Impacts of ageing for developed economies

In my second blog on the Ditchley Foundation conference on the implications of ageing in developed economies I’ve digested the discussion on the consequences of ageing. (Read the first post here)

Healthcare

It was striking that the conversation was dominated by healthcare. We distinguished between ‘true’ age-related healthcare costs, associated with chronic conditions and long term care, as opposed to the costs of the last year of life, which arise whenever someone dies and may actually be higher for early death (when people are more likely to benefit from costly interventions).

There was agreement that ageing is not the main driver of health costs, with improving technology and rising expectations considerably more important.

Participants questioned whether US health spending was an unusual outlier, or the inevitable trajectory for other advanced economies. While American delegates tended to be fatalistic about health costs, participants from other countries pointed to their success in checking rising costs and maintaining health spending at a lower share of GDP (usually with better health outcomes, since healthcare only has a small impact on a society’s health). Continue reading “Impacts of ageing for developed economies”

Trends in ageing for developed economies

I recently spent three days at a conference on ageing in developed economies, hosted by the Ditchley Foundation at their splendid Oxfordshire pile. I was one of the rapporteurs for the event and asked to focus on the causes and impacts of population ageing.

Undaunted by the breadth of this exam question participants from Sweden, the UK, Canada, the US, Japan and the Netherlands pooled their evidence and insight to considerable effect. In this first blog, I précis our discussions on causes and trends (NB the whole conference was under the Chatham House rule).

Image from enabledbydesign via Creative Commons

Fertility – There was surprisingly little discussion of the impact of the post-1945 baby boomers (perhaps experts now take them for granted, or see them as only transitory phenomenon). By contrast there was intense debate on the subsequent slump in fertility observed since the 1960s across the developed world.

Fertility rates vary widely, with the USA and Scandinavia remaining fairly fertile, while Southern Europe and East Asia have seen fertility fall far below population replacement requirements. The latter will lead to population decline and for coming decades skew the age profile of the population upwards, for as long as older, more fertile generations remain alive.

Interestingly the UK, Germany and France seem to have had some success in improving fertility in recent years. There was scepticism about the effectiveness of deliberate pro-birth incentives but agreement that flexible work and supported childcare is very important (migrant mothers play a moderate role too).

However I was surprised to hear that the strongest determinant of variations in developed world fertility rates are our different attitudes to birth outside marriage. This lesson implies that conservative cultures may find it very difficult to increase fertility (it also adds a new dimension to the UK debate on using public policy to support marriage). Continue reading “Trends in ageing for developed economies”

The Baby Pop

There is a ‘baby boom’ in London. Births during the first six months of this year have broken all records.” So The Coshocton Tribune reported back in August1920.

However, the term ‘baby boom’ usually refers to the period roughly between 1946 and 1966, during which a high number of births were recorded in the United States of America. Hence, the ‘baby boomers’ epithet lumps together all the people currently between 44 and 65 years of age, give or take one year.

There hardly passes a week when the “baby boomers” don’t make into the local news, as if the UK had experienced a similar demographic explosion to the USA and -given that it is usually used in the context of a fiscal and pension crisis looming just round the corner- at the same time. I contend here that this is far from being the truth: the UK did not experience a ‘baby boom’ but a moderate increase in fertility for only the ten years starting in 1958.

To measure fertility, the best demographic indicator is the ‘total fertility rate’ (TFR). Its definition is rather technical, but I hope it suffices to say here that total fertility rates measure, well, fertility: when the rate goes up, it’s because more babies are being born.

So, let’s start with the US data. The next figure presents annual US total fertility rates between 1940 and 2009. It shows that total fertility rates exceeded 3.0 between 1947 and 1964. In contrast, they have lingered around 2.0 since the late 1980s.

What about the UK? The following figure presents TFR for England and Wales, along with the US data we have already seen. Apart from a blip in 1947, England and Wales experienced a sustained increase in fertility between 1958 and 1968. Hence, fertility started to increase about a decade later in Britain (the earliest cohort, who is turning 52 this year, has a long way to go until reaching state pension age –in contrast to the first American ‘boomers’). As importantly, TFRs in England and Wales never reached the vertiginous 1950s US rates –merely a modest 2.94, at its highest, in 1964.

It depends on your idea of how stentorian an explosion has to be to qualify as a ‘boom’, of course, but you would possibly agree with me that those who state that there was a ‘baby boom’ in the USA shortly after the WWII might have a point but that, according to the data, the news about UK births has been greatly exaggerated.

We estimated how many more people would be alive today if TFR in England and Wales had reached between 1958 and 1968 the average TFR the US experienced between 1947 and 1964. Accounting for age-specific mortality rates, there would be just short of 2 million more people alive today –around twice the size of Birmingham, UK second largest city, or about the size of West Midlands Urban Area (which includes Wolverhampton, Dudley and Walsall, apart from Birmingham) –the second urban area by size in the UK. Then we would be talking. However, compared to the American case, all we saw in Britain was but a baby ‘pop’.


Age UK Budget reaction

Some weeks ago Age UK submitted evidence to the Treasury ahead of the Budget, outlining our key Budget priorities for later life. While we’ve had some good news today, the Chancellor’s response – or silence – in other areas left our ‘wish list’ largely unfulfilled.

The highlight today for Age UK was the hint that the Government will introduce a simple flat-rate state pension of around £140 a week. This will be great news for those who receive it – we’ve been calling for a simpler, better single State Pension for many years. But as always, the devil is in the detail. We didn’t hear today when this pension is going to be implemented, and we know from the Chancellor’s statement that it won’t apply to those currently in receipt of State Pension. With 1.8 million older people living in poverty in the UK today, we believe that more needs to be done to tackle pensioner poverty now.

Future increases to the State Pension Age past 66 will now to be determined by an automatic process, according to today’s Budget statement. While we accept that the State Pension Age will have to increase periodically to take account of welcome increases in life expectancy, simplistic indexation is not the answer. In particular, it’s essential that any increase isn’t based solely on average life expectancy, as health inequalities mean that life expectancy varies wildly across the UK. Any new uprating must also take into account the impact changes will have on the poorest, those out of work and those with health problems or disabilities.

After spending years campaigning for an end to age discrimination, it was disheartening today to see the postponement of new age equality provisions for small businesses. We’ve been promised that this will not include the ending of the Default Retirement Age, which will begin to be phased out from April, but it will water down the banning of age discrimination in the provision of goods and services. Age equality makes economic sense, and older consumers’ spending will be key in reducing the deficit, so we would have liked to see more Government support to help small businesses adapt to the changes, rather than abandoning them.

Finally, there were areas where the Budget said nothing, where action was urgently needed. We already know that adult social care is going to be badly hit from April, as we hear news of local government cuts. We asked the Chancellor to channel any extra money he could find to top up support for care users who are among the most dependent in society. Yet while there was a little extra for other favoured projects – money for councils to fill potholes among them – there was nothing to see off the looming crisis in care.

Read more coverage of the Budget on the main Age UK site

The fiscal clouds and the long-term vision

Pound coins - Photo: Flickr user hitthatswitchOver the last few days and weeks economists and analysts have speculated about the comprehensive spending review. In the build-up, endless rumours and ‘leaks’ and even snapshots of confidential papers inundated the media and kept almost everyone busy – and worried.

After the announcements, some breathed a deep sigh of relief, many felt disappointed while others felt outraged. However important it may be, the CSR only presents a set of fiscal measures to tackle the short term – until 2014 at the most – or, as the Chancellor put it in his speech, measures that ensure “that what we buy, we can afford; that the bills we incur, we have the income to meet; and that we do not saddle our children with the interest on the interest on the interest of the debts we were not ourselves prepared to pay.”

The Chancellor also announced that “a stronger Britain starts here”. Perhaps, but it will take a lot more than fiscal restraint for this attempt not to become a false start.

Fortunately, economics has developed the life-cycle approach, but unfortunately it is taught solely as a way to study consumption and saving decisions. There’s more to it than this.

Let’s consider the Marmot Review on health inequalities, for example. It lists a number of key policies over the life course. When it comes to ‘adults of retirement age’, one of the policy objectives was to increase access to apprenticeships. Certainly most apprentices are young adults – so, how come this is an appropriate objective for people past state pension age? It is, if we look far at the horizon where these young people get to retirement age.

Around 21 per cent of all economically active adults in England have qualifications below Level 2. Students who leave our schools with no or very low qualifications are twice as likely to claim job-related benefits before they are 25 as those with better qualifications. And it is also much more likely that it will be them who may have to struggle most to keep warm in winter and who may have to get by on very low incomes when they get to retirement age, and it is them who are more likely to endure worse health earlier in life and even more likely not to make it to retirement age.

A life-cycle or life-course approach helps dispel the short-term fiscal clouds and focus our effort on the long term vision more clearly. In our submission to the Comprehensive Spending Review, we highlighted 12 key long-term challenges we face as an ageing society. That is, even though we discussed and proposed measures related to public spending over the next four years, we refused to be locked in the short-term fog and never lost our vision.

The best thing about the CSR announcements – if there is such a thing as a ‘best thing’ about it – is that now the focus of the economic discourse may concentrate on the bigger, more meaningful and crucial picture, that of raising productivity and employability, and reducing inequalities, on behalf of everyone – including the people currently in older age and the future older people. This is the real challenge facing us in the longer term and Age UK will be seeking to ensure that it is not forgotten.