An ageing population has several economic consequences. The major problem is funding welfare systems (pensions and healthcare). With the proportion of working people who create wealth and paying taxes falling whilst the proportion of elderly people dependent on the welfare system increasing funding the system is becoming increasingly difficult.
Japan has large aging population bringing many problems. It has life expectancy of 76.4 for men and 82.4 for women (the highest in the world). The average age of the population has risen from 31 in 1970 to 40 in the 1990’s. It is expected to rise to 45 by the year 2025, the highest average age of any developed country. The numbers of those aged over 100 rose from 198 to 11 346 in the same period. This is destined to have a serious impact on the ratio between the number of people over 60 and those of working age. The current figure is 39% and this is expected to rise by 2% per year. Economically Japan could suffer with reduction in labour supply, constraint on economic growth, reductions in investment, changes in household savings and increased health insurance premiums.
The theme is clearly of immediate concern to developed countries where ageing is already well advanced and will continue, with considerable social and economic repercussions. In recent years, however, the process has gained significance also in developing regions where a number of countries have started to be concerned with the long-term implications of their ageing populations.
It is often assumed that in developing countries, ageing proceeds faster in urban areas where fertility and mortality declines are typically more advanced than in rural settings. In reality, however, ageing in rural communities usually manifests itself earlier and advances more rapidly than in the cities. By far the most important determinant is rural-to-urban migration, which comprises mainly younger adults and thus increases the proportion of older persons 'left behind' in the villages. In some rural areas, ageing is further accelerated by factors such as the return of older persons, often upon retirement from the urban workforce, or the increased mortality among younger adults due to HIV/AIDS. Thus, in the majority of poorer countries, ageing is predominantly a rural phenomenon. An aging population means that there food supplies decrease in LEDC’s leading to potential famines. This is because traditionally the younger people support the older generation and so they have less time to grow crops as well as a smaller workforce to produce the crops. Also an aging population will inhibit their development.
However there are some beneficial consequences of an ageing population. Some manufacturing companies have tapped into the growing niche market for products such as wheelchairs and stair lifts. The service sector has been boosted by the purchase of leisure and recreational facilities at off-peak times during the working week. A proportion of pensioners is sufficiently wealthy to bear the bear the full costs of their own healthcare, private nursing and residential care. Some large properties that were formally of little commercial value because of size and location have been converted into residential homes and become profitable. Many elderly people are great travellers and take advantage of the lower prices outside school holidays, which has helped to extend the tourist season and allowed hotels and tour companies to spread their costs over more of the year.
Countries with a youthful, dependent population are usually in stages 2 and 3 of the demographic transition model. Here death rates are declining whilst birth rates remain fairly high leaving a large youthful population, as is the case for India. In India the birth rate in 1991 was 29/1000 whilst death rates were only 13/1000 with life expectancy of only 60, hence as much as 36% of the population are under 15 compared to only 19% in Britain. This causes a major problem to the country, mainly through rapid population growth. The main economic problem is finding enough resources to feed and provide jobs for the rapidly expanding population. The high dependent population means that good jobs are hard to find and as many as 74% live an agricultural subsistence way of life. Family workers who could be earning money must stay sat home and look after the children, as childcare cannot be afforded. Instead of the government using money to invest in the economy, thus increasing the economic output and hence GDP of the country it must use money to help support the youthful population with educational needs as well as infant healthcare. This therefore limits economic performance as shown by the very low GDP per capita of $540/capita.
The rapid population growth causes problems such as exhaustion of resources, soil erosion, pollution, deforestation, lack of food supply, unemployment, income insecurity, overstretched health and educational service, lack of suitable housing and creation of squatter developments. A youthful population and rapid population growth rate should be dealt with for the country to develop. However to do this often drastic polices such as China’s one child policy might be introduced. This can cause further problems such as female infanticide. Due to the high youthful population as much as 50% of the population live below the poverty line.
However a youthful population can have advantages. In some countries economic development is stifled due to lack of human resource e.g. Singapore. Here the country has more than sufficient job opportunities and resources and in fact must get 40% of its labour force from abroad. To solve this problem and hence invest in its own economy Singapore is introducing polices to get a much larger youthful population. In India it is part of tradition to have many children because the subsistence way of life requires young, fit and mobile people to work the fields thus providing and supporting the elderly. Without the youthful population many elderly people would struggle to support themselves dying younger and lowering life expectancy.
