Hannah (Year 12)
Editor’s note: Hannah wrote this essay during her time in Year 12 at GSAL. It was submitted for peer review at Routes: The Journal for Student Geographers. Hannah is now studying Geography at the University of Durham. CPD
The ‘demographic timebomb’ is often used to refer to the crisis that many countries are facing because of declining birth rates and an ageing population. As people live longer and have fewer children, the proportion of older people in the population grows, while the proportion of economically active working-age people shrinks. This significant demographic shift can lead to a wealth of economic and social challenges, including higher healthcare, social care and pension costs, and reduced economic growth. Countries with rapidly ageing populations, such as many European countries and Japan, are particularly concerned about the potentially explosive consequences of this demographic shift on their society and economies.
With its low birth rate and fast-ageing population, Europe is facing a demographic crisis; one that economists fear could hit growth and public finances. Europe is an extreme example of the trend of a global ageing population with its critically low fertility rates particularly in Southern Europe and high rates of emigration, mainly of young adults, in Eastern Europe and it is now “the world’s oldest continent” (Romei, 2020).
Portugal, Greece, Italy and Spain are among the top-10 world economies with the lowest number of births per woman and Southern Europe has a fertility rate of just 1.37 (far below the replacement rate of 2.1) (Romei, 2020). This may have been caused by poor job prospects and low wage expectations, coupled with a lack of family-friendly policies and an inflexible labour market. Nikolai Botev, formerly with the United Nations Population Fund (UNFPA), said, “Women in Southern Europe enjoy equality in terms of education and employment, but within the family, traditional gender roles persist, with women expected to shoulder much of the household responsibilities.” (Romei, 2020) Conversely in Eastern Europe, emigration, often of young, economically active people, has resulted in a multiplied decrease in working-age proportion of the population as natural increase has reduced drastically as young workers have left.
The effects of this lack of young workers on the economy is likely to be more significant than previously realised. Kary Mullis looked at the effects of demographics on innovation in an economy and showed that the youngest inventors are much more likely to produce completely ‘novel, discipline-changing innovations’ (The Economist, 2023). It is known that innovation raises productivity which allows living standards to improve in the long term. The consequences of any potential decline in innovation are likely to be of global significance.
Compounding the low birth rate, life expectancy in Europe has increased by around 30 years over the last century (Our World In Data, 2022), which means that the population is ageing at an unprecedented rate. This is a positive development but an ageing population is likely to lead to an increased demand for health and social care services, which can put pressure on government budgets. Together with the increased costs of pensions, government spending is accordingly directed towards funding social welfare and healthcare systems for this ageing population as opposed to making improvements in services such as education and infrastructure. Additionally as the population ages, there will be fewer young workers entering the workforce which will create labour shortages and cause a decline in productivity and economic growth. This means that for every worker paying tax and national insurance, there will be more older, retired citizens. The European Commission forecasts that spending on pensions and healthcare for the elderly will rise by 2.3%, from 25% of GDP in the EU, by 2040. (Romei, 2020).
However conversely, these older citizens are significantly healthier than in the past thereby mitigating both the social care and healthcare costs associated with an ageing population. A BMJ article (2013) argued that this healthier cohort of older people are continuing to participate in both voluntary and paid work for longer and may also have accumulated significant assets. Healthy life expectancy is known to be increasing (WHO, 2019) and most medical costs are known to be incurred in the final months of life. The BMJ calculated a ‘real elderly dependency ratio’ as the sum of people with a remaining life expectancy of less than 15 years divided by the number of employed people and this showed that dependency has fallen by one third over the past four decades, with the real dependency ratio in Europe set to stabilise near its current level in the future. Critics of this argument have suggested that although health care costs seem not to rise, the number of people living for longer above the pension age will increase and therefore government spending on pension costs will inexorably increase unless the statutory pension age increases.
In common with Europe, Japan has an ageing population with the world’s highest longevity at around 85 years. This is facilitated by healthy diets and active lifestyles, a high-quality healthcare system with a strong public health programme and universal health insurance. However, Japan has had disastrously low birth rates with a fertility rate below the accepted replacement rate since the 1960’s, which is causing the labour force to shrink (BMJ, 2012). The low birth rates have been attributed to a lack of equal child rearing responsibility from male partners, as well as a lack of family friendly policies in the workplace with long hours being usual and with difficulties with women returning to work after having children. In Japan, employees are under pressure to choose their company over their family. The economy has been criticised as being “labour focused rather than people focused”. While China’s population shrank in 2022 for the first time in six decades, its economy is projected to grow by 4.6% in 2023 whereas Japan, on the other hand, has downgraded its economic growth projections for the next two years. (Siripala, 2023) Growing pessimism among young people about the future, cultural changes and lack of interest in finding a partner and raising a family, in combination with Japan’s stagnant economy is also accelerating the population crisis. The government’s concerns over the dwindling numbers of young workers entering the workforce, the potential labour shortages and decline in productivity and economic growth have led it to unveil “radical countermeasures” to boost the birth rate including more financial assistance to help with child rearing, preschool education, maternity services, and workplace reforms. Prime Minister Kishida Fumio proposed to combat population decline by a “smart spending” scheme, reforming the social security system, reviewing ineffective subsidies and integrating growth strategies; however, Japan’s public debt is double the size of its annual economic output so raising much needed public revenue requires tax hikes that will be borne by younger generations. Japan has reached a historical turning point where it is believed that in eight years time, the number of women of child bearing age will fall to a point where population decline cannot be reversed. This means that Japan’s population crisis needs to be solved soon and the solution may need to be more radical than those so far attempted. (Siripala, 2023).
So what could be done to mitigate the effects of an ageing population? Although the world’s total population continues to rise, this increase is not occurring in countries with an ageing population. Therefore, some have suggested that allowing more immigration of young people to countries with an ageing population may be a possible solution to compensate for dwindling birth rates.
In 2022 the UN projected the world population had reached 8 billion. However, despite an inexorable increase in the global population to date, it is thought that after reaching a peak of 10 billion around 2060 (Shute, 2022), the world’s population will then decline. In the last 25 years, almost all the population growth has happened in developing economies, mainly in Asia, Oceania and Africa and the share of people living in developing countries has increased from 66% in 1950 to 83% today and should reach 86% by 2050 (UNCTAD, 2022). By the middle of this century, UN data has shown that the only countries, who are likely to be in Stage 3 of the Demographic Transition Model and enjoying the demographic dividend of youth (the growth in an economy resulting from a change in the age structure of a country’s population), are in sub-Saharan Africa.
Any migration of people will bring with it challenges, both in the donor and host countries. Emigration of skilled workers from low income countries does not allow the economy there to diversify and may lead to skills and labour shortages, as well as a decline in economic growth. Mitigation of migration by governments is needed as developing countries will need workers themselves in the long term. Recruiting highly trained healthcare workers from developing countries to work in more developed areas is currently considered ethically dubious. Recently, the Nigerian Government has proposed a bill preventing Nigeria’s medics from leaving the country for 5 years after graduation, stopping the brain drain of healthcare professionals to high income countries such as the UK (Devi, 2023). In 2018, only 12% of Nigeria’s total population had a tertiary education qualification and Nigeria itself is short of medics (World Bank, 2022). However, there is widespread opposition to the medical bill by Nigerian medics as the health system only offers low salaries for workers, restricted career pathways and insufficient training. Although the popularity of political decisions is seen in the short term and elections are won or lost on a 4 or 5 year cycle, governments need to consider the demographic needs of their country in the long term, as demographics occur on around 60 year cycles . Changing demographics take time to filter through the system.
Furthermore, as demographic decline affects an increasing number of countries, educated migrants will become harder to find. Sub-Saharan Africa is the only region of the world likely to be a potential source of migrants for future years. However, access to contraception and education particularly for girls, has meant that the birth rate is falling in these countries too. Matthias Doepke, noted that falling birth rates for this reason are no longer limited to wealthier countries, saying “There’s a global convergence in women’s aspiration for careers and family life” (The Economist, 2023). Immigration can temper demographic decline temporarily but in the long term, immigration cannot fully compensate for the fall in births in developed countries.
Japan, along with many other countries, has always shown a fierce resistance to immigration and many immigrants still face political barriers to their arrival. In the UK, Brexit was probably due to a misalignment of partial truths regarding immigration, whereby despite the low demands of heathy, young immigrants on health and social care services, the pressures on the NHS and schools were perceived by many as being caused by migration. However, the European Commission estimates that immigration increases the annual long run GDP of a country by 0.2 to 1.4 per cent above the baseline growth (d’Artis, 2017). Despite these economic benefits, the politicisation of the issue of immigration has led to polarised viewpoints and deep social divisions have emerged.
In addition to immigration policies, other countries are offering financial incentives to families in an attempt to increase their birth rates. By subsidising childcare and increasing job flexibility with paid parental leave, countries hope to increase the attractiveness of having children. However, attempts in a plethora of countries have typically yielded meagre results. Therefore, many countries have focused on other factors that increase productivity to counteract the effects of demographic decline such as government investment in education and training programmes and healthcare and social welfare programmes. With investment, the population of the country can develop skills essential to a thriving workforce and it ensures that the elderly are well cared for with everyone having access to the services that they need. As the potential workforce shrinks, maximising the output of everyone in it will become essential and could help offset the effects of an ageing population for some time, especially in middle-income countries such as China where there are millions who receive an inadequate education and so contribute little to the economy. Although, a restructuring of retirement and pension systems as well as healthcare policies and practices may be necessary to ensure that countries can cope with the changing demographic landscape, it would mean more workers stay in employment for longer, which in turn increases the productivity of economies. In the UK, for example, the State Pension age was increased from 65 to 66 from 2018-2020 (Pensions Act, 2011). But these policies are often extremely unpopular meaning many governments do not consider them as an option to combat the ageing populations and demographic timebomb. The recent riots in France are testament to the unpopularity of such political decisions (Graham-Harrison, 2023).
Although the traditional ageing countries of Japan and Southern Europe still lead the list of rapidly ageing populations, today many more countries are following suit. Now, more than ever, the demographic timebomb is a serious issue requiring urgent attention from policymakers around the world. By adopting a multi-faceted approach to the issue, we can try to mitigate the effects of this crisis and ensure that the demographic timebomb does not explode.
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