Demographics, Economics and Migration The Fundamental Social Choices

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Demographics, Economics and MigrationThe
Fundamental Social Choices

• Adair Turner
• 18th May, 2004

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Three Dimensions of Demographic Change

• Increasing Longevity
• Declining Fertility
• Baby Boom Cohort

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Life Expectancy at Birth(1) - Male
____________________ Source GAD for UK United
Nations for World Note These are Period Life
expectations, which actually underestimate the
expected life span of a baby born in the year
specified, but which are easier to calculate than
the correct cohort figures and therefore
frequently used in international comparisons. See
footnote x in lecture text for explanation
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Life Expectancy at 60(1) - Male
____________________ Source Eurostat demographic
year book GAD for UK Note On Period basis
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Total Fertility Rates Europe and North America
1950-2000
In chart minimum value in y axis is 0.5 and
crosses at 0.75 In PowerPoint a white fill box
has been used to blank out the 0.5
____________________ Source United Nations
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Total Fertility Rates Asian Countries 1950-2000
In chart minimum value in y axis is 0 and crosses
at 0. 5 In PowerPoint a white fill box has been
used to blank out the 0
____________________ Source United Nations
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Total Fertility Rates Iran, Turkey, Brazil,
1950-2020
In chart minimum value in y axis is 0 and crosses
at 0. 5 In PowerPoint a white fill box has been
used to blank out the 0
1950 and 2020 are text boxes in PowerPoint with a
white fill
2020
1950
-55
-65
-75
-85
-05
-95
-15
-25
____________________ Source United Nations
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From Pyramids to Columns
Age Group
100
95 - 99
90 - 94
85 - 89
80 - 84
75 - 79
70 - 74
65 - 69
60 - 64
55 - 59
50 - 54
45 - 49
40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 - 9
0 - 4
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Italys Population Structure 1970-2050
Millions

• Age Band
• 80-100
• 60-80
• 40-60
• 20-40
• 0-20

____________________ Source U.N. Medium variant
for 2050 projection
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Support Ratio Dynamics
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Support Ratio Forecasts 2000-2050
Ratio of 20-64 Year Olds to 65
____________________ Source UN Medium Variant
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Demographic Change in UK and China UN Medium
Variant
Roy Waterhouse 26-8-03MS Graph charts. This
time, they have been doneas Stacked Bar charts,
the X-axisrunning from 0 to 100. To achieve
the appearance of the charts, they are donein
three rows, with the middleone containing the
real dataBlank values of equal amountsare put
in either side (with thecolours changed to
white),and the whole rowadds up to 100(see
screen dump right). The bars then have to
bere-coloured manually . The Legend is
donemanually.
Population by Age Band
2050
2000
UK
China
____________________ Source OECD Historical
Statistics OECD Economic Outlook
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P.A.Y.G. Schemes Three Alternatives

• If support ratios for any given retirement ages
  fall, then three possible solutions
• Increased retirements ages
• Poorer pensioners
• Bigger worker contributions

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Support Ratio Dynamics under Different
Demographic Challenges
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Support Ratio Dynamics
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Are Funded Systems Different?

• In any pension system todays pensioners are
  dependent on resource transfer from todays
  workers
• Funded systems only help overcome demographic
  challenges if they increase savings in current
  and future generations
• Funded systems face demographic risks
• The implications are closely similar for funded
  and non-funded systems

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Key Choice At Global Level

• Is world population stabilisation desirable?
• YES environmental balance?
• NO support ratio problems?
• Is world population stabilisation inevitable, if
  there is economic success everywhere?

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Key Choices At National/European Level

• Accept the deterioration of support ratios
• Poorer pensioners
• Later retirement ages
• Higher taxes
• Higher savings
• Offset the deterioration of support ratios
• Immigration
• Higher birth rate

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Immigration Only Responses UN Migration Scenario

• To maintain the ratio of 15-64 year olds to 65
  year olds constant requires

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Rising Longevity, Fixed Retirement Age and Stable
Support Ratios
RetirementAge
Initial Structure
PlusRising Longevity
Plus Immigration to Keep Support Ratio Constant
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Support Ratio Dynamics
?
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Population Density US and Europe
000s per Sq.km 2000
____________________ Source United Nations,
Statistical Abstract of the US 2002
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Europe and Its Neighbours Population
Millions
Russia,Ukraine Belarus
European Union
EasternEurope
WesternAsia
Africa
____________________ Source UN Medium Variant
Note UN definition plus Pakistan, Afghanistan
and Iran
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Demographics and Geopolitical Weight
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Immigration Pros and Cons

• Arguments for
• Arguments
• against
• Argument of
• inevitability

- Support ratio improvement - Big population
gives geopolitical weight. - Population
density environmental economic consequences -
Integration challenge - Only a temporary solution
if all the world is successful shifting the
burden of adjustment to a stable population onto
our grandchildren but at a higher population
density - It is going to happen anyway, so lets
ensure the integration is successful
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Fertility Intentions of Women
England Wales
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European Fertility Rates - 2001
____________________ Source GAD
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Choices A Personal View

• World population stabilisation beneficial and
  inevitable if whole world successful
• Major population decline beehives not columns
  are very economically and socially difficult
• Britain faces a very rapid adjustment over next
  30 years due to baby boom retirement
• Significant immigration unavoidable

• Must at some time deal with column shaped
  demographics
• This requires revolution in attitude to
  retirement age
• Birth rates of 2.0 better long-term than 1.7
• Family friendly policies vital
• Manage the unavoidable level of immigration to
  ensure optimal integration
• But mass immigration not needed
• And not in the very long-run feasible or
  desirable