No amount of miracle cream can conceal the fact that the UK has an ageing population, but the endurance of humanity is beginning to take a toll upon several parts of the economy from banking to healthcare to retail. Age has become a strain- especially in our changing world today.
The lack of birth rates in conjunction with long life expectancies has led to a shift in our global age structure- in 2020, 727 million people were aged 65 or older and it is forecasted to more than double by 2050.
A decline in the working age population stimulates a negative multiplier effect as it leads to a supply shortage of qualified workers. This triggers a slow labour force growth and leaves demand occupations vacant, resulting in a lack of productivity, higher labour costs, and firms looking internationally uncompetitive. Ultimately resulting in a limited propensity to invest by dejected firms, thus ensuing secular stagnation.
Government spending is already very tight-fisted, but with the ever-increasing pressure of an ageing population, the share of GDP spent on healthcare services on social security services and pensions is foreshadowed to upswing to 10% of GDP by 2062. An increase in life expectancy ultimately calls for crippling costs of pensions and care services. If the retirement age is fixed, whilst the life expectancy increases, there is more potential for people to claim pension benefits and less paying income taxes. This creates speculation of high tax rates on the currently declining workforce, to balance out the surge of dependency on the government; conversely this can create disincentives for employees to work, thus increasing the fall in productivity and economic growth. Alternatively, a wage spiral could take place, as an ageing population results in a shortage of workers.
Within the UK the number of economically active (taxpayers) has dramatically taken a toll- the older demographic have become more pension dependent and reliant on the state. Advanced industrialised nations are in a predicament, as lower tax revenues in comparison to their spending is a burden upon the government’s budget.
We’re not only ageing as individuals but as a global community. An ageing population has long-term impacts on the development of the world.
The longevity of the population is clearly a drain on economic resources, as there has been an increase in the number of elderly living on their own. Not only does this have a negative impact on their health- due to severe isolation, but it also reduces the number of homes available and accentuates the housing crisis further.
Whilst some argue that the suitable option would be to place them in retirement homes; others rightfully argue that it is an unsustainable cost, as retirement homes are currently struggling with the lack of labour and skills. As fewer workers are able to support the elderly, the working-age population are caring for their children as well as their elderly parents (which is a labour-intensive thing to do). Ultimately, having a knock-on impact upon their work-life productivity. Retirement homes are also heavily reliant on government spending, which in turn strains the public budget.
Planning for the future has always been beneficial, yet higher savings for pensions have considerably lowered capital investment. In the circular flow of income, savings is a direct leakage that offers no benefits to the economy-so a higher percentage of income set aside for pension funds, consequently, reduces the amount of savings available for useful investment- intensifying the slow rates of growth.
A main driver of the ageing population comes from the low birth rates, since many young women choose to be more career-driven or have become better educated and have had better access to healthcare. As well as that, given the current rising costs of living and housing, the struggles to maintain a standard of living currently wards off any thoughts of having kids, thus leaving the population demographically unsustainable. It is projected that in 2030 the UK will have 13 million people aged over 65.
The risk-takes of our community lives amongst the younger populace- they’re the innovators willing to invest in new businesses. They also thrive within the seniors of our population, who have years of industry experience and go onto discover firms, however, the key part to highlight is the ‘years’, their propensity to take risks compared to the young generation are much lower. The senior risk-takers simply have numbered years and are discomforted with high-risk strategies, as in most cases they don’t have the time to recover from any economic losses- like a market downturn. Businesses and firms need stability and assurance, which the ageing demographic threatens dearly, as the dramatic down-spiral of young people leaves the ‘brain-pool’ to be lowered globally, let alone within the country.
There would also be a shift in the market according to the population’s demands of goods and services. The ratio between consumption and production is higher for younger and older people than it is for working adults. For instance, elderly people would have more spending power- those over 65+ have increased their spending by 75% between 2001-2018. Whilst this is a positive influence upon the economy, it is heavily restricted by the barriers age presents- such as mobility and technological limitations. So, in most cases, the older generation have less opportunities to spend their wealth- harming the economy.
An ageing population can be alleviated through several governmental measures- in Australia, they use a points-based immigration system which allows labour forces to be supplied with the adequate expertise and skills it lacked, to increase its GDP. The impact of the ageing population had previously been mitigated by migration- but given the UK’s exit of the EU a consequence of low migration is the rise in the dependency ratio. The UK government have taken measures to slowly trying to increase the retirement age and increase private-sector pensions, to ensure that the ageing population is manageable. Other alternatives that aren’t as controversial, would be to increase child-care provisions, which would encourage women to work, as well as promoting elders to make use of their healthy years that are being lost in retirement.
The dominating ageing population is a challenge but shouldn’t be considered as an ‘inconvenience.’ The ageing population shouldn’t be viewed as an expense, but an underutilised resource. For instance, retirees have begun their pursuit in higher education due to having more time on their hands, this could be hugely beneficial for the economy-for firms can exploit their new skills, thus increasing their labour force, (in Germany, ageing workers are kept on the job to ensure national economic stability). Moreover, the ageing demographic can be used to mentor young employees with their experience and pass down their knowledge, rather than let it be wasted and forgotten.
The ageing population is a force that the economy should prepare for.
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