Wednesday, August 02, 2006

Ageing Populations

Ben Bernanke and the Coming Demographic Transition

Ben Bernanke's speech yesterday should prove interesting for all readers of Demography Matters. The speech is interesting not so much for his views on the US social security system as such, but for the way he conceptualises the problem. This IMHO is a huge step forward. We are in the midst of an ongoing demographic transition. Here are some extracts:

The Coming Demographic Transition: Will We Treat Future Generations Fairly?

In coming decades, many forces will shape our economy and our society, but in all likelihood no single factor will have as pervasive an effect as the aging of our population.

This coming demographic transition is the result both of the reduction in fertility that followed the post-World War II baby boom and of ongoing increases in life expectancy. Although demographers expect U.S. fertility rates to remain close to current levels for the foreseeable future, life expectancy is projected to continue rising. As a consequence, the anticipated increase in the share of the population aged sixty-five or older is not simply the result of the retirement of the baby boomers; the "pig in a python" image often used to describe the effects of that generation on U.S. demographics is misleading. Instead, over the next few decades the U.S. population is expected to become progressively older and remain so, even as the baby-boom generation passes from the scene. As you may know, population aging is also occurring in many other countries. Indeed, many of these countries are further along than the United States in this process and have already begun to experience more fully some of its social and economic implications.
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Peter Drucker on Demography

Could microeconomics help us out?

I'm new here, so I think it's good to start by writing about what awoke me personally to the issue of ageing populations. About pension bombs and dependency ratios I had heard before, but it took one course book, about three years ago, to realise that there's much more involved than that. In fact, the book I read gave it only one chapter -but it was written by Peter Drucker, and he can be quite convincing. (In this one, the Mediterranean reality, for example, is described as that of "collective national suicides".)
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Ericsson Offers Redundancy To Workers In The 35 to 50 Age Group


Well, I think this certainly is news. And it fits in with the findings of ongoing research from Italian economist Francesco Daveri. See especially working paper 309: "Age, technology and labour costs", which examines the case of Finland and especially Nokia (available on this page, abstract pasted at the bottom of this post).

Ericsson, the telecoms equipment maker, on Monday offered a voluntary redundancy package to up to 1,000 of its Sweden-based employees between the ages of 35 and 50. The unprecedented move is designed to make way for younger workers.
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So, you think you can fix the demographic crisis, right?

The spirit of procastination having taken possession of me, and with Google at my fingertips, I decided to abuse numbers in a most outrageous way. What follows is, at best, statistical fiction (one day I want to help write the U.S. budget, which is the Da Vinci Code of statistics: everybody knows it's fiction, from the writers to the critics, except the clueless millions who don't).
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An Ageing Problem?

In a comment on CAP TvK's Ageing in the EU 25 post David Friedman said:

"Progress in biological knowledge has been very rapid in the past century, so it wouldn't be surprising if, well before 2050, the aging problem was solved."

Here there are two issues: that improvements in biological knowledge can lead to longer, more productive lives, and that ageing is a problem, and indeed a problem that has a solution. This post will adress the latter issue.
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Ageing in the EU25: a short introduction.

For those who are interested in the current situation on ageing in the EU region. This recent EC paper "The economic impact of ageing populations in the EU25 Member States", gives a good and concise overview. The first part is a summary of what we know about the impact of ageing on the labour supply, input, capital intensity, TFP and indirect budgetary effects.

The 2nd part goes into the projections for all the EU-25 members. It also gives three distinct time periods the EU zone will go through
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Older Workers In The UK Continue Working

This news from the FT today is very interesting indeed:

More than half the jobs created in the past year were filled by people above the state pension age, according to official statistics.

The rise in the number of working older people reflected increasing financial pressures created by pensions shortfalls and a growing willingness of employers to take on older staff, employers’ organisations said.

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Greying in Liguria

This article in the IHT provides an interesting insight into how the ageing process is affecting one region of Italy, the Liguria region whose capital is Genoa. Probably the idea of NO children in the streets is something of an exaggeration, but the main picture is clear:

There are hundreds of stores in the Fiumara Mall - Sephora, Elan, Lavazza Café. But in a nation long known for its hordes of children, there is not one toy store in the sprawling mix, and a shiny merry-go-round stands dormant.
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Czech Pensions

I just found this article from the Prague Daily Monitor via a link on an interesting looking website called Age Times. It is pretty wooly, but the fact that the Czech pension system is already going into deficit does start ringing alarm bells. The problem obviously can only get worse if they don't have a substantial reform, but to have anything more to say I think I will need to look into this a bit further.
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US: The Coming Demographic Tsunami



Well, reading through this account of a recent speech by David M. Walker, head of the US Government Accountability Office, I have only one thing to say: Demography Really Does Matter.

Walker has committed himself "to touring the nation through the 2008 elections, talking to anybody who will listen about the fiscal black hole Washington has dug itself, the "demographic tsunami" that will come when the baby boom generation begins retiring and the recklessness of borrowing money from foreign lenders to pay for the operation of the U.S. government".
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3 comments:

Dr. Leonid Gavrilov, Ph.D. said...

Thank you for your interesting post!
I thought perhaps you may also find this related publication interesting to you:
Aging of Population
http://longevity-science.org/Population_Aging.htm

Vijay S. Jodha said...

Sir

I couldn't agree more with your findings. I had worked over an eight year period on a project on the subject of ageing which resulted in a book and a travelling exhibition presented by the United Nations. More information at http://www.agelessmindandspirit.com/

Vijay S. Jodha
jodha@vsnl.com

knightsmart said...

I was first introduced to the Art of Demography in 1978 on a Teacher Training Course. I realised the implications to shipping (my industry) and have spent the last 30 years trying to raise awareness regarding international crewing. To no avail! Over the past few years, every man and his dog is trying to find a solution!