An ageing population is becoming a common feature in our world, and it has a huge impact on the economy. Studies have shown that older citizens and adulthood are dominating demographics in all corners of the world, which is an area of concern, especially when considering the effects on our economy.
So, how does the ageing population affect the economy?
Are Ageing Populations Bad for the Economy?
Ageing populations are bad for the economy because they put pressure on finances rolled out by the government and other relevant parties. Young generations have high incomes, so that the government can collect a lot of money through taxes. The economy grows due to business ventures and innovations from young people. But ageing populations survive on pensions that are usually low. Most of them resort to government welfare programmes that need a huge chunk of funding. Also, the ageing population means fewer working-age people in the economy, thus creating a stunted growth of the economy [Source]. Young people are known to take risks to maximise their profits, and this feeds the economy with new ideas, but older generations minimise risks and are too careful with their resources, and they save a lot and spend a little bit; hence, the economy regresses.
Why is the Ageing Population a Global Issue
An ageing population affects numerous nations across the globe. Studies show that the birth rate has decreased due to the expensive demands of life. Many people are looking for extravagant lifestyles, so having a large family would probably be a burden. Women are now chasing after their dreams instead of being ‘stay at home full time’ mothers. Due to this, the ageing population is a global concern. It also affects the world economy linked and intertwined due to globalisation. “The rapid ageing of populations worldwide presents an unprecedented set of challenges: shifting disease burden, increased expenditure on health and long-term care, labor-force shortages, dissaving, and potential problems with old-age income security” [Source].
How can we Solve the Ageing Population Problem?
Solutions to solve the ageing population problem depends on the given context. These solutions include improving people’s living standards so that having many kids is not seen as an expensive choice. In most developing countries, all hopes lie within the academic path. One cannot afford to send many kids to school up to the tertiary level. Hence, families end up having one or two kids. Another solution will be to introduce free education to lessen the burden of school fees. Other developed nations encourage childbearing by offering grants targeted at the welfare of children. Governments need to step up in aiding the welfare of their citizens to encourage giving birth, especially amid the current global crisis of covid-19, which had dire effects on large families.
How can an Ageing Population lead to Inflation?
It is noted that “Population ageing will lower saving rates, increase real wages, and raise inflationary pressures. As a result, high inflation will return as the primary challenge for monetary policy” [Source]. When the working-age population is higher, then disinflationary is the result, and vice versa is true. The ageing population has many demands, and excess demand fuels inflation; such demands are caused by low-income pensions and the need for healthcare, funeral cover and medical care.
What are the Challenges of an Ageing Population?
The challenges of an ageing population include inflation due to excess demand on basic needs such as medical care, healthcare, insurance and funeral cover. The economy is affected due to a low number of working-age individuals, so it does not grow. The ageing population tends to save rather than spend, so finances will not move around as expected. The ageing population lacks fresh ideas, thus causing stunt growth in politics, social gatherings, and economic activities. The ageing population avoid migrating because it looks for retirement homes where they will stay. Hence they do not propel the global village and mingling of cultures. Also, pressure is put on governments by the ageing population because it wants to be fed instead of hunting for resources on its own. An ageing population is not vibrant, so a country cannot survive with such kind of working classes
Which Country has the Highest Ageing Population
The country which has the highest ageing population in China [Source].
How an Ageing Population will Change the World
“The number of people worldwide over 65 years old will triple by 2050, drastically altering some countries’ demographic makeup”[Source]. Such an ageing population is bound to impact the world by affecting “economic growth, patterns of work and retirement, how families function, the ability of governments and communities to provide adequate resources for older adults, and the prevalence of chronic disease and disease”.
What are the Advantages and Disadvantages of an Ageing Population?
The advantages of an ageing population are that it “leads to a growing pool of volunteers in the economy. The elderly contribute free labour to community and government projects after retirement” [Source]. A huge number of retired people means that most of these people will have amassed wealth and can give back and improve society. Furthermore, older people are looked upon as experienced, allowing them to assist the community. Many people in society attribute comprehensive decision making in communities to a large percentage of adults.
The main disadvantages of an ageing population are related to an increase in pension and healthcare costs, and governments are pressured to draft ways to finance a large number of people in retirement [Source]. It also reduces the amount of revenue collected through income taxes and taxes from company owners or business initiatives. Also, ageing population reduces the vibrant working class and the number of workers in an economy, thus leading to a stunt economic growth. An ageing population does not necessarily bring in new ideas, so a locality is forced to stick to traditional ways and does not take risks in trying new things. The ageing population is very conservative in most cases, so modernity will not progress quickly.
What are the Negative effects of an Ageing Population?
The notable negative effects of an ageing population include fuelling inflation on the economy and putting pressure on government coffers due to pensions being rolled out and retirement packages. Also, ruling governments will carry the burden of catering for retired people. Usually, an ageing population is characterised by diseases and needs nutritious intake, which hikes excess demand on producers and resources. The economy does not grow if the dominant population is ageing and lacks new ideas for innovation and development. An ageing population saves a lot, so the economy will be starved due to a lack of spending.
What Factors cause an Ageing Population
There are several factors which cause an ageing population. They include “age, sleep, dietary habits, nutrition, physical activity, general health condition, emotional well-being, physical impairment, cultural factors, life events, social support, family well-being, financial resources, cognitive functioning, and diseases” [Source]. In developing countries, physically demanding jobs coupled with poor diet and fewer sleeping hours cause ageing. In other countries, ageing is propelled by harsh weather conditions. Furthermore, the decreasing birth rate is not compensating for the ageing population; therefore, the world is slowly becoming more populous with older people.
Ageing Population Problems in Healthcare
The ageing population comprises citizens who are 65 and above, and these people need serious medical care. People are diagnosed with chronic diseases and other dire illnesses at this stage. As one grows older, the body becomes weak and needs a good diet plus medical supplements. This means that the healthcare sector experiences excess demand for medical care from an ageing population.
Responses to an Ageing Population
When faced with an ageing population, the government should beef up the health care system to cater to older citizens and reduce death rates. Also, it needs to consider fully funding pension schemes and retirement packages so that pensioners do not plunge into poverty. More so, there is a need to increase the birth rate by creating a viable environment where bearing many children does not become an expense or burden on the parents. This includes introducing free public education. Women should also be given flexible work regulations where they can pursue their careers while also finding time to mother their kids without the need to choose between becoming a mother and chasing after a career.
Countries with an Ageing Population
According to the Population Reference Bureau, the top 10 countries with ageing populations include India, China, the United States, Japan, Brazil, Germany, Indonesia, Italy, France and Russian Federation [Source].
Impact of an Ageing Population on Business
An ageing population entails people who have lived out their years and are prepared to retire to enjoy the fruits of their labour. Retiring means that businesses will be losing both workers and owners, although some will continue as shareholders and silent partners. Also, ageing population lack vibrancy, energy and fresh ideas to bring into a business, so businesses are likely to fall.
However, the ageing population is beneficial to businesses because that is where one can find investors and funders who can help the young generation to start new organisations and businesses.
What is the Ageing Population in Economics?
Ageing population in economics means fewer working-age people in the economy, which usually leads to a shortage of qualified workers. The ageing population in economics comprises qualified and skilled personnel who would have been in the business industry for very long, but at this age, these people must be in supervision and managerial positions. It is a risk to find an ageing population in the workforce, manufacturing floor, or field.
Social Impacts of an Ageing Population
In terms of social impacts, an ageing population affects the flow of trends in people’s lifestyles. For instance, the society is kept alive with the spectrum of younger-older generations, and this feeds innovation and modernity. But if an ageing population dominates society, the social-cultural activities will be inclined to the traditional ways and always be conservative.
But there are social benefits of an ageing population, including people enjoying long lifespans. Also, there will be deeper family bonds with great grandparents and grandkids, mentorship of the young people by the older citizens, educational attainment by older citizens becoming skilled at a late stage, and earlier inheritances and retirements dates [Source].
Effects of an Ageing Population on the Workforce
An ageing population causes a shortage of qualified workforce since most workers will be retiring. This also means that skilled personnel will be retiring, leaving a void on the working staff. But having a number of the ageing population might mean that the workforce is filled with experienced workers who have spent most of their time executing duties.
But at such an age, these skilled personnel need to be supervised or in managerial positions because they lack the energy to work well in the workforce. They also need to collaborate with the younger generation to be advised on contemporary trends and incorporate these new ideas into the working environment. An ageing population tends to adhere to traditional working and performing duties. They do not take risks trying new methods because they would want to protect their legacy at work and earn a retirement package with a good record. Having older citizens in the workforce is seen risk because work accidents are likely to happen. Businesses have to release more funds to ensure that the workplace environment is safe and has medical care available to cater to older people.
When retirement comes, the workforce will lose a lot of people to retirement, which will call for a massive recruitment exercise.