The Future Effect of Ageing Population on Countries - Literature review Example

Running Header: HOW AN AGEING POPULATION WILL AFFECT COUNTRIES IN THE FUTURE The Future effect of Ageing Population on Countries Name Course Name and Code Instructor’s Name Date Many people began worrying about population explosion in 1960s. In recent times however, the issue of ageing population is increasingly taking centre stage in many discussions. Three main factors have been attributed to the increase in ageing population. First is the decline in the fertility rates that has been experienced in many countries in recent past (Gupta, 2007). This has resulted in a decline in the number of young people and increased the percentage of the aged population (Vettori, 2010). Statistics have indicated that fertility rates have declined from five children per woman in 1950s to about 2.5 in 2005 (Alley, Chang & Doshi 2008). UN has projected that fertility rates will decline to two children per woman by 2050. This is expected to reduce the number children by half. Another factor that has been attributed to an increased ageing population is increased life expectancy (Lutz, Sanderson & Scherbov, 2008). It is projected that the global life expectancy will rise to 75 years by 2050. Both developing and developed countries are experiencing an increased life expectancy although HIV/AIDS is reversing this trend in some countries (Christensen et al., 2009). In combination with the declining fertility rates, increased life expectancy has resulted in a sharp increase in the percentage of elderly in the overall population. Variation in deaths and birth rates has also played a major role in the increased ageing population (Dalton et al., 2008). For instance, after World War II, there was an increased fertility rates in developed countries and this shifting the population structure as this population passes the age of 60 (Bengtsson, 2010). Moreover, in developing countries some large cohorts that are resulting from sustained high fertility rates accompanied with declining infant mortality rates are greatly contributing to ageing population (Vettori, 2010). Consequently, the number of aged population is on increase. This is expected to have far reaching effects on many countries (Holzmann, 2009). This essay discusses the expected impact of ageing population on countries in future. One of the expected consequences of ageing populations in future is that there will be a demographic structure change (Lutz, Sanderson & Scherbov, 2008). It is argued that by 2050, the number of children as a percentage of the total population is expected to dwindle. The median ages in different countries is also expected to rise (Bengtsson, 2010). Consequently, the population pyramid is expected to become increasingly rectangular in many countries with some countries demonstrating a shrinking base (Gupta, 2007). Moreover, the working population is also expected to reduce drastically and the general population growth is expected to decline in future due to increasing ageing population (Christensen et al., 2009). The effect of this will have far reaching consequences on economic and social spheres of many countries. Another consequence of ageing population on countries in future is a decline in the number of labour force (Dalton et al., 2008). With increased ageing population, many countries are likely to experience a reduction in the number workers (Bengtsson, 2010). For instance, Japan is expected to experience a yearly workforce decline of about 1%. This is predicted to be capable of affecting negatively on Japanese economic output and GDP (Alley, Chang & Doshi 2008). It is argued that the a decline of numbers of workers in Japan is expected to through Japanese economy in a prolonged period of recession lasting up to 10 years or more (Uhlenberg, 2009). Contrary to this, workers are expected to experience a rise in their income, which will not have any positive effect on GDP (Christensen et al., 2009). In countries like USA, the declining workforce will imply that the population paying taxes will decline and hence public programs, which are in need of the tax money, will face great financial problems (Vettori, 2010). Ageing population in many countries is also expected to impact on the organization and delivery of health care. It is expected that healthcare will shift from addressing acute illnesses to chronic conditions (Lutz, Sanderson & Scherbov, 2008). Moreover, the number of health care workers especially paraprofessionals and nurses is expected to decline (Christensen et al., 2009). Ageing people mainly suffer from chronic diseases such as heart diseases, Alzheimer’s disease and osteoporosis as opposed to acute diseases (Gupta, 2007). Thus, given that the ageing population is expected to form major percentage of the general population in future, many health facilities will be re-organized to address chronic conditions rather than acute diseases (Dalton et al., 2008). Thus, the style of medicine will need to change to a continuous management of various conditions rather than one time intervention aimed at correcting a single problem (Bengtsson, 2010). Moreover, it is expected that in future, a continuous relationship will be required between patients and doctors to enable the patients cope with diseases rather than being cured (Christensen et al., 2009). Since chronic conditions come with disability, it is expected that many countries will have to invest more in provision of long-term care services such as home health, nursing homes, adult day care, personal care and congregate housing (Alley, Chang & Doshi 2008). In addition, the ageing population in many countries will in future require an integration of medical and long term care services (Uhlenberg, 2009). Changes in population structure are likely to exert a significant influence on economic growth of many countries in future (Bengtsson, 2010). Studies have indicated that population ageing is associated with a decline in fertility rates. This implies that increasing ageing population is associated with a decline in young population (Lutz, Sanderson & Scherbov, 2008). The ratio of consumption to production is usually high for youthful and elderly population while the ratio is low for working population (Gupta, 2007). This implies that with increasing ageing population many countries are likely to experience a slower economic growth due to a decline in the number of working population and reduced savings. It is argued that labour supply and savings per capita tend to decline with increasing percentage of the elderly population (Dalton et al., 2008). This implies that if factors such as productivity and migration are kept constant then the growth in income per capita is lower (Vettori, 2010). Based on this it has been argued that social security and Medicare programs in many countries will be unsustainable due to increasing ageing population (Christensen et al., 2009). Other commentators have argued that the increased growth of ageing population will become a challenge to the sustainability of public finances in European Union Member states (Alley, Chang & Doshi 2008). It is expected that the increasing ratio between the retiring workers and the working population will result in exponential increase in the public expenditure on pensions and health. This implies that in future it will be difficult to maintain a balance between future public expenditure and tax revenues. This is mainly attributed to an expected slowing of the capital stock growth and the expected weakening of the labour force productivity. The ageing population is also expected to significantly increase the cost of expenditure on health care programs and government pension. For instance, the cost of expenditure on social security pension in Spain is projected to double in the next five decades. As such expenditure of Spain on social security pension is expected to rise from current 8.4% of the GDP to 15.7% of the GDP by 2050 (Dalton et al., 2008). The healthcare programs are expected to account for 8% of GDP by 2050 rising by 2% from the current 6% of the GDP. Thus, the expected increase in the government expenditure on pensions and health care provision due to increasing ageing population imply that these costs will outweigh GDP since the ratio of elderly population to working population is expected to increase (Alley, Chang & Doshi 2008). Consequently, the budget outlays of many governments are likely to increase especially when these programs continue to be financed on a pay as you go basis (Uhlenberg, 2009). The sustainability of these expenditures in future is dim. For them to be sustainable there will be need to increase taxes levied on working population (Lutz, Sanderson & Scherbov, 2008). Unless changes are made on the benefits granted to elderly population, the tax rates will need to be very high to finance these costs. However, high tax rates will have major adverse effects on any country (Gupta, 2007). For instance, such tax rates will reduce hiring and employment rates and employees will be paid lower hourly wages. Therefore, the available pre-tax incomes will greatly reduce (Dalton et al., 2008). This implies that raising taxes to finance increased costs of pensions and medical care will result in a decline in national income and in economic growth (Alley, Chang & Doshi 2008). Due to expected rise in tax rates on businesses, the expected profits to be made by businesses will decline and household income from savings will decline (Galasso, 2006). In summary, the ageing population is expected to increase in future. This will have so many consequences on many countries. One of the expected consequences of ageing populations in future is that there will be a demographic structure change. Another consequence of ageing population on countries in future is a decline in the number of labour force. Ageing population in many countries is also expected to impact on the organization and delivery of health care by shifting from addressing acute illnesses to chronic conditions. The economic growth of many countries is also expected to decline in future because of increasing number of elderly people. The ageing population is also expected to significantly increase the cost of expenditure on health care programs and government pension. Thus, the ageing population around the world is expected to have far reaching consequences on both social and economic effects of different countries around the globe. References Alley DE, Chang VW, Doshi J. (2008). The shape of things to come: obesity, aging, and disability. LDI Issue Brief, 13(1). Bengtsson, T. (2010). Population Ageing - A Threat to the Welfare State? The Case of Sweden. New York: Springer Christensen, K., Doblhamer, G., Rau, R., & Vaupel, J. (2009). Ageing populations: the challenges ahead. The Lancet, 374(9696), 1196-1208 Dalton, M., O’Neill, B., Prskawetz, A., Jiang, L., & Pitkin, J. (2008). Populationaging and future carbon emissions in the United States. Energy Economics, 30(2), 642-675 Galasso, V. (2006). The political future of social security in aging societies. London: MIT Press Gupta, A. (2007). Modelling Our Future: Population Ageing, Social Security and Taxation. London: Emerald Group Publishing Holzmann, R. (2009). Aging Population, Pension Funds, and Financial Markets: Regional Perspectives and Global Challenges for Central, Eastern, and Southern Europe. Washington: World Bank Publications Lutz, W., Sanderson, W., & Scherbov, S. (2008). The coming acceleration of global population ageing. Nature, 451, 716-719 Uhlenberg, P. (2009). International Handbook of Population Aging. New York: Springer Vettori, S. (2010). Ageing Populations and Changing Labour Markets: Social and Economic Impacts of the Demographic Time Bomb. Canberra: Gower Publishing, Ltd. Read More