popular ageing myths debunked - göteborgs universitet

Popular Ageing Myths Debunked:

A sustainable future cannot be reached through the pursuit of youthfulness

Jane O’Sullivan

Symposium - Population and Ageing: Disaster or Triumph?

Sustainable Population Australia – 7 March 2015

Sustainability• The ability to leave future generations an environment that is no

less wondrous, diverse, bountiful and benign than that we enjoy, and lives that are no less secure and fulfilling.

• I = P.A.T (Impact = Population x Affluence x Technology)

• Sustainability requires a population within the carrying capacity of its environment.

• Population growth is absolutely incompatible with a sustainable future.

• Population decline may be necessary or desirable to retreat from overshoot and restore ecological sustainability.

Stein’s Law: "If something cannot go on forever, it will stop."

2012 UN Population Projections

Constant Fertility 28.6 billion by 2100

High Fertility2050: 10.9 billion2100: 16.6 billion

Medium Fertility2050: 9.6 billion2100: 10.9 billion

Low Fertility2050: 8.3 billion2100: 6.8 billion

UN Population Projections 2010 and 2012

Year

1960 1980 2000 2020 2040 2060 2080 2100

Wo

rld

Po

pu

lati

on

(b

illi

on

s)

0

2

4

6

8

10

12

14

16

18


Year

1960 1980 2000 2020 2040 2060 2080 2100

Wo

rld

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(b

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s)

0

2

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High Fertility

Medium Fertility

Low Fertility

Projections are blind to carrying capacity

Resource Constraints?

Joel Cohen “How Many People can the Earth Support”: 7-12 billion is “the zone”“If most people would prefer a decline in birth rates to a rise in death rates, then they

should take actions to support a decline in fertility while time remains to realize that choice.”

Demographic Transition

• The great triumph of the modern era: most people born will lead long and healthy lives.

• The fall in birth rates has lagged behind the fall in deaths. This results in population growth.

• Globally, we are in a protracted Stage 3.

• There is nothing inevitable about reaching Stage 4 – We have to make it happen.

• The risk is that resource limits will cause mortality to rise, before fertility has fallen sufficiently. We may return to Stage 1 – a brutal future.

Implications of Demographic Transition

2. Age structure changes:

1. Population

grows

Mill

ion

s

Mali 1950 Mali 2015 India 2015 Australia 2060?

Dependency ratios

“Working age population” 15-64 years

“Old age dependents” 65+ years

“Young dependents” 0-14 years

• Ageing is an inevitable feature of the demographic transition.

• It is self-limiting: once Stage 4 (stationary population) is established, proportion in each age cohort remains constant.

• The majority of people are working-age (stabilises around 55%).

• Lower fertility with compensating immigration means higher median age, but also higher % in prime working age:

• UK low-fertility projection: Below replacement fertility (1.64) with top-up immigration (0.2%) + pension age of 68 leads to stable ratios around Japan’s current level (22% pension age, 62% working age)

Stage 1 Stage 4Stage 3Stage 2

Even a shrinking population may be socially and economically successful.

• Even the feared “coffin” shaped demographic is stable and manageable, until population declines to preferred levels.

• Japan’s population is forecast to “crash” at a reckless 0.6% p.a. (one third of Australia’s growth rate).

• Over-65s stabilise around 36%, working age still >50%.

• A declining population can be readily stabilised through a small rise in fertility –there is no inexorable spiral into oblivion.

Myth 1: that we’ll all be stranded in our nursing

homes with no-one left to look after us.

Australia is not alone in ageing paranoia.

• Ageing is the main excuse for maintaining population growth.

• Population growth is a policy variable (a choice).

• A significant shift in policy in the past 20 years:• High fertility nations have reduced family planning.• Low fertility nations have resisted stabilisation.

• A consequent resurgence in global population growth.

Global population won’t peak unless individual nations embrace stabilisation or descent.


Year

1990 2000 2010 2020 2030

An

nu

al

Inc

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en

t o

f P

op

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tio

n (

mil

lio

ns)

0

20

40

60

80

100

120

Annual Increment of Population

Medium Projection

Constant Fertility Projection

Recent estimates of actual increasefrom Population Reference Bureau

Population growth only partly delays ageing

A. Population projections

Year

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Au

str

alia

n p

op

ula

tio

n (

millio

ns)

0

10

20

30

40

Historical population

High projection: TFR=2, NOM=220,000

Low projection: TFR=2, NOM=0

B. Proportion over 65 and working age

Year

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Ra

tio

pe

r ce

nt

0

10

20

30

40

50

60

70

80

90

100

% of population >65 years old

Old Age Dependency: % >65 / 15-64 years old

% of population in working age 15-64 years


A. Population projections

Year

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Austr

alian p

opu

lation (

million

s)

0

10

20

30

40

Historical population

High projection: TFR=2, NOM=220,000

Low projection: TFR=2, NOM=0

B. Proportion over 65 and working age

Year

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Ratio p

er

cen

t

0

10

20

30

40

50

60

70

80

90

100

% of population >65 years old

Old Age Dependency: % >65 / 15-64 years old



• Our current low dependency ratio is a transitory artefact of the demographic transition.

• We will return to the sort of ratio we had in the 1960s (boom time).

• A very large, ever expanding population translates into a very small increase in proportion of working age.

All experts agree that high immigration will not keep us young.

• Productivity Commission 2011• “Plausible increases in fertility and net migration would have little impact on

ageing trends.”

• “any effect would be short lived. This is because immigrants themselves age”

• “to maintain the age structure of 2003-04 in 2044-45, annual migration during that period would need to be above 3 per cent of Australia’s population, leading to a population of over 100 million by the middle of this century”

• Sustainable Australia Report 2013:• “every 50,000 new migrants have roughly half the impact on ageing trends

than the previous 50,000.”

Myth 1: that we’ll all be stranded in our nursing homes

with no-one left to look after us.

Myth 2: that increasing immigration will keep us young.

What about Bernard Salt’s “big tilt”?

• 2011 was merely the change between historical data and outdated projections.

• In neither projection is there negative growth in workforce.

• Not all working age people are actually employed.

Salt says: “2011 is a break point year. From this year onwards, more baby boomers exit the workforce than generation Ys enter.”

What is this chart saying?

From “The Big Tilt”By Bernard Salt (2011)

Salt says Japan is “busted”

• What happens when workforce starts to shrink?

From “The Big Tilt”By Bernard Salt (2011)

The myth that Japan is broke

Ellen Brown 2012: “By 2006, Japan’s exports were three times what they were in 1989”

Financial Times 2011: "If the business of a state is to project economic vigour, then Japan is failing badly" wrote David Pilling. "But if it is to keep its citizens employed, safe, economically comfortable and living longer lives, it is not making such a terrible hash of things.“

(That was before Abenomics…)

What is Australia’s “business of state”?

• To keep its citizens employed, safe, economically comfortable and living longer lives?

• – in a stable, bountiful and beautiful environment, for many generations to come?

• The largest possible GDP growth?

• The most spending per person (regardless of debt)?

• The biggest profits for big investors?

• The greatest speculative gain for property traders?

What is Australia’s “business of state”?

• To keep its citizens employed, safe, economically comfortable and living longer lives?

• – in a stable, bountiful and beautiful environment, for many generations to come?

• The largest possible GDP growth?

• The most spending per person (regardless of debt)?

• The biggest profits for big investors?

• The greatest speculative gain for property traders

Intergenerational Reports

• Introduced in 2002 to build public support for accelerated population growth.

• Constructed two myths:• Ageing as an economic disaster, • Immigration as a means to “rebalance” our demography.

• Greatly exaggerate the costs of ageing,

• Completely omit the costs of population growth.

• Deficits are projected by assuming tax and welfare policies will not adapt.

Hockey’s IGR meaningless forecasts based on magical thinking - Richard Denniss, Crikey 5/3/2015

From Dr. Alison Taylor, Principal Demographer, Queensland Treasury

The “3 Ps”: IGR’s central narrativeGDP = Population x Participation x Productivity

Four very problematic assumptions:

• Natural resources don’t matter.• Diluting, degrading and depleting them will not affect per capita

wealth, because they are not in the model.

• Job seekers create jobs.• The size of the economy will be proportional to the number of

working age people.

• The 3 factors are independent.• Population growth will not reduce participation (competition for

jobs) or productivity (competition for resources and markets).

• Growth rate costs nothing.• The infrastructure, equipment and professional personnel that

added people need will be created without penalty.

The first “P”: Population- but wealth is a per capita thing!• Did population growth help Australia avoid the GFC?

• Negative per capita growth for >4 quarters – made deeper by population growth.

• Population growth delinks GDP from wealth.

GDP versus Per Capita GDP

Date

2004 2006 2008 2010 2012

pe

r ce

nt

ch

an

ge

-0.5

0.0

0.5

1.0

1.5

2.0

% change in GDP in each Quarter

% change in GDP per capita in Quarter

Population growth rate (annualised percentage)

Population growth rate % annualised

% change in GDP per Quarter

% change in GDP per capitaper Quarter

The second “P”: Participation

• Assumes “Job seekers create jobs”!• Theory that a larger proportion of working age

people means a larger workforce.• (Bernard Salt uses the words interchangeably.)

• “Workforce participation measures labour supply”(or is it a product of supply, demand, cultural expectations, cost-of-living pressures, welfare options, terms of trade…)

The second “P”: Participation

They assert that the unemployed are unlikely to take up the slack because:

“Unemployed people and people outside the labour force are generally different from the employed in skill, motivation and aptitude.”

(I would be surprised if those employers left on the shelf were not the least skilled and motivated!)

Modelling assumes current patterns of participation will continue.

From Productivity Commission (2005) “Economic Implications of an ageing Australia”:

The real world experiment• Is the proportion of people employed governed by the supply of people of

working age, or by the supply of work?

• There is no correlation between ageing and proportion of people employed.

2D Graph 2

Old age dependency ratio (%65+/15to64yrs)

18 20 22 24 26 28 30 32 34 36 38

% e

mp

loyed o

f to

tal popula

tion

40

42

44

46

48

50

52

54

56

USA

AUSTRALIACANADA

NORWAY

DENMARK

UK

FRANCE

FINLAND

SWEDEN

GERMANY

JAPAN

The real world experiment• Is the proportion of people employed governed by the supply of people

of working age, or by the supply of work?

• The differences are even smaller when part-time work is considered.

2D Graph 2

Old age dependency ratio (%65+/15to64yrs)

18 20 22 24 26 28 30 32 34 36 38

% e

mp

loye

d F

TE

of

tota

l p

op

ula

tio

n

40

42

44

46

48

50

52

54

56

USA

AUSTRALIA

CANADANORWAY

DENMARK

UK

FRANCE

FINLAND

SWEDEN

GERMANY

JAPAN




Myth 3: that a smaller proportion of working-age

people means fewer people actually working.

The third “P”: Productivity• Does population growth increase productivity?

• There is no trend among nations, nor among municipalities (USA).

2D Graph 2

Population growth rate, % p.a. 2000-2010

-0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8

GN

I per

capita g

row

th, %

p.a

. 2000-2

010

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

USA

AUSTRALIA

CANADANORWAY

DENMARK

UK

FRANCE

FINLAND

SWEDEN

GERMANY

JAPAN

Are we measuring productivity decline as GDP growth?

• Density diseconomies:• “The cost of providing new infrastructure is rising faster than the rate

of inflation — in part, because costlier construction options, such as tunnelling for new roads, now need to be adopted in the large cities.”

Infrastructure Australia (2011)

• Unremunerated costs of labour:• “on the perimeters of Brisbane, Sydney, Melbourne and Perth, more

than 90 per cent of jobs are at least an hour away on public transport.”

Grattan Institute (2013)

• Residential housing debt tripled since 2003.• Servicing that extra debt takes 3% of GDP.

What about wealth distribution?• The GINI coefficient measures inequality of income:

• The most youthful nations have the poorest poor.

• “Because immigration makes labour more abundant relative to the existing stock of capital and land, it tends to increase the returns to the latter at the expense of labour.”

– Productivity Commission 2011

• Greater inequality is associated with worse physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage pregnancies, and child well-being (Wilkinson & Pickett, “The Spirit Level” 2009)

2D Graph 2

Old Age Dependency Ratio (%65+/15to64yrs)

18 20 22 24 26 28 30 32 34 36 38

GIN

I co

eff

icie

nt

0.22

0.24

0.26

0.28

0.30

0.32

0.34

0.36

0.38

0.40

0.42

USA

AUSTRALIA

CANADA

NORWAY

DENMARK

UK

FRANCE

FINLAND

SWEDEN

GERMANY

JAPAN

Remeasuring Ageing

Data from Sanderson & Sherbov (2010) “Remeasuring Ageing” Science 329:1287-1288.

Remeasuring Ageing

USA Japan

2005-10 2025-30 2045-50 2005-10. 2025-30. 2045-50.

Ratio

0.0

0.2

0.4

0.6

0.8

1.0

Old Age Dependency: 65+ / 15-to-64

Adults with <15 years Life Expectancy / > 15 years

Adults with disability / able adults

Health and disability needs are more related to proximity to death than to age.

Can we afford pensions?

• If the labour market is oversupplied, pensions only replace unemployment and disability benefits.

• Raising the pension age by 3-5 years negates change in working age proportion.

… but is not needed if rising participation maintains labour supply.

• Reducing over-generous superannuation tax breaks would more than compensate for extra pensions.

• Pensions are efficient economic stimulus (mostly spent, returning taxes to govt); super payments reduce consumption spending.

• The worst trends for retirement funding are housing inflation and casualisation of work.

… a generational time-bomb imposed by population growth.




Myth 3: that a smaller proportion of working-age people

means fewer people actually working.

Myth 4: that pension and health care costs will blow the

budget.

What about the cost of growth rate?• A higher population growth rate means a greater

proportion of total economic activity dedicated to expanding infrastructure, equipment and skills.

• For each 1% p.a. population growth, around 7-10% of GDP is needed for expansion.

• Govt infrastructure spending has been around 1.85% of GDP per 1% p.a. growth.

• The increased burden is proportional to the lifespan of the assets to be multiplied.

• If infrastructure lasts 50 years, maintenance requires creation of 2% of the stock per year. 2% population growth doubles this burden: 100% more cost for 2% more revenue.

• This is an “opportunity cost” – income that would otherwise be available for wellbeing of existing people.

Cost of ageing vs. growth• Difference in all age-related costs between stabilising

around 25 million (IGR1) and “Big Australia” projection (IGR3) is 1% of GDP by 2050.

• Public infrastructure cost of growth has historically been around 2.6% of GDP (1.85% per 1% population growth) but is currently over 3.3% an rising. (Not included in the IGRs.)

• Expect energy and materials costs to outpace inflation –better to have a labour-intensive burden (health) than resource-intensive (construction).

• More than doubles the cost of decarbonising the economy.

• Non-monetary costs: loss of biodiversity, food and water security, public amenity and quality of life.







budget.

Myth 5: High population growth will ease fiscal

pressures.

Misconception of ‘Investment’The two big ‘Nation-Building’ activities: Infrastructure

Skills Training

Both require expenditure up front, before their working life begins.

• “Investment” or “recurrent costs”?


Skills Training



Val

ue

/ C

ost

of

All

Du

rab

le A

sset

s $

Year 1

Current inventory


Skills Training



Year 2

Val

ue

/ C

ost

of

All

Du

rab

le A

sset

s $

Year 1


Skills Training



Year 2

maintenance

expansion

improvement

Year 1

Val

ue

/ C

ost

of

All

Du

rab

le A

sset

s $


Skills Training



Year 2

= investment(getting ahead)

maintenance

expansion

improvement

Year 1

recurrent cost(treading water)

}

Val

ue

/ C

ost

of

All

Du

rab

le A

sset

s $

If we fail to increase inventory at the same rate as population, the shortfall or ‘backlog’ rapidly reduces access to and quality of services for the whole population.

recurrent cost

investment

{actually builtwithin budget

infrastructure deficit or budget deficit

Year 1 Year 2

Val

ue

/ C

ost

of

All

Du

rab

le A

sset

s $

Treading water, or drowning?

Treading water, or drowning?

Year 1 Year 2 Year 3

actually builtwithin budget

infrastructure deficit or budget deficit

recurrent cost {

Val

ue

/ C

ost

of

All

Du

rab

le A

sset

s $

If we fail to increase inventory at the same rate as population, the shortfall or ‘backlog’ rapidly reduces access to and quality of services for the whole population.

If funded by debt, the repayments add to next year’s deficit.







budget.

Myth 5: High population growth will ease fiscal

pressures.

Myth 6: Expanding infrastructure is an investment that

will pay for itself in the future.

The “not yet added” are fully dependent on current workers

Australia

Uganda Japan

Young

Old

Young Young

Working age Working age Working age

Old Old

European Union

Young

Working age

Old

Uganda3.3% p.a.

Australia1.5% p.a.

European Union0.3% p.a.

Japan-0.1% p.a.

Young

Working age

Old

Young

Working age

Old

Young

Working age

Old

Young

Working age

OldNot yetadded

Not yetadded

Not yetadded

A: Gross National Income (GNI) distributed per capita to age categories

B: Inclusion of capacity expansion (on behalf of the not-yet-added) to distribution of GNI

How would you spend $30 Billion?• Each added person costs around $125,000 for public

infrastructure.

• Net immigration, not counting refugees, is around 240,000 per year.

• A balanced migration program would free up enough money for

• Restoring welfare and community services• Restoring university funding• Environmental rehabilitation programs• Renewable energy investment• Gonski reforms of education• Universal dental health• High speed rail etc• And much more…

What’s your preference?

The population policy balance?

Depopulation Dividends

Could a shrinking, ageing population be :

• Smarter? - greater proportion with higher ed.

• Cleaner? - fewer greenhouse gases.

• Richer? - concentration of inheritance.

• Healthier? - greater proportion of life in wellness.

• Happier? - more leisure in the life cycle.

Kluge et al. 2014. The Advantages of Demographic Change after the Wave: Fewer and Older, but Healthier, Greener, and More Productive? PLOS one 9(9): e108501.

Thank [email protected]

popular ageing myths debunked - göteborgs universitet

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