indicators suggest that obesity and other ailments could eventually curtail the steady improvement in longevity, for the next 20 to 30 years this pattern seems clear.

 

The nature of age has changed. Once an adult has reached the age of 60, he or she can expect 13 more years of full health in India, 15 more years in China, 19 more years in United State and 21 more years in Japan. And this healthy life expectancy at 60 is increasing rapidly, by approximately one year every five years (Table 3)

 

 

Table 1 : Birth Rates of World and Few Selected Countries

	World	China	India	Indon esia	Brazil	US	Germany	Japan
1970-1975	4.7	5.8	5.4	5.6	5.2	2.5	2.0	2.1
2005-2010	2.6	1.4	2.8	2.6	1.7	2.1	1.3	1.3

 

Table 2: People Over-60 Group (In Million)

1950	2000	2010	2050
200	600	800	2000

Source: Kearney Global study

 

Table 3 : Healthy Life Expectancy at Age 60 ,by country (2010)

	India	China	US	Germany	Japan
Average number of years lived beyond age 60	13	15	19	20	21
Additional Years of Health life expectancy (2005-20)	0.8	1.1	1.4	1.5	1.0

 

 

 

Worldwide, 60 and-older consumers spent more than $8 trillion in 2010; by the end of this decade, they will spend $ 15 trillion. Shopping is not only a necessity, also a social and leisure experience. Mature consumers in India spend more on household and slightly less on food than their younger counterparts, Americans, Indians and Turks spend much more on Vitamins and health supplements than people in most other countries (Table4)

 

AGEING PERSPECTIVE IN INDIA:

In india, the second most populous country in the world, there is a rapidly growing population of old people. The population of the elderly in India is increasing much faster than the total population and is projected to increase still faster in the future. A report released by the United Nations Population Fund and Help Age India to mark the International Day of Older Persons  observed on October  1^st , 2012 suggests  that India had 99.2 million elderly persons in 2011, with the number expected to grow to 173 million by 2026. Actually the percentage of elderly people has been growing over Censuses. As per 1991 Census, the share of elderly people was 6.7 per cent that has gradually been increasing. In 2001 Census, it increased to 7.4 percent and to 8.2 percent in 2011 census. It is projected that in 2021 Census it will increase to 10.7 per cent (Table5).

 

STATE-WISE ELDERLY POPULATION:

Across the States, there is a substantial variation in the population of elderly people. Six States Kerala, Himachal Pradesh, Punjab, Goa, Pondicherry and Odessa-have more than 8 percent elderly people followed by 14 states having more than 7 per cent elderly people. These states are uttrakhand, Karnataka, Andhra Pradesh, Haryana, Tripura, Chhattisgarh, West Bengal, Madhya Pradesh, Uttar Pradesh, Gujarat, Rajasthan, Manipur, Jammu& Kashmir and Bihar (Table 6)

 

 

 

Table 4: Evolution of Income-share for the Over-60s by Country (%2005-2020)

Country	Age+Share of Income (2005)	Age+Share of Income (2020)	Country	Age+Share of Income (2005)	Age+Share of Income (2020)
Belgium	26.6	32.3	Mexico	09.0	13.1
Brazil	09.7	15.4	Netherlands	20.9	27.8
Bulgaria	14.8	19.2	Norway	22.2	28.8
China	11.2	17.4	Romania	14.4	20.8
Denmark	18.9	23.5	Russia	1.4	26.7
Finland	23.9	34.1	South Africa	11.7	16.5
France	24.8	31.6	Spain	21.6	24.4
Germany	27.1	29.7	Sweden	30.2	34.3
India	08.6	12.0	Turkey	11.6	15.7
Indonesia	08.6	12.0	United Kingdom	23.4	29.2
Italy	24.0	24.1	United States	15.7	23.6
Japan	26.2	31.4

 

Table 5: Age Distribution of Population in India over Decades (In Million)

Census 1991 (In Year)			Census 2001 (In Year)			Census 2011 (In Year			Census 2021(In Year)
0-14	15-59	Above 60	0.14	15-59	Above 60	0-14	15-59	Above 60	0-14	15-59	Above 60
318.1 (37.6)	471.2 (55.7)	56.7 (6.7)	3363.1 (35.3)	585.3 (56.9)	76.1 (76.14)	351 (29.0)	758.8 (62.7)	99.2 (8.2)	328.4 (25.1)	837.4 (64)	140 (10.7)

Note: Percent in parenthesis

 

 

Table 6: Percentage of Elderly in the Total Population of States/Union Territories

Kerala	Himachal Pradesh	Punjab	Tamil Nadu	Maharashtra	Goa	Pondicherry
10.5	8.6	8.6	6.5	6.4	8.3	8.2
Odisha	Uttarakhand	Karnataka	Andhra Pradesh	Haryana	Tripura	Chhattisgarh
8.2	7.5	7.5	7.4	7.3	7.3	7.3
West Bengal	Madhya Pradesh	Uttar Pradesh	Gujarat	Rajasthan	Manipur	Jammu&Kashmir
7.2	7.2	7.2	7.2	7.2	7.1	7.1
Bihar	Lakshadweep	Jharkhand	Assam	Mizoram	Sikkim	Delhi
7.1	6.9	6.0	6.0	5.4	5.3	5.2
Daman & Diu	Chandigarh	A & N Islands	Meghalaya	Arunachal Pradesh	Nagaland	Dadra and Nagar Haveli
5.0	4.9	4.8	4.7	4.6	4.6	4.0

Source: Situation Analysis of the Elderly in India, June 2011, Ministry of Statistics and Programme Implementation, Gol.

IMPLICATIONS OF POPULATION AGEING:

If age specific behavior with respect to labor supply and savings were fixed, labour supply and savings per capita would tend to decline with a rising elderly share of the population. Keeping all other factors such as productivity and migration equal, this would imply low growth in income per capita. This frame of reference appears to underlie the rather alarmist views of commentators such as Peter Peterson, who has argued that, “global aging could trigger a crisis that engulfs the world economy {and} may even threaten democracy itself” (Peterson,1999). Ken Dychtwald has also raised concerns that, “we are going to have a self centered generation just sucking down all the resources” (Dychtwald,1999), and former U.S. Federal Reserve Chairman Alan Greenspan has warned that aging in the United States “makes our social security and Medicare programmes unsustainable in the long run”(Greenspan,2003). The agequake has significant repercussions on labour market positive and negative implications. In one hand, the ageing gives a boost to the business activities in the field of e-commerce, health sector and Old age-home. On the other hand, the ageing acts as a retard factor for development.

Ø Population ageing will have adverse effect on savings, Savings growth will register a decline; consequently capital formation will be hampered and expansion of investment will get contraction.

 

Ø An ageing population could lead to a shortage of workers and hence push up wages, causing wage inflation. Alternatively firms will respond by encouraging more people to enter workforce through offering flexible working practices.

 

Ø There could be a decline in productivity and growth because those in work may have to pay higher taxes. This could create disincentives to work and disincentives for firms to invest also.

 

Ø The dependence ration will increase. This implies that there will be more people claiming benefits such as state pensions and less people working and paying income taxes. The number of people of working age per older person of 65 plus has fallen from 12 to 9 in 50 years and is projected to fall four over the next 50 years. The burden on the young, economically and socially will rise.

 

Ø Government spending will witness a surge on health care and pensions. Also those in retirement tend to pay lower income taxes because they are not working. This combination of higher spending commitments and lower tax revenue is a source of concern.

 

Ø Population ageing inevitably leads to changes in the quantity and quality of agricultural labour force. It is projected that in many areas the supply of labour will be badly affected and old age labourers having less productivity will be a hindrance in expansion of agricultural production and even maintaining the prevailing production pattern.

 

EPILOGUE:

From the above discussion it is clear that the fast growth in size of old cohort will have serious repercussions on every sector of the economy. The government expenditure will increase in form of pensions and providing access to health care services whereas the revenue of government will face a decline because the retired people tend to pay lower income taxes. Different sectors of economy will face the shortage of productive labour force that will result in push up wages. These repercussions of the population ageing convey the policymakers and planners to fight ageism that is so deeply ingrained in the societal psyche and reinforced by the media. Let us conclude in the words of the President of India, Pranab Mukherjee: “Elderly should not be considered a spent force and consigned to the history books, but seen as active members of the society contributing to its wellbeing.”

 

1.     The United Nations makes several separate forecasts of population size, including ones based on low-, medium, and high-fertility assumptions. This paper uses the UN’s medium fertility scenario except where otherwise stated.

 

2.     In some countries, fertility decline has led to pronatalist policies, which, if successful, would help to reverse the rise in the elderly share of the population. This effect notwithstanding, increased fertility would not begin to address.

 

3.     This calculation was made by comparing projections of India’s population and age distribution from 2000 to 2050 using (a) linearly interpolated values of the UN Population Division’s assumptions of the TFR and life expectancy in 2000 and 2050, and (b) linearly interpolated values of the UN Population Division’s assumptions of the TFR with life expectancy held constant at its 2000 level. A similar calculation was made for china, except that life expectancy for women was fixed at 80 beyond the year 2035, due to a restriction imposed by the software package DemProj.

 

REFERENCES:

1.     Dychtwald, K. (1991). Ken Dychtwald on the Future. San Francisco Chronicle November 15.

2.       Greenspan, A. (2003). Aging Global Population. Testimony before the Special Committee on Aging, U.S. Senate

3.       Peterson, P.G. (1991). “Gray Dawn: The Global Aging Crisis.” Foreign Affairs (January/February).

4.       UN Population Division (2009).