The Economic Consequences of Population Aging

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Case Details:

Case Code : ECON023
Case Length : 19 Pages
Period : 1960-2007
Pub. Date : 2007
Teaching Note :Not Available
Organization : --
Industry : Miscellaneous
Countries : Worldwide

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"A substantial degree of population aging is expected over the next few decades in all regions of the world. Ideally, policy responses should be put in place ahead of time to ease adaptation to these long-term demographic changes." ¹

- An excerpt from the World Economic and Social Survey 2007, United Nations Department of Economic and Social Affairs, released in June 2007.

"People are living longer and, in some parts of the world, healthier lives…. Societal aging may affect economic growth and many other issues, including the sustainability of families, [and] the ability of states and communities to provide resources for older citizens." ²

- An excerpt from a report presented at the Summit on Global Aging³ in March 2007.

Introduction

In July 2007, Japan's Ministry of Internal Affairs and Communications published a report on the changing demographics in the country. According to the report, the proportion of people aged 65 or over had grown to around 21 percent in 2007, from 17.3 percent in April 2000.⁴ With this, Japan displaced Italy to become the country with the highest percent of aged people⁵. The report added that if current trends continued, the population of elderly people in Japan would account for 40.5 percent of the total population by 2055 - and there would only be 1.3 people of working age (15-64 years) to support each person over the age of 65 years in 2055 (down from more than 3 people of working age⁶ in 2007).

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The report predicted average life span of 90.34 years for women and 83.67 years for men⁷ by 2055 (Refer Exhibit I for the projected life expectancy of the Japanese). In recent times, aging populations – characterized by an increase in the mean or the median age of the population, and a decline in the proportion of those aged 15 or lower and a rise in the proportion of those aged 65 or over in the total population – and their consequences have become an area of focus for economists, marketers, sociologists, and policy makers.

The phenomenon was expected to affect almost all countries, whether developed or developing. However, developed countries would experience it sooner than others or were already experiencing it.

Countries with large and growing young populations - referred to as the 'youth bulge' - could, for the present, enjoy the benefits of a young population; but, with time, these countries too would have aging populations.

The aging of populations occurred primarily for two reasons – declines in the birth rate and increases in life expectancy.

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1] William M. Reilly, "U.N.: Prep for Aging Population," www.upi.com, June 19, 2007.

2] "Nine Trends in Global Aging Present Challenges, Says US Study," www.seniorjournal.com, March 16, 2007.

3] The Summit on Aging was hosted by the United States State Department in collaboration with the National Institute on Aging.

4] "Japan has Highest Rate of Elderly," www.news.yahoo.com, July 11, 2007.

5] Among nations with population of more than 30 million.

6] Chris Hogg, "Japan's Elderly are Urged to Work," www.news.bbc.co.uk, June 8, 2007.

7] "Japan Worried about the Elderly," www.digitaljournal.com, June 9, 2007.