Developing countries unprepared for ballooning elderly population, experts say

By Tim Brown

Yet most experts no longer consider overpopulation a major threat to humanity. Of greater concern to social scientists is the emerging trend of population aging — the topic of a recent panel discussion hosted by Canada’s International Development Research Centre (IDRC) at its head office in Ottawa.

Two factors account for population aging: first, people are having fewer children; and second, they are living longer. The fear, says UN economist Jorge Bravo, is that societies will be unable to cope with the high costs of elder care — especially in countries with lower incomes, and with fewer and less developed financial and political resources.

“Both developed and developing countries are going through this process,” says Richard Jackson, director of the Global Aging Initiative at the Washington DC-based Centre for Strategic and International Studies. “The important difference is that much of the developing world is moving through this transition much more rapidly than the developed world.”

Though women in wealthy countries typically have fewer children, even the world’s least developed countries have seen a dramatic decrease in fertility rates — an overall drop of 30% since 1970 according to UNICEF. In Latin America, the change is even more pronounced — births have dropped 55% (from 5.3 to 2.4) since 1970. At the same time, Latin Americans are living longer than in the past, and the UN predicts that life expectancy will continue to rise.

Building a strong foundation

The long-term impacts of this shift are uncertain, and until now few researchers have studied it. What is known is that healthcare costs will soar in industrialized countries as people rely more heavily on medical services. In Africa and Latin America, however, not even this much is clear. According to Ron Lee, Director of the Center on the Economics and Demography of Aging at the University of California, Berkeley, “in developing countries the old consume the same as the young.”

In partnership with the UN, the African Economic Research Consortium (AERC), and the Universities of California and Hawaii, IDRC is supporting parallel research in Latin America and Africa to determine what is happening to people’s wealth as they age. Experts are deciphering whether seniors are supporting their children, or are themselves being supported. They are analyzing how much people depend on government transfers. Beyond mapping demographic trends, this research is designed to help developing country policy makers make informed decisions on social welfare policy.

Experts often talk about the dividends of an aging population: “The good news is that when birth rates fall [parents] have fewer children to take care of,” says Jackson. With fewer mouths to feed, each working-age adult has a better opportunity to save, invest, and educate the young, building a strong foundation for sustained economic growth.

One reason IDRC is focusing research in Latin America and Africa is that despite population aging, neither region is seeing a parallel increase in living standards. This is less surprising in Africa, where in many countries the aging process is only beginning. But Latin America’s window to leverage the dividend is already starting to close; after several decades the ratio of producers to dependents is forecast to decrease— this time, though, dependent seniors will outnumber children.

Another problem is that some of these countries are implementing social welfare programs without considering how these costs will skyrocket down the road.

“The future of public pensions looks awful,” says Ron Lee. Brazil, for example, recently implemented a generous plan for the elderly. “But it’s one thing to support them when they only account for 7% of the population,” says Jackson. “It’s altogether different when they measure 25%.”

Yet there is hope. Chile demonstrates how effective policy can lead to better economic outcomes, both now and in the future. Today spending on health and education is relatively high, and pension programs have been reformed to emphasize personal savings rather than burden future generations of workers.

Many countries in Latin America and southern Africa don’t have meaningful pension plans to start with. “This may be an advantage,” says Lee, explaining that developing countries have an opportunity to craft smart and sustainable policy from the outset.

Tim Brown is an Ottawa-based writer.