As populations age, younger nations have a better future

By 2018, 65-year-olds will outnumber those under the age of 5 a historic first

Right now, the world is evenly divided between those under 28 and those over 28. By midcentury, the median age will have risen to 40.

Demographers also use another measure, in addition to median age, to determine whether populations are aging: ‘elder share.’ If the share, or proportion, of people over 60 (or sometimes 65) is growing, the population is aging. By that yardstick too, the world is quickly becoming older. Pick any age cohort above the median age of 28 and you’ll find its share of the global population rising faster than that of any segment below the median.

By 2018, 65-year-olds, for example, will outnumber those under 5 — a historic first. In 2050, developed countries are on track to have half as many people under 15 as they do over 60. In short, the age mix of the world is turning upside down and at unprecedented rates.

This means profound change in nearly every important relationship we have — as family members, neighbours, citizens of nations and the world. Aging populations also alter how business is done everywhere. The globalisation of the economy is accelerating because the world is rapidly aging, and at the same time the pace of global aging is quickened by the speed and scope of globalisation.

These intertwined dynamics also bear on the international competition for wealth and power. The high costs of keeping our aging population healthy and out of poverty has caused the United States and other rich democracies to lose their economic and political footing. Countries on the rise amass wealth and geopolitical clout by refusing to bear those costs. Older countries lose work to younger countries.

To see this process at work, look at China. In its march to prosperity, the country has encouraged hundreds of millions of its young people to move into cities. Chinese metropolises — some, like Beijing, ancient but newly sprawling, others, like Shenzen, built from scratch — are where the factories are. Foxconn Technology Group, for example, the giant electronics manufacturer that builds components for Dell, Hewlett-Packard and Apple in gigantic plants in Shenzen and elsewhere in urban China, will soon employ enough people to fill 60 per cent of the jobs in Manhattan.

Dorian Gray economy

But China’s is a kind of Dorian Gray economy, its young and footloose global identity hiding a grayer reality. By and large, older workers have been excluded from its remade, globalised economy. They are left behind in their rural villages, or they are pushed from their urban homes into the ghettos of dour apartment blocks on the urban edge to make room for the new apartments and offices occupied by younger urbanites and the companies eager to hire them. Discrimination — ‘age apartheid’ might be a better term — is one way to describe what’s going on here: no country sorts its population more ruthlessly by age.

The problem for China is that it is rapidly approaching the point after which it will no longer be the relatively young country we see today. In 2015, China’s working population below the age of 65 will begin to shrink. Meanwhile, the number of people over 65 will be rising to 300 million by 2050, a threefold increase.

Richard Jackson, the director of the Global Aging Initiative at the Centre for Strategic and International Studies, notes that China will be older than the US within a generation, making it the first big national population to age before it joins the ranks of developed countries. One of China’s biggest fears, expressed repeatedly in public pronouncements, is that it will grow old before it grows rich.

To avoid this fate, China is doing all it can to lure the world’s production and capital while its work force is young. In large part, it does this by denying meaningful pensions and health care to its people today. Not only do the vast majority of elderly Chinese have little more than their meagre savings, but today’s workers have pensions so measly as to be irrelevant.

To keep the cost of manufacturing in China low for the rest of the world, the young Chinese work force is, for now, rarely provided more than token pensions, health care or disability insurance. In aging, developed countries, older workers with long tenure are usually at their peak in terms of pay and the cost of their benefits. In the US, for example, health care costs for workers who are between 50 and 65 are, on average, almost two times what they are for their peers in their 30s and 40s.

In a 2006 analysis of how aging work forces influence global flows of capital, the economists Ronald Davies and Robert R Reed noted that because ‘older’ economies have smaller work forces and higher wages, they push investment to younger economies, which offer higher rates of return. And high costs in older economies reach beyond wages — into taxes, which are used to pay for age-related public spending like social security. China’s youthful labour force thus helps the country maintain its low-cost economic ecosystem and attract foreign investment that seeks the higher returns a ‘younger’ economy offers, whether or not any particular pot of foreign money goes to employ young people.

China is not the only country in which a young labour force attracts global businesses and investors. Much of the developing world, particularly in Asia and Latin America, operates the same way. An outspoken champion of outsourcing, Nandan Nilekani, a former head of Infosys, the Indian technology giant, is well known for promoting India as a place to corral young workers in an otherwise aging world. Call it ‘global age-arbitrage.’

Average life expectancy is increasing nearly everywhere. Longer life is itself a kind of byproduct of globalisation, the result of the worldwide exchange of public-health technology, medical breakthroughs and, perhaps the most life-giving development of all, the spread of literacy. Every person who can read has access to the world of health information, including Internet sites and government pamphlets on diseases.

Above all, however, for communities or countries to age, people must have far fewer children. Today, almost no place in the developed world has a total fertility rate of 2.1 children, the replacement rate needed to keep a population from declining. The population of nearly every developed country is expected to shrink before midcentury.

Smaller families

When emerging nations gear up for the global economy, they tend to take two steps that encourage smaller families: they extend educational and employment opportunities to young women, and they urbanise. Urban women postpone having children until they are prepared for and established in their jobs. Rearing children in the city is also more expensive. Cities serve the global economy, and the global economy drives people to cities. The world gets older.

Such urbanisation and globalisation can take hold with remarkable swiftness. Japan was one of the youngest countries in the world until around 1950, and now its population is arguably the world’s oldest. (Its median age will exceed 56 by midcentury, up from 43 today.) The median age in western Europe today is just over 40; it will rise to near 50 by 2050. Population aging did not always happen so quickly. France was the first country in the world to see its share of 65-year-olds double, from 7 per cent to 14 per cent; this took about 115 years, starting in 1865. But China will experience the same doubling in 25 years.

One conundrum for aging societies is how to keep older people employed at a time when economic conditions favour the young, whether nearby or far away. The workplace left to itself comes up with some solutions, but they require older workers to accept more ‘flexible’ conditions, which often means joining the so-called contingent work force of part-timers, self-employed contract workers and temps hired through agencies.

In Japan, retirees from the biggest companies are well provided for, but for many of the rest — workers at smaller companies, the self-employed — the fear of outliving their money is real. One in five elderly Japanese lives in poverty. So the Japanese stay on the job when they can. Since 2006, the number of Japanese still working after the customary retirement age of 60 has risen by more than 11 million. Most are officially retired but are back at their companies, under contract. They typically earn about half their former wages.

Will the world ever grow young again? Perhaps, but not anytime soon. Today, many of the places that are growing old the fastest are in the developing world, largely because that’s where urbanisation is most rapid. It is hard to conjure a situation in which people move back to the countryside and again have larger families.

Instead, if past is prelude, today’s young countries like China will be the countries that in the not-distant future go shopping for younger workers in younger places. Those places will be transformed by satisfying an older China’s needs, and the cycle will repeat itself: when the world finds its next young place, that country may well age even more quickly than the formerly young countries that preceded it.