February 19, 2014
One of the topics discussed at the ESPAS conference in Brussels this week was about the implications of rapidly rising average longevity in advanced countries for the pension and social security systems. The short answer to that question is simple: our pension and social security systems cannot deal will as many old people as demographers are predicting. But the problem is not unsolvable – we simply need fewer old people. And this is not an impossible task if we dare to re-frame the issue.
There is a lot that we know about ageing and longevity. Each year our life expectancy increases by three months. What we know is that all the people that will be old in 2030 are alive today. Even people who will be old in 2070 are alive today. And, I would dare say, some people who will be old in 2130 are alive today. Singularity University considers the infinite life span, in addition to infinite energy and infinite machine intelligence the three elements of singularity that will change everything in the 21st century. In any case there are no signs that the rise of life-expectancy is slowing down.
Demographic quantity, quality and empowerment
In short demography is more predictable than any of the factors that ESPAS is considering and will impact the future of Europe and the world by 2030. But it is certain only in numbers. Actually demography is more than about numbers, it is about three elements: quantity, quality and empowerment.
The quantity is about the size of the population in various age groups. Not much can be done about that except reasonable family policies and targeted immigration. But fast and big changes are not to be expected. The quality is about the education and skills that the citizens have. It can be substantially improved with policies that invest in education and in raising, attracting and retaining creative talent. Finally, the empowerment is about what kind of opportunities are there for the people into whose skills, education and creativity we have invested.
Most of the developed world, but Europe in particular, will struggle with quantity. Birth rates are not there and large immigration is not considered acceptable. We will need to compete very hard in quality skills and education. Everybody has learned the lesson of importance of education and emerging economies are catching up and in some cases overtaking us in the quality and investment into education. Which leaves us with the opportunities and empowerment. Centuries ago, when the world was dark, it was the European civilization that unleashed the potential of its people most successfully.
It is great that people live longer …
The fact is that people will live longer. Some western societies will be old first. We will have to invent social models, business models and technologies. We will have those ready when the rest is old as well. But West and the rest will be getting older and some studies suggest that global population with peak at around 2030.
Longevity and population ageing are usually presented as a problem. But does it have to be interpreted in that way? Isn’t it great that we will live longer, that we will live to see our grand, grandchildren, read the books and gone to places we believed we would run out of time for? Isn’t it good that the global population will stabilize and prevent a resource crisis?
There are numerous studies on the longevity economy – the economy focusing on old people. Some suggest it would be third in the world, larger than Japan. Longevity economy will be 52% of US economy in 2032. Already in 2012 the 55-65 age group created almost as many new businesses as 20-34 group and growing.
… if we see opportunities in problems
There are issues to be addressed. A severe one is dependability ratio – how many working persons support a retired person. A mathematical fact is that things will get better after they get worse. The situation when the baby boomers are retired and smaller population is working will not last forever. With fewer people working there will be, further down the line, also fewer people retired.
In principle, however, we should let go of the model in which in the first part of life one learns, in the second one works and in the third one rests. A mix of learning, working and resting should take place throughout life. Gonzelez’s Reflection group on the future of Europe suggested that retirement should be a right but not an obligation. There are ideas to scrap the concept of “retirement age” altogether and keep it only as a mathematical concept used to determine after what age the savings paid into retirement insurance should suffice for living but not working.
With so many young people unemployed in Europe it may look out of touch with reality to discuss later retirement. Indeed the greatest problem of advanced technological economies is where will the demand for human work come from. Reframing another problem – medical care – could help.
Why is it that in any other sector of economy, more demand is good except in medicine and care, where it is considered bad?! Why is serving coffee to healthy person considered a gainful occupation while making a meal for a sick person a cost to society? Occupations where people care for other people could provide many jobs that cannot be outsourced and that will closely follow the demographic trends.
Another example of such person-person jobs are in the education sector. Here too there may be more demand and more employment opportunities once education ceases to be a cost and becomes a business. If people work they find their life more meaningful, they create value for others and pay taxes. Preventing them form sitting idle is important and making such work part of the economy would help. This does not mean however, that in the field of medical care and education the principles of solidarity and equal opportunity should be dismissed. On the contrary.
Ageing and longevity is also about quantity, quality, and empowerment. The numbers are clear, their interpretation is not. “Old” is a definition, how old is »old« is relative. What was considered “old” in Biblical times is not old today. While statistics can help in counting fewer old people, this is not enough. Perhaps the greatest challenge of an older society is the dominance of people which are not only wiser but also more conservative, less risk taking and less optimistic.
Speaking about the demographic qualities of an ageing society we know it is important to provide the opportunities for continued education and life-long learning. Trickier will be the measures to keep older people active, ambitions, hungry for achievement. Such people will hate to retire. We do not know enough about how to do that.
Empowerment will come through deep reform of economic and social models. Longevity economy will be a big part of the economy and services where people care, educate or inspire other people important. We should allow all this to contribute directly to the economy and not be a burden to budget.
And budgets will have to be balanced, particularly countries with stagnant or declining populations. Debts that a family made will not be repaid by five or more children as could be the case 100 years ago. A clash of generations, as some call it, is looming. Grey economy is a silver lining to this cloud. If we dare re-framing care and education as part of the economy.