Population ageing

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In demography population ageing (or population aging in North American English) occurs when the median age of a country or region rises. With the exception of 18 countries termed by the United Nations 'demographic outliers' (see the UN 2005 Human Development Report) this process is taking place in every country and region across the globe.

Population ageing is consituted by a shift in the distribution of a country’s population towards ever older ages. Thus an increase in the population’s mean or median age, a decline in the fraction of the population composed of children, or a rise in the fraction of the population that is elderly are all aspects of population aging.

Population ageing is a highly generalised process, it is most advanced in the most highly developed countries. Among the countries currently classified by the United Nations as more developed (with a population of 1.2 billion in 2005), the median age of the population rose from 29.0 in 1950 to 37.3 in 2000, and is forecast to rise to 45.5 by 2050 The corresponding figures for the world as a whole are 23.9 for 1950, 26.8 for 2000, and 37.8 for 2050. In Japan, one of the fastest ageing countries in the world, in 1950 there were 9.3 people under 20 for every person over 65. By 2025, this ratio is forecast to be 0.59 people under 20 for every person older than 65 (United Nations, 2004).

The sources of population aging lie in two (possibly related) demographic phenomena: rising life expectancy and declining fertility. An increase in longevity raises the average age of the population by raising the number of years that each person is old relative to number of years in which he is young. A decline in fertility increases the average age of the population by changing the balance of people born recently (the young) to people born further in the past (the old). Of these two forces, it is declining fertility that is the dominant contributor to population aging in the world today (Weil, 1997).

More specifically, it is the large decline in the total fertility rate over the last half century that is primarily responsible for the population aging that is taking place in the world’s most developed countries. Because many developing countries are going through faster fertility transitions, they will experience even faster population aging than the currently developed countries in the future.

Asia and Europe are the two regions where a significant number of countries face severe population ageing in the near future. In these regions within twenty years many countries will face a situation where the largest population cohort will be those over 65 and average age will be approaching 50.

Most of the developed world (with the noteable exception of the United States) now has sub-replacement fertility levels, and population growth now depends largely on immigration together with population momentum which arises from previous large generations now enjoying longer life expectancy.

The effects of an ageing population are considerable. Economically older people are more likely to save money and less likely to spend it on consumer goods. This leads to lower interest rates and disinflationary or even deflationary pressure.

Social welfare systems have also begun to experience problems. Earlier pay-as-you-go pension systems are now almost completely unsustainable due to population ageing. The largest area of expenditure in many countries is now health care and the cost of health systems will increase dramatically as populations age, a situation which will face many governments with hard choices between higher taxes or a reduced government role in providing health care.

The second largest expenditure of most governments is education and these expenses will tend to fall with an ageing population, although this may be partly offset by the increasing proportion of the young population who continue into tertiary education.

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References

Gavrilov L.A., Heuveline P. Aging of Population. In: Paul Demeny and Geoffrey McNicoll (Eds.) The Encyclopedia of population. New York, Macmillan Reference USA, 2003, vol.1, 32-37.
United Nations, 2005, Human Development Report 2005, Oxford, Oxford University Press.
United Nations, World Population Prospects: The 2004 Revision Population Database, Population Division, 2004.
Weil, David N., “The Economics of Population Aging” in Mark R. Rosenzweig and Oded Stark, eds., Handbook of Population and Family Economics, New York: Elsevier, 1997, 967-1014.

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