Society is getting older, even in China, a possibly unforeseen result of its one child policy.
From an economic point of view, a major cost of an aging population is a high, rising dependency ratio. That is the number of people who are not working relative to those who are at work and have to support the rest.
Generally, this is measured by looking at age groups, separating the young and the old from the working age population. Low birth rates leave relatively few dependent children. However, as many parents know, the average working age is coming later. A generation ago, you were considered able to work and no longer dependent at 16. Now, the age is more like 25.
In the elderly, too, a change in how we define the working population is in order. The cut-off has been 65, and still is in most studies. We could define away a lot of the dependency problem by raising that age. Most older people still consider themselves independent at 65 and plan to work beyond that age, especially given the increase in life expectancy.
A smaller share of workers in a society generally means less production and slower growth. So it was surprising when Morgan Stanley released a paper by Charles Goodhart of the London School of Economics saying that the current demographic shift toward the end of life was beneficial for the economy.
A major benefit of the reduced potential labour supply should be an increase in real wages. As anything, labour included, becomes scarcer; its price goes up. The massive increase to the world’s labour supply as China industrialized led to outsourcing, slower manufacturing growth, and downward pressure on wages in North America and Europe. Now that trend may be turning.
As we look at an older population, we have to ask whether the expected increase in wages will be enough to offset the fearfully-anticipated rise in the cost of providing health care to an aging, and often sicker, population.
Goodhart optimistically looks at the increase in the demand for labour generated by the need for caregivers to an aging population. Governments that will have to provide the needed care are concerned not only about where they are going to get the workers at all levels to deliver it, but also how they will pay for it.
On a more positive note, the Canadian Cancer Society shows us how, through prevention, we can reduce the national health care burden as we age. The Cancer Society is doing the research that will tell us how to avoid cancer. We all know that eliminating tobacco is a good first start and most of us have done that. But, did you know that the same good things that reduce your risk for heart attacks, strokes, diabetes and possibly Alzheimers will also improve the odds of avoiding cancer? They include maintaining a healthy weight, being physically active, and eating wisely.
Finally, bringing us back to demographics, women are less likely to develop breast cancer if they have children, especially when they are still young. This is a pattern commonly seen among First Nations, the youngest component of Canadian society. There, women often have their children at a young age and are free to devote themselves to higher education and careers when their babies are bigger — perhaps a pattern the rest of us might consider.
Women having more children at a younger age will increase the dependency ratio in the short term, but will improve it once those kids reach working age. If we want a larger working age population sooner, we can resort to Canada’s long standing way of increasing the workforce: immigration. We all know that there are hordes of people out there who would love to come here.
Troy Media columnist Roslyn Kunin is a consulting economist and speaker.