There is no such problem as ageing
You recently may have read about forecasts from Moody’s, the OECD or the United Nations, forecasting that by 2050 we will all be using Zimmer frames and that the number of elderly waiting for places in care homes will have grown exponentially. Or that, next to Germany, Italy and Japan, there will be ten other countries with over 20% of the population aged over 65.
Most likely you will have read that aging is a major problem for governments and that these demographic trends will have a profound impact on the economy, growth and employment. Also, pension funds will probably have told you that the way we will have to provide for our retirement, will entail a lot of uncertainty and risk. You may have read that migration might be the answer to our ageing population, or how our aging populations will be offset by demographic trends in emerging countries.
Finally, a clever banker will probably have told you to have a solution to all these problems. Maybe some kind of swap, option or a ‘financial innovation’.
So you put down whatever you’re reading and decide to get some fresh air; oxygen for your grey cells. But once on the street, you get bowled over by a spirited 60-year-old on an electric assisted bicycle, while in the canal, four grey haired ladies in tracksuits are rowing their boat with powerful strokes.
The terrace around the corner is empty, except for an elderly couple who are flirting shamelessly. If ageing is so bad, then why are all those elderly people having so much fun?
I think the world is worried over nothing and aging is not the problem it is made out to be, simply because the calculation methodology is flawed, because all these forecasts are based on something called the Old-Age Dependency Ratio (OADR). Simply put, the percentage of people aged over 65. I think the cutoff age of 65 years is no longer appropriate though. People over 65 are not ‘dependent’, but often contribute positively to the economy. They stay in their jobs for longer, and even unpaid work as a volunteer will make a positive contribution to the economy. And if they do not work, there is a good number that simply pays taxes on the income earned from pensions or savings.
But more importantly; because we live longer, we are getting younger. Sixty-five is the new fifty!
It is in the last years of our lives, that we are most in need of help and care from family, health care providers or the government. And our last years of our lives continue to move forward into the future. So basically we should not look at the number of people over 65, but at the percentage of people depending on the support of others and the number of people taking care of them.
And guess what? According to research by professors Spijker and MacInnis (2013)1 at the University of Edinburgh, this percentage has been declining for decades. The vision of both men is pretty revolutionary and I recommend everyone to read their original study. That is, Spijker and MacInnis created the Real Elderly Dependency Ratio (REDR); a ratio of the number of people who are expected to live another 15 years or less, compared with the total number of working people, regardless of their age.
There still is a problem in Japan and Russia, but the fact remains that for most developed countries, we keep getting younger as we age. So the problem of an aging population does not exist.
1. Spijker, J., & MacInnes, J. (2013). Population ageing: The time bomb that isn’t? British Medical Journal, vol 347.
Jeroen Wilbrink is senior client advisor at NN Investment Partners