Richard Jackson at the UNITAR/UNFPA Workshop

Richard Jackson participated in a UNITAR/UNFPA Workshop on population issues. His presentation focused on the challenges that rapid population aging in the developed and developing worlds posses for global development and security.
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Demography, Development, and Geopolitics
how population aging will affect global growth and security in the 21st century
Richard Jackson CSIS Global Aging Initiative UNITAR/UNFPA Workshop March 31, 2005

The whole world is aging--and today's The whole world is aging--and today's developed countries are leading the way. developed countries are leading the way.
30% 25% 20% 15% 10% 5% 0% 1950 1970 1990
Developed World
Source: UN (2005)

Percent of Population Aged 65 & Over: History and UN Projection

25%

26%

Year 2005
19% 14% 16%

23%

15% 13% 10% 8%

8% 4%

9% 4%

10%

12%

13%

4%

4%

4%

5%

6%

2010

2030

2050

Developing World

Three challenges for today's developed Three challenges for today's developed countries. countries. the FISCAL challenge rising retirement costs

Riising retirement costs will impose a heavy R sing retirement costs will impose a heavy burden on workers and taxpayers. burden on workers and taxpayers.
35% 30% 26% 25% Percent of GDP 20% 20% 15% 10% 5% 0% UK US Canada Germany 2000
Source : CSIS (2003)

Public Benefits to the Elderly (Aged 60 & Over), as a Percent of GDP, 2000 and CSIS Projection for 2040 27%

32% 29%

23% 18% 15% 12% 9% 9% 12% 16% 17%

Ja p a n 2040

France

Italy

Three challenges for today's developed Three challenges for today's developed countries. countries. the FISCAL challenge a rising retirement costs the LABOR challenge a graying and shrinking workforce

In many fast-aging countries, the size of the In many fast-aging countries, the size of the workiing-age population will shrink dramatically. work ng-age population will shrink dramatically.
30% 20%

23% 12%

Percent Change in the Working-Age Population (Aged 15-64), 2005 to 2050

10% 0% -10% -20% -30%

3%
US d ana a UK ce n ma er -9% G y ly It a a ap J n

C

n Fra

-19% -32%

-40%

-33%

Sour c e: UN (2005)

Three challenges for today's developed Three challenges for today's developed countries. countries.

the FISCAL challenge rising retirement costs the LABOR challenge a graying and shrinking workforce the GROWTH challenge stagnant or declining markets

Countriies with slowly growing workforces Countr es with slowly growing workforces may have slowly growing economies. may have slowly growing economies.
225 200 175 150 125 100 75 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
* Assumes constant labor-force participation and productivity growth of 1 percent per year. Source: UN (2001) and CSIS (2004)

Grow th in Real GDP by Country,* Year 2000=100, 2000-2050

US France UK Germany Japan Italy

The aging of the developed countries threatens to put tremendous stress on the global economy and the geopolitical order.

Five potential destabilizing trends. Five potential destabilizing trends.
Shrinking consumer markets, declining profits--and rising protectionism. Declining rates of savings and emerging capital shortages. Aging and risk-averse electorates. Shrinking defense and international affairs budgets.

Public budgets will be under intense pressure Public budgets will be under intense pressure from rising retirement costs. from rising retirement costs.
25% Percent of G-7 GDP 20% 15%
11.5%

G-7 Defense Spending Compared with Public Pension & Health Spending, as Percent of G-7 GDP
13.9%

21.7%

10%
6.9% 5.8% 3.8% 2.3%

5% 0% 1960 Defense

?
2030 Projections

1980

2000 Pensions & Health

Source: CIA, OECD & OMB (various years)

Although the developing world is still much younger than the developed world, some fast-aging developing countries will catch up by the middle of the century.

In the developing world, East Asia and Latin In the developing world, East Asia and Latin In America face the biggest aging challenges. America face the biggest aging challenges. America
30% Elderly (Aged 65 & Over), as a Percent of the Population by Region in 2005 and 2050 25.9% 23.8%

25% Percent of Population

20% 14.3%

18.4% 15.3%

15%

10% 6.7% 5% 5.0% 3.4% 6.1%

7.7%

0% Afri ca Rest of Asia Lati n America 2 005 20 50 East Asia* Developed Regi ons

* Includes Oceania and excludes Japan, Australia, and New Zealand.
Source: UN (2005)

Contours of the aging challenge in the developing world:

THE CASE OF CHINA

China is about to undergo a stunning China is about to undergo a stunning China demographic transformation. demographic transformation. demographic
China is still a young nation, preoccupied with China modernizing its economy, creating jobs, and raising living standards. and Over the next few decades, however, China will Over age dramatically. Thirty-five years ago, there were six times as Thirty five many children in China as elderly. Thirtymany five years from now, the ratio will be two five to one--the other way around. to

Within a generation, China will have an older Within a generation, China will have an older population than the United States. population than the United States.
25%
Elde rly (Aged 65 & Over), as a Percent of the Population in China and the United States, 1970-2050

20%
P erc ent of the Population

15%

China

10%

US

5%

0%
85 90 70 75 80 30 35 95 00 05 10 15 20 25 40 45 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 50

Source: UN (2005)

Today's developed countries became Today affluent societies before they became aging societies. China--along with aging along other fast-aging developing countries other aging --may grow old before it grows rich.

Behind China's age wave: A dramatic decline in Behind China's age wave: A dramatic decline in fertility rates. fertility rates.
8.0 7.0 6.0 Total Fertility Rate 5.0 4.0 3.0 2.0 1.0 0.0 1949 1953 1957 1961 1965 1969 1973 1977 1 981 1985 1989 1 993 1997 2 001
Source: NBS and NPFPC (various years)

Chinese Total Fertility Rate, 1949-2002

Behind China's age wave: An equally dramatic Behind China's age wave: An equally dramatic rise in life expectancy. rise in life expectancy.
80 70 60 50 41 40 30 20 10 0 1950-1955
Source: UN (2005)

Chine se Life Expectancy at Birth, 1950-2005
63 60 50 45 65

67

67

68

70

72

Life Expectancy

1960-1965

1970-1975

1980-1985

1990-1995

2000-2005

Bottom line: Fewer workers to support each elder. Bottom line: Fewer workers to support each elder.

16 14 12
Aged Support Ratio

Ratio of Working-Age Chinese (Aged 15-64) to Elderly Chinese (Aged 65 & Over), 1950-2050

10 8 6 4 2 0 1950 1960 1970 1980 1990 2000 2010 20 2 0 2030 2040 2050

Sou rce: UN (2005)

China is unprepared for its age wave. China is unprepared for its age wave.

Only a small minority of the population Only has pension or health-care coverage. has care Most Chinese rely on the extended family for support in old age--but the family but family is under growing stress even before the age wave rolls in. before

The demographic dividend. The demographic dividend.

Fortunately, the developing-country age Fortunately, country waves still loom over the horizon. For the next few decades, East Asia and Latin America will experience a period of "demographic dividend" in which in the impacts of aging will be mostly positive. positive.

The demographic dividend could bring The demographic dividend could bring important economic benefits. important economic benefits.

Higher rates of savings, investment, and productivity growth. A shift from labor-intensive (low wage) jobs to capital intensive (high wage) jobs. Growing economic integration between the developed and developing worlds.

Global aging is a global problem Global aging is a global problem requiring global solutions. requiring global solutions.
Immigration and outsourcing can help match jobs with workers. Cross-border investment can help match savers with investment opportunities. Bottom line: An open global economy can allow young people to help themselves by helping to support old people across international borders.

Imperatives for an aging world. Imperatives for an aging world.
The developed countries need to reduce the cost of their pay-as-you-go retirement systems, raise rates of labor-force participation, and extend work lives. The developing countries need invest more in human capital, raise living standards, and develop adequate systems of protection against a destitute old age.

We live in an era defined by many challenges, from global warming to global terrorism.

None is as certain as global aging.

And none is likely to have such a large and enduring effect on the shape of national economies and the world order.