Let’s face it, the common perception shrouding ageing isn’t all that pleasant. I personally would much rather prefer to remain in my teen years than find a hip replacement. That being said, ageing is an unavoidable consequence of mortality, but whether it poses a threat to the global economy is still a question with an indefinite answer.
In the present day context, the word ‘old’ is almost synonymous with the word ‘liability’. Our intuition leads us to think of the elderly as brakes that stagnate growth due to retirement. But despite the current ‘exponential’ rate of ageing, our popular thought is quite misleading. From a western perspective, ageing is not a puncture, but in many senses, a stimulant to growth. For example, in the U.S, more than half of the people aged between 62 and 74 are working. Their combined income exceeds that of the youth (aged 16 to 24). In other words, they contribute more to U.S government in the form of taxes than the youth, who we perceive as active and exuberant. But we cannot generalize this notion as there is still a significant number of elderly people in retirement.
Studies conducted by professors in Princeton show a striking trend between employed and retired old people. 65% of American men aged 62-74 with a professional degree are in the workforce, compared with 32% of men with only a high-school certificate. In other words, the more educated one is, the less likely one is to retire. This brings us to income inequality as a consequence of ageing. The retired consume more than they save, whereas the employed save more than they consume. This creates a big gap in terms of disposable income and this trend continues as money saved is passed onto future generations.
The whole spectrum of ageing is different for emerging nations. The main reason for this demarcation can be owed to the importance given to secondary education. As we have observed with the U.S, old people work primarily because they have specialized skills (earned through secondary education) that are highly demanded in the market. Since nations such as China and India have proportionally less number of elderly with secondary degrees, the old are more likely to retire. This trend, if continued, can be detrimental. The more people retire, the more cumbersome it is for the government to maintain a liquid flow of pension funds. An increase in transfer payments will decrease government spending on infrastructure and social services.This trend will likely stagnate growth and affect mainly those who are ‘in’ the work force . And let us not forget, we are dealing with two nations with combined population numbers of well over two billion.
Age should not be an artificial expiry date for work. That is a wrong supposition that can only end up hurting us. The nations who we picture as old (Japan, Germany, US etc.) are the ones who are least likely going to be affected by the current trends of ageing. It is the emerging economies, as explained above, that are most vulnerable to this phenomenon. True, the rate of ageing in these nations is far less than that of the countries in the west. However, with a rising middle-class, this situation will reverse. India, China, Brazil etc. must focus on revamping existing secondary education systems to accommodate more people. They must restructure their transfer payments to be more progressive so as to ensure the retired who are well off, get back on their feet and start earning. They should also look to establish inheritance taxes to stop the continuation of income inequality. Such steps have the potential of absorbing the economic shocks of ageing.
So, coming back to the question, “Is ageing an inevitable peril?”. Inevitable, yes; peril, not necessarily. I’ll leave that for you to decide.