Development in an Ageing World

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• Development in an Ageing World
• Canadian Institute of Actuaries
• Montreal 15 April 2008

http//www.un.org/policy
Rob Vos
Director Department of Economic and Social Affairs United Nations
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The world population is ageing at an accelerating
rate
and by 2050, 80 of older persons will live in
developing countries
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• Ageing reflects human progress
• Increased longevity and lower mortality
• An opportunity through the active participation
  of the older persons in the society
• but it also poses challenges
• Smaller labour force may affect economic growth
• Sustainability of old age pension and health
  care systems may come under pressure
• Adjustments in living arrangements, long-term
  care systems and participation in society needed
  to ensure wellbeing of older persons

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Dependency ratios will increase, but ...
... there is an asymmetric transition Challenges
differ for developed and developing countries
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Economic challenges for ageing societies

• Growth of labour force will decelerate or even
  turn negative. This may potentially affect
  economic growth and welfare
• Possible responses
• Population policies fertility and family
  planning, migration
• Outsourcing
• Increased female labour participation
• Remove incentives to early retirement
• Improve working environment for older workers
• Increase labour productivity
• ? Measures 3-6 are most important

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Economic challenges for ageing societies

• Making people stay longer in the labour force
• Removing incentives for early retirement
• Reducing fiscal incentives to early retirement
• Increasing statutory retirement age
• Create a closer link between contribution and
  benefits (e.g., introducing notional accounts)
• Removing public pre-retirement benefits
• Improving working environment
• Change the tasks in order to reduce the risk of
  injuries
• Improve the medical assistance in job places
  (e.g., provide adequate medical supplies)
• Change the work loads for older workers
• Removing aged-based discriminatory practices

7
Productivity growth required to counter balance
demographic change
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Economic opportunities for more slowlyageing
societies

• Labour force is still growing and could provide a
  window of opportunity for economic growth, but
  only if
• Policy Actions
• Boost employment rate
• Improve economy wide productivity
• Increase investment in human and physical
  capital

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Ensuring old age income security

• Inadequate coverage
• 80 of world population lacks social security
  coverage currently.
• Without policy change 1.2 billion older persons
  may face income insecurity by 2050!!!
• There is a clear connection between social
  security coverage and old age poverty
• Unsustainable pension systems
• Weak growth and employment creation
• Early retirement practices short working life
• Mismanagement, bad governance, poor design
• Demographic pressures

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Close link income per capita and contributions
to public pensions
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Ensuring old age income security Comprehensive
reforms are needed

• No one size fits all but guiding principles
  should be
• Universal access
• Solidarity
• Equity (horizontal, gender)
• Adequacy of benefits to avoid poverty
• Financial sustainability

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Ensuring old age income security Comprehensive
reforms are needed

• Multi-layered old age income security systems
  (tailored to country conditions and preferences)
• Non-contributory Pillar universal social pension
  scheme
• Also feasible for developing countries (Figure)
• Contributory Pillar targeting certain wage
  replacement level
• Parametric reforms (raising retirement age!) with
  labour reform (increasing participation rates)
• Structural reforms (elements of fully funding,
  assuring economic security)
• Other Pillars
• employer-related, private schemes, individual
  savings and/or asset accumulation
• Any system requires growth to be sustainable

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Universal protection estimated costs
Back
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Ensuring long-term health care for older persons

• Population ageing is accompanied by an
  epidemiological transition
• Due to faster transition, developing countries
  are not experiencing compression of morbidity
• Moreover Population ageing implies
• - Increased demand for health services
• - Change in the type of services needed
  (long-term care)

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Ensuring long-term health care for older persons

• Challenge for developed countries maintaining
  the level and quality of health services while
  containing the costs
• Challenge for developing countries (double health
  cost burden) ensuring basic health needs to vast
  part of population while deal with the increase
  demand for health services due to ageing

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Ageing and health expenditures

• Health costs will increase,
• but ageing is NOT the major cost driver
• Changes in health seeking behaviour
• Rising wage costs of medical personnel
• Inefficiency in delivery
• New (costly) medical technology
• Pharmaceuticals

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Ageing and health expenditures Australia
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Ensuring long-term health care onto old age
Adapting health policies

• Combination of private and public insurance to
  improve risk pooling
• Limit the cost of drugs
• Better training of medical personnel and
  incentives to attract workers
• Home-based long term care (ageing in place)
• Preventive health care and health education

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• Population ageing is inevitable...,
• so what can be done?
• Fertility and migration policies are not enough
• Increase labour productivity and participation
  rates!
• Extend working life (improving working
  conditions)
• Reform of pension systems Multi-Pillar systems
  with universal social scheme at its basis!
• Reform of health care systems preventive action,
  home-based care and limit cost of drugs
• All these challenges seem surmountable!