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Centre for Economic Demography

Lund University School of Economics and Management

Population Ageing: significant results since 2006

Population ageing has been analysed in a recent book written by members of the Centre for Economic Demogrpahy (CED) from various disciplines, with a focus on the causes, effects, and potential solutions to population ageing (Bengtsson 2010a). The causes of population ageing are not self-evident, with most people believing that this is an end result of increased longevity. Following upon Coale & Hoover (1958) and Lee (1994), we have shown that almost all of the population ageing up through the 1980s was caused by declining fertility. But since the 1980s, population ageing has been a mixed result of both declining fertility and increasing longevity. Certain myths about the solutions to population ageing have also been examined. The popular conception that increasing migration levels will shift the population age structure in a more favourable direction are proved wrong, since migration has only a marginal effect on age structure. Increasing fertility is not an obvious solution either, as it will lead to an increased dependency ratio and thereby exacerbate the problem in the short-term. Increased fertility would not have any positive effect on population ageing for 20-25 years, which is the time required for these birth cohorts to enter the labour market.

Since population ageing is a serious threat to the modern welfare state, the various aspects of how the state is affected are discussed (Bengtsson 2010b). Both healthcare and elderly care are sectors currently financed by the Swedish government. These sectors will face serious pressures in the next 40 years, problems that are dissected in-depth. The pension system is shown to be financially stable in the face of population ageing, but to be politically unstable. While the pension system is likely to survive, the replacement ratio to each retiree will decrease, probably leading to pressure for reform. The potential to maintain the current standard of living for retirees in the face of an ageing population is debated in terms of raising taxes and extending the number of years worked. Solutions may be found in increasing the retirement age to 70 years, which is not unthinkable given the improving health among those in their 60s. A tax solution does not seem possible, given the mobility within the EU of both workers and capital: the only tax which can conceivably be raised is the tax on real estate, an asset which is by definition immobile.

Turning to the need for elderly care and health care, socioeconomic differences in adult mortality are increasing over time in Sweden suggesting that the need is higher for low income groups (see Research Area The Demographic Transition). The question is then how to finance and organise care. Analyses using SHARE data for 10 European countries, suggest that informal care directed to elderly parents is associated with significant costs in terms of foregone labour-market opportunities and that these adverse effects vary between countries (Bolin, Lindgren & Lundborg 2008). Analysing the relative importance of individual versus institutional factors in explaining variations in the utilisation of physician services among the 50+, we find that individual differences in health status accounted for about 50% of the between-country variation in physician visits, while the organisational and cultural factors considered each accounted for about 15% of the variation (Bolin, Lindgren, Lindgren & Lundborg 2009).

 

References:

Bengtsson T. (ed.) (2010a) Population Ageing, a Threat to the Welfare State? The Case of Sweden. Berlin/Heidelberg: Springer.

Bengtsson T. (2010b) "Introduction." In Bengtsson T. (ed.) Population Ageing, a Threat to the Welfare State? The Case of Sweden. Dordrecht: Springer, 1-6.

Bolin K, Lindgren A, Lundborg P. (2009) "Utilisation of physician services in the 50+ population. The relative importance of individual versus institutional factors in 10 European countries." International Journal of Health Care Finance and Economics, 9, 83-112.

Bolin K, Lindgren B, Lundborg P. (2008) "Informal care among single-living elderly in Europe." Health Economics, 17(3), 393-409.

Coale AJ, Hoover, E. (1958) Population Growth and Economic Development in Low-Income Countries. Princeton, NJ: Princeton University Press.

Lee RD. (1994) "The Formal Demography of Population Aging, Transfers, and the Economic Life Cycle." In Martin L, Preston S. (eds.) The Demography of Aging. National Academy Press, 8-49.