DEMOGRAPHIC CHALLENGES FOR THE 21ST CENTURY

1. DEMOGRAPHIC CHALLENGES
FOR THE 21ST CENTURY
Dr. Roby Nathanson

2. The current situation
 Available
projections suggest that all Western
countries face the prospect of population aging.
 The problem is even more pronounced in the euro
area, although there are considerable differences
across countries concerning the pace of aging
 Important consequences for economic growth, labor
markets,
markets.
public
finances
and
possibly
financial

3. Global Aging
• Population dynamics, accompanied by significant
improvements in health and longevity among the
elderly are leading to growing percentages of ageing
populations and growing rates of old age
dependency.
• The prevalence of two population models is clearly
seen, at the regional level, reflecting the varying
impact of population dynamics (fertility and
mortality).

4. 1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Living Longer
Israeli Males
Israeli Females
CBS (2012)
Jewish Males
Jewish Females
85
80
75
70
65
60

5. United Nations, Department of
Economic and Social
Affairs, Population Division
(2013)
Living Longer
Israel
95
90
85
80
75
70
65
60
55
50
45
US
World
Europe

6. Living Longer
 In
most parts of the world, people are living
significantly longer lives than in previous decades.
 For the world as a whole, life expectancy increased by
two decades since 1950 (from 48 years in 1950–55 to
68 years in 2005-10).
 During the current half century, the UN Population
Division projects global life expectancy to rise further
to 76 years.

7. Declining Fertility
OECD members
4
3.5
3
2.5
2
1.5
1
World
United Nations, Department of Economic and
Social Affairs, Population Division (2013)
European Union
Israel

8. Declining Fertility
 The world’s total fertility rate fell from 5 children per
women in 1950 to roughly 2.5 today, and is projected
to drop further to about 2.2 by 2050.
 As families have fewer children, the elderly share of
the population naturally increases.

9. Old-Age Support Ratio
Number of people of working age (20-64)
per person of pension age (65+)
Italy
Japan
Korea
Mexico
OECD (2011), Pensions at a Glance
Turkey
OECD
Israel
16
Younger OECD countries
14
12
10
8
6
4
Older OECD countries
2
0
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050

10. Employment to Population Ratio
International Labor Organization (2011)
Israel
65
63
61
59
57
55
53
51
49
47
45
OECD members
World
European Union

11. Employment (ages 55-64)
OECD (2013)
65.0
60.0
55.0
50.0
45.0
40.0
35.0
30.0
Germany
Israel
2005
2006
Italy
2007
2008
United
Kingdom
2009
2010
United States
2011
2012
OECD

12. Problematic aspects of Aging
 Lower birth and death rates increase the aged
dependency ratio, only partly relieved by lighter
youth dependency ratio.
 Generally
adverse
effects
on
economic
production/consumption balance; lower economic
growth than previously.
 Specific
problems: labor shortage, possible
inflation, care arrangements for elderly, adequacy
of pension provisions, possibly a less creative
older workforce.

13. Social Security Implications
 Aging is leading to a rethinking of pension scheme
parameters and structures all around the world.
 Aging creates tensions with regard to generational
equity, it requires responses from and adaptations to
all systems, such as: youth and senior citizen
employment and restructuring of health and
retirement systems.
 There is certainly no single solution as regards the
best pension system.
 The concept of optimal financing varies from one
country to another and can focus on stabilizing
contribution rates, redistributing revenues or
encouraging savings.

14. Social Security Implications
 Valid policies for adapting to aging are those that
focus on:
 The capacity of individuals and households to make the
necessary adjustments (through professional activity, saving
or private transfers).
 And on the other hand, the capacity of institutions to support
and bring about the necessary modifications in individual
behavior.
 Adaptations
to employment and social security
policies must aim for life-long training, guaranteeing a
minimum coverage and promoting a culture of
prevention in the labor market in terms of health and
safety.

15. Social Security Implications
 Social security must be driven by a culture of
prevention in all its components, objectives and
methods of implementation in the labor market and in
other sectors.
 Extending the working life is key to the success of
many pension reforms. Achieving this requires that
people be healthy and well-trained, making prevention
and life-long learning highly important.

16. Social Security Implications
 Population aging creates an increasing need for long-
term care services and protection against related
costs, and countries are beginning to pay more
attention to this important risk.
 Finally, the aging challenge calls for an in-depth
revision, which has already begun, of fragmented
social security systems, making sure to maintain a
multi-dimensional and multi-risk approach.