- The industrialized world is facing a seismic demographic
shift. The economies that have driven world growth over the past half century
-- the United States, Japan, Germany, Britain and Canada -- are getting
old.
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- It is happening at different rates -- Canada and the
United States are still teenagers compared to greying Japan -- but demographers
say the shift will have vast implications for economic growth, taxes, government
finances and societal and cultural norms.
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- Among the most pressing issues is: Will there be enough
money to cover the retirement of an increasingly large cohort of elders?
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- "We have a tidal wave approaching our shore,"
said Laurence Kotlikoff, professor of economics at Boston University and
author of The Coming Generational Storm, set to be released in April.
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- "Europe and Japan have an even bigger one and no
one is paying attention."
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- The math behind the shift is simple: people are having
fewer children and living longer.
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- The numbers are startling.
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- First, fertility rates. The combination of rising wealth
and birth control has led to a plunge in birth rates around the world.
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- Ignoring immigration, it takes 2.1 births per woman to
keep a population stable with the extra 0.1 covering infant mortality and
the fact that slightly more males are born than females.
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- In Italy and Spain, fertility rates have slipped below
1.2. In Germany and Japan, they hover between 1.3 and 1.4. The United States
has a fertility rate of 1.9 while Canada's is about 1.6.
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- That is a dramatic decline from the baby boom of the
mid-1940s to the mid-1960s when Canadian women had 3.5 children on average
each.
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- At the same time birth rates are declining, advances
in medicine are prolonging life expectancy.
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- Life expectancy for Japanese men at age 65 jumped to
82 in 2000 from 77 in 1960, according to Watson Wyatt, an international
consultancy that presented a major study on ageing and the implications
for pensions at the World Economic Forum in Davos, Switzerland, recently.
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- Over the same period, life expectancy in Canada has risen
to 82 from 79 for men and to 85 from 81 for women.
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- "We think the mortality improvements will continue
to increase," Jean-Claude Menard, chief actuary for the Canadian Pension
Plan, the person who has his finger on the pulse of Canadian demographics.
"We think the life expectancy at 65 will increase from the current
17 years to 20 years [for men] by 2050 and from the current 20 years for
women to 23."
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- The classic pyramidal age structure -- in which a larger
number of young people support a smaller number of old people -- that has
characterized populations over the last century will gradually morph into
a pillar formation for younger countries, such as Canada, by 2030, and
into an inverted pyramid for older countries like Italy. The result will
be fewer young people to support a growing bulge of old people.
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- Demographers paint the picture in several ways for Canada.
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- - By 2030 there will be only three workers for every
pensioner, down from a ratio of five to one today. By 2075 the ratio will
be two to one.
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- - By 2015 only one person will be entering the workforce
for every one that leaves, down from 10 who enter now for every six that
leave. After about 2015, more people will leave the labour force than those
that enter.
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- - After 2025, all projected population increase in Canada
will come from migration, according to figures from Mr. Meynard's office.
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- - Meanwhile, the percentage of the population over 65
will rise from about 9% now to 17% by 2020 and to nearly 25% by 2050.
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- To get an idea of what it will be like when 17% of our
population is over 65 just think of Florida, where today 17% of the population
is already over 65.
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- Mr. Kotlikoff at Boston University predicts that by 2050
there will be enough centenarians in the United States to fill up Washington,
D.C., a city of half a million people.
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- The number of people 85 and older will fill up the United
States' six biggest cities -- New York, Los Angeles, Chicago, Houston,
Philadelphia and Phoenix, he added.
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- "Imagine walking around in New York and not seeing
anyone under 85 and then going to D.C. and not seeing anyone under 100,"
he said.
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- Japan and Europe are ageing at an even faster pace than
Canada, which has fairly robust immigration rates, and ageing faster than
the United States, where fertility rates are still relatively high.
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- "For the most part, immigration rates are not high
enough to make up for the low fertility rates and many of these countries
are likely to see their populations start to shrink during the next decade
or two," the report from Watson Wyatt said. "In Japan, this may
already be under way."
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- Martin Barnes, managing editor of the Montreal-based
Bank Credit Analyst, calculates that by around 2050 the working age population
(aged 15-64) of Italy, Spain, Japan, Switzerland and German will have declined
by 30% to 40%.
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- "Historically, such huge country-wide population
contractions would have occurred only in the context of devastating plagues,"
Mr. Barnes wrote in a study last year.
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- The economic implications will be huge.
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- Many economists predict slower growth as the boomers
start to conserve their wealth instead of spending it and the smaller ranks
behind fail to fill the gap.
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- Mr. Barnes sees labour shortages and continued outsourcing
of production to Asia. Western economies will become increasingly service-oriented.
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- Society is already adapting to the longer lifespans,
with young people living with their parents longer, delaying marriage,
children and the start of their careers. The retirement age is likely to
rise, so could the divorce rate -- people could conceivably be married
for 80 years.
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- But it is the fiscal crunch that makes demographers nervous.
Will taxes have to soar to close the gap between the swelling ranks of
retirees and the shrinking ranks of workers?
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- Copyright © 2004 CanWest Interactive Inc. All rights
reserved.
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- http://www.canada.com/national/nationalpost/financialpost/story.html?id
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