“Life is too long to say anything definitely. Always say perhaps.”Leo Tolstoy, War and Peace, 1869
“Demography is destiny”Auguste Comte
The shape and size of a country’s population is not literally destiny – change birth rates or death rates and the population’s shape and size will eventually change too – but it is close to it. Birth and death rates are both hard for public policy to change very much, short of war, and changes take generations to have a major impact. But public policy and social behaviour can have a huge impact on the economic, social and financial character of this demographic “destiny”. And in the coming decades, they will need to. Countries that prepare well for their destinies will be in a lot better shape than those that don’t. That difference is what the Wake Up 2050 Index seeks to measure.
The story ought by now to be familiar. Developed countries had their demographies sharply changed by the second world war, first with an exceptional number of deaths but then with a post-war “baby bulge”. A generation or so later, this meant there were relatively few elderly but a growing number of young ones entering the labour force, which was terrific both for economic growth and for public finances. The growth of public welfare provision, amid affluence in the 1960s and 70s, established pension schemes to provide incomes in retirement and to provide health care the principal costs of which would come in old age – all set up at a time when the numbers of pensioners, sick or healthy, were fairly few.
Meanwhile, improvements in diet and medical science have lengthened lifespans to an extent that, surprising as it may seem, was largely unpredicted by those managing pension schemes and health services. Fertility rates, however, went in the opposite direction, with the number of babies born to the average women dropping well below the 2.1 that statisticians consider enough to keep the population steady. So, as the chart shows, the average (median) age of all the western developed countries has been rising – more slowly in places like America and Australia where immigration rates have been high, faster in Europe and Japan, where immigrants have been fewer and birth rates lower.
Yet, even while this destiny was unfolding, in America, Europe and Japan alike, assumptions about what constituted people’s working lives remained steady: companies worked on the belief that employees would, or should, retire in their early 60s, and the statisticians on whom public policy relied treated “working age” as being between 15 and 64. Such assumptions now look outdated and unrealistic.
For, in the face of this pretty radical change in the shape and size of our populations, any country that does nothing much about it will face pretty obvious consequences: pension and health costs, many borne by taxpayers, will soar, and the productive share of the population, those who produce the output and pay the taxes to pay for all those costs, will decline. But there is also a further factor, one consequent upon affluence: if populations grow obese and prone to high levels of chronic disease, then health costs will rise even further and productiveness will be dented.
The consequences are brutally clear. The well-prepared country is one in which a high and rising proportion of the over-65s are enabled or encouraged to stay in the workforce; in which public spending on pensions is contained; in which obesity is limited; in which healthy life expectancy at birth – ie the age till which people on average avoid chronic or debilitating disease – rises; and in which the fertility rate is as close as possible to the 2.1 births per woman replacement rate, so that a reasonable supply of young people is maintained. Look at Japan: it scores well on keeping the over-65s in work, on obesity and on healthy life expectancy at birth; it fares less well on public spending on pensions and on the fertility rate.