Ageing paranoia: its fictional basis and

all too real costsJane O’Sullivan

Fenner Conference 2013 – Population, Resources and Climate Change. AAS 10-11 October 2013

Ageing is the main excuse for maintaining population growth• Population growth is a policy variable (a choice).• A significant shift in policy in the past 20 years:

• High fertility nations have reduced family planning.• Low fertility nations have resisted stabilisation.

• A consequent resurgence in global population growth.

Global population won’t peak unless nations embrace stabilisation or descent.

2012 UN Population Projections

UN Population Projections 2012 Revision

Year

1960 1980 2000 2020 2040 2060 2080 2100

Wor

ld P

opul

atio

n (b

illio

ns)

0

2

4

6

8

10

12

14

16

18

High15.8 16.6 billion

Medium10.1 10.9 billion

Low6.1 6.8 billion

2012 UN Population Projections

UN Population Projections 2010 and 2012

Year

1960 1980 2000 2020 2040 2060 2080 2100

Wor

ld P

opul

atio

n (b

illio

ns)

0

2

4

6

8

10

12

14

16

18

High15.8 16.6 billion

Medium10.1 10.9 billion

Low6.1 6.8 billion

2012 UN Population Projections

UN Population Projections 2010 and 2012

Year

1960 1980 2000 2020 2040 2060 2080 2100

Wor

ld P

opul

atio

n (b

illio

ns)

0

2

4

6

8

10

12

14

16

18Constant Fertility 28.6 billion

UN Population Projections 2010 and 2012

Year

1960 1980 2000 2020 2040 2060 2080 2100

Wor

ld P

opul

atio

n (b

illio

ns)

0

2

4

6

8

10

12

14

16

18

2012 Estimate 2010 Estimate 2012 Low 2010 Low 2012 Medium 2010 Medium 2012 High 2010 High

High15.8 16.6 billion

Medium10.1 10.9 billion

Low6.1 6.8 billion

Projections are blind to carrying capacity

Resource Constraints?

Joel Cohen “How Many People can the Earth Support”: 7-12 billion is “the zone”“If most people would prefer a decline in birth rates to a rise in death rates, then they should take actions to support a decline in fertility while time remains to realize that choice.”

Annual Increment of PopulationUN Population Projections 2010 and 2012

Year

1990 2000 2010 2020 2030

Annu

al In

crem

ent o

f Pop

ulat

ion

(mill

ions

)

0

20

40

60

80

100

120

Medium Projection

Constant Fertility Projection

Recent estimates from Population Reference Bureau

Press briefing upon publication of UN’s “World Population Prospects: The 2012 Revision”“…Most of this increase is due to changes in our estimates of current fertility for several high-fertility countries …“Our medium-variant projection continues to assume a rapid fall in future levels of fertility for these countries. We continue to calibrate the pace of future fertility decline using the historical experience of countries that underwent a major reduction of fertility levels after 1950, in an era of modern contraception. The medium variant projection is thus an expression of what ‐should be possible …“… [it] could require additional substantial efforts to make it possible.”

John Wilmoth, Head of Population Division, UNDESA

Fertility reduction in response to population-focused family planning programs

Typical fertility reduction of 2-3 units per decade in the first two decades.(UN projection assumes 1 unit per decade.)

Year1950 1960 1970 1980 1990 2000 2010

TFR

(birt

hs p

er w

oman

)

0

1

2

3

4

5

6

7

8

Least developed countriesLess developed excl. ChinaMaldives IranViet Nam Thailand Mauritius South Korea

UN Survey of Population Policy 2011

Old age dependency and Govt concern

Government's level of concern about ageing

No Issue Minor Concern Major Concern

Old

Age

Dep

ende

ncy

Rat

io (6

5+ /

15to

64ye

ars)

0

10

20

30

40

BurundiComorosDjibouti

Eritrea

Ethiopia

KenyaMadagascar

Malawi

Mauritius

Mozambique

Rwanda

Seychelles

SomaliaSouth Sudan

UgandaZambia

Zimbabwe

Angola

CameroonChad

Congo

Gabon

Algeria

Egypt

LibyaMorocco

Sudan

Tunisia

Botswana

Lesotho

Namibia

South Africa

SwazilandBenin

Burkina Faso

Cape Verde

Cote dIvoireGambia

GhanaGuineaGuinea-BissauLiberia MaliMauritaniaNiger Nigeria

Senegal

Sierra Leone Togo

China

Japan

Mongolia

Kazakhstan

Kyrgyzstan

TajikistanTurkmenistan

Uzbekistan

Afghanistan

BangladeshBhutan

IndiaMaldivesNepal

Pakistan

Sri Lanka

CambodiaIndonesiaMalaysiaMyanmar

Philippines

SingaporeThailand

Timor-Leste

Viet Nam

Armenia

Azerbaijan

Bahrain

Cyprus

Georgia

Iraq

Israel

Jordan

Kuwait

Lebanon

Oman

Qatar

Saudi Arabia

Turkey

Yemen

Belarus

Bulgaria

Czech Republic

Hungary

Poland

Romania

Slovakia

Ukraine

DenmarkEstoniaFinland

Iceland

Ireland

Latvia

LithuaniaNorway

Sweden

United Kingdom

Albania

Croatia

Greece

Italy

Malta

Montenegro

Portugal

Serbia

Slovenia

Spain

TFYR Macedonia

AustriaBelgiumFrance

Germany

Luxembourg

Netherlands

Switzerland

Bahamas

Barbados

Cuba

Grenada

Haiti

JamaicaSaint Lucia

Belize

Costa Rica

El Salvador

GuatemalaHonduras

Mexico

Nicaragua

Panama

Argentina

Brazil

Chile

Colombia

Ecuador

Guyana

ParaguayPeru

Suriname

Uruguay

CanadaAustraliaNew Zealand

Fiji

Solomon IslandsVanuatu

Kiribati

Samoa

Tonga

Population growth and Government opinion of it

Government's opinion of population growth

Low Satisfactory High

Pop

ulat

ion

Gro

wth

Rat

e (%

p.a

.) 20

05-2

010

-2

0

2

4

Burundi

Comoros

Djibouti

Eritrea

EthiopiaKenya

Madagascar

Malawi

Mauritius

Mozambique

Rwanda

Seychelles

Somalia

South Sudan

Uganda

Zambia

Zimbabwe

Angola

Cameroon

Chad

Congo

Gabon

AlgeriaEgypt

Libya

Morocco

Sudan

Tunisia

BotswanaLesotho

Namibia

South Africa

Swaziland

BeninBurkina Faso

Cape Verde

Cote dIvoire

Gambia

GhanaGuinea

Guinea-Bissau

Liberia

Mali

Mauritania

Niger

NigeriaSenegal

Sierra Leone

Togo

China

Japan

Mongolia

KazakhstanKyrgyzstan

Tajikistan

TurkmenistanUzbekistan

Afghanistan

Bangladesh

Bhutan

India

Maldives

Nepal

Pakistan

Sri Lanka

CambodiaIndonesia

Malaysia

Myanmar

Philippines

Singapore

Thailand

Timor-Leste

Viet Nam

Armenia

AzerbaijanCyprus

Georgia

IraqIsrael

Jordan

Lebanon

OmanSaudi Arabia

Turkey

Yemen

Belarus

Bulgaria

Czech Republic

Hungary

Poland

Romania

Slovakia

Ukraine

Denmark

Estonia

Finland

IcelandIreland

LatviaLithuania

Norway

Sweden

United Kingdom

Albania

Andorra

Croatia

GreeceHoly See

Italy

Malta

MontenegroPortugal

San Marino

Serbia

Slovenia

Spain

TFYR Macedonia

Austria

Belgium

France

Germany

Liechtenstein

Luxembourg

Monaco

Netherlands

Switzerland

Bahamas

Barbados

Cuba

Dominica

Grenada

Haiti

Jamaica

Saint Lucia

Belize

Costa Rica

El Salvador

Guatemala

Honduras

Mexico Nicaragua

Panama

ArgentinaBrazilChile

Colombia

Ecuador

Guyana

Paraguay

PeruSuriname

Uruguay

Canada

Australia

New Zealand

Fiji

Solomon IslandsVanuatu

Kiribati

Nauru

Palau

Cook Islands

SamoaTonga

Tuvalu

International support for family planning has fallen

Basic Research

HIV/AIDS

Basic ReproductiveHealth Services

Family Planning Services

Basic Research

HIV/AIDS

Basic ReproductiveHealth Services

Family Planning Services

Allocation of international funding for “Population Assistance”from S.W. Sinding 2009. Population Poverty and Economic Development. Phil. Trans. R. Soc. B 2009 364, 3023-3030.

Fertility rebound in developed countries

from: Myrskyla et al. 2009 “Advances in development reverse fertility declines”

Ageing is an inevitability of the demographic transition

from: Productivity Commission 2005: “Economic Implications of an Ageing Australia”

Population growth only partly delays ageing

Year

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Prop

ortio

n of

dep

ende

nts

(%)

0

20

40

60

80

100

Prop

ortio

n of

dep

ende

nts

(%)

0

20

40

60

80

1001960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Popu

latio

n (m

illio

ns)

0

10

20

30

40

Popu

latio

n (m

illio

ns)

0

10

20

30

40

% over 65

Aged dependency: >65 / 15-65

Dependency Ratio: (<15 & >65) / 15-65

“Real” dependency ratio?: (<20 & >70) / 20-70

TFR=2, NOM=0

TFR=2, NOM=220,000

The “3 Ps”: GDP = Population x Participation x ProductivityAssumptions:• Natural resources don’t count.

• Diluting, degrading and depleting them will not affect per capita wealth, because they are not in the model.

• Job seekers create jobs.• The size of the economy will be proportional to the number of

working age people.

• The 3 factors are independent.• Population growth will not reduce participation (competition for

jobs) or productivity (competition for resources and markets).

• Growth rate costs nothing.• The infrastructure, equipment and professional personnel that

added people need will be created without penalty.

Self-affirming factorisation:• The “Kaya formula” for global emissions is another

example: Emissions = Population x GDP/person x Energy Intensity of $ x Carbon intensity of energy

Year

1970 1980 1990 2000 2010

Gre

enho

use

Gas

Em

issi

ons

(Gt C

O 2e

p.a.

)

0

10

20

30

40

50

60

Emissions (IPCC)

Glo

bal P

opul

atio

n (B

illio

ns)

0

1

2

3

4

5

6

7

8

Population (UN)

The first “P”: Population- but wealth is a per capita thing!• Did population growth help Australia avoid the GFC?

• Negative per capita growth for >4 quarters – made deeper by population growth.

• Population growth delinks GDP from wealth.

GDP versus Per Capita GDP

Date

2004 2006 2008 2010 2012

per c

ent c

hang

e

-0.5

0.0

0.5

1.0

1.5

2.0

% change in GDP in each Quarter% change in GDP per capita in QuarterPopulation growth rate (annualised percentage)

Population growth rate % annualised

% change in GDP per Quarter

% change in GDP per capitaper Quarter

So, does population growth increase participation or productivity?• The ageing argument: keep the proportion of working age

people high.• Productivity Commission 2011

• “Plausible increases in fertility and net migration would have little impact on ageing trends.”

• “any effect would be short lived. This is because immigrants themselves age”• “to maintain the age structure of 2003-04 in 2044-45, annual migration

during that period would need to be above 3 per cent of Australia’s population, leading to a population of over 100 million by the middle of this century”

• Sustainable Australia Report 2013:• “every 50,000 new migrants have roughly half the impact on ageing trends

than the previous 50,000.”

Models show ageing will reduce participation

The unemployed are unlikely to take up the slack because:“Unemployed people and people outside the labour force are generally different from the employed in skill, motivation and aptitude.”

Productivity Commission (2005) “Economic Implications of an ageing Australia”

The real world experiment

• Is the proportion of people employed governed by the supply of people of working age, or by the supply of work?

• There is no correlation between ageing and proportion of people employed.

2D Graph 2

Old age dependency ratio (%65+/15to64yrs)

18 20 22 24 26 28 30 32 34 36 38

% e

mpl

oyed

of t

otal

pop

ulat

ion

40

42

44

46

48

50

52

54

56

USA

AUSTRALIACANADA

NORWAY

DENMARK

UK

FRANCE

FINLAND

SWEDENGERMANY

JAPAN

The real world experiment• Is the proportion of people employed governed by the supply of people

of working age, or by the supply of work?

• The differences are even smaller when part-time work is considered.

2D Graph 2

Old age dependency ratio (%65+/15to64yrs)

18 20 22 24 26 28 30 32 34 36 38

% e

mpl

oyed

FTE

of t

otal

pop

ulat

ion

40

42

44

46

48

50

52

54

56

USAAUSTRALIA

CANADANORWAY

DENMARK

UK

FRANCE

FINLAND

SWEDEN

GERMANY

JAPAN

The real world experiment• Does population growth increase productivity?

• There is no trend among nations, nor among municipalities (USA).

2D Graph 2

Population growth rate, % p.a. 2000-2010

-0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8

GN

I per

cap

ita g

row

th, %

p.a

. 200

0-20

10

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

USA

AUSTRALIA

CANADANORWAY

DENMARK

UK

FRANCE

FINLAND

SWEDEN

GERMANY

JAPAN

Are we measuring productivity decline as GDP growth?• Density diseconomies: Infrastructure Australia (2011)

• “The cost of providing new infrastructure is rising faster than the rate of inflation — in part, because costlier construction options, such as tunnelling for new roads, now need to be adopted in the large cities.”

• Unremunerated costs of labour: Grattan Institute (2013):

• on the perimeters of Brisbane, Sydney, Melbourne and Perth, more than 90 per cent of jobs are at least an hour away on public transport.

• Residential housing debt tripled since 2003.

What about wealth distribution?• Does a growing workforce create more opportunities for the needy?

• The most youthful nations have the poorest poor.• “Because immigration makes labour more abundant relative to the existing stock

of capital and land, it tends to increase the returns to the latter at the expense of labour.” – Productivity Commission 2011

2D Graph 2

Old Age Dependency Ratio (%65+/15to64yrs)

18 20 22 24 26 28 30 32 34 36 38

Low

est q

uint

ile %

sha

re o

f inc

ome

5

6

7

8

9

10

11

USA

AUSTRALIA

CANADA

NORWAY

DENMARK

UK

FRANCE

FINLAND

SWEDEN

GERMANY

JAPAN

What about wealth distribution?• The GINI coefficient measures inequality of income:

• Greater inequality is associated with worse physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage pregnancies, and child well-being (Wilkinson & Pickett, “The Spirit Level” 2009)

2D Graph 2

Old Age Dependency Ratio (%65+/15to64yrs)

18 20 22 24 26 28 30 32 34 36 38

GIN

I coe

ffici

ent

0.22

0.24

0.26

0.28

0.30

0.32

0.34

0.36

0.38

0.40

0.42USA

AUSTRALIA

CANADA

NORWAYDENMARK

UK

FRANCE

FINLAND

SWEDEN

GERMANY

JAPAN

What about Pensions and Health Care Costs?• If the labour market is oversupplied, pensions only

replace unemployment and disability benefits.• Raising the pension age by 3-5 years negates change

in working age proportion.… but is not needed if labour supply holds up.

• The worst trends for retirement funding are housing inflation and casualised work.

… a generational time-bomb imposed by population growth.

Can population growth offset Health Care Costs?• Most increase in health costs is due to changing

treatment technologies and expectations. • Cost is related more to proximity to death than to age.

• Proportion of adults with <15 years life expectancy in creases at half the rate of old-age dependency.

• Proportion of adults with disabilities increases even less.

• However, death rate will increase with ageing – only partly offset by population growth.

• Why is expanding construction regarded as economic boom, but expanding health care regarded as a burden?

Remeasuring Ageing

Data from Sanderson & Sherbov, “Remeasuring Ageing” Science 329:1287-1288, October 2010.

Remeasuring Ageing

USA Japan

2005-10 2025-30 2045-50 2005-10. 2025-30. 2045-50.

Rat

io

0.0

0.2

0.4

0.6

0.8

1.0

Old Age Dependency: 65+ / 15-to-64Adults with <15 years Life Expectancy / > 15 yearsAdults with disability / able adults

What about the cost of growth rate?• A higher population growth rate means a greater

proportion of total economic activity dedicated to expanding infrastructure, equipment and skills.

• For each 1% p.a. population growth, around 7-10% of GDP is needed for expansion.

• Govt infrastructure spending has been around 1.85% of GDP per 1% p.a. growth.

• The increased burden is proportional to the lifespan of the assets to be multiplied.

• If infrastructure lasts 50 years, maintenance requires creation of 2% of the stock per year. 2% population growth doubles this burden.

• This is an “opportunity cost” – income that would otherwise be available for wellbeing of existing people.

Cost of ageing vs. growth• Difference in all age-related costs between stabilising

around 25 million (IGR1) and “Big Australia” projection (IGR3) is 1% of GDP by 2050.

• Public Infrastructure cost of growth has historically been around 2.6% of GDP (1.85% per 1% population growth) but is currently over 3.3% an rising. (Not included in the IGRs.)

• Expect energy and materials costs to outpace inflation. • More than doubles the cost of decarbonising the economy.• Loss of biodiversity, food and water security, public amenity

and quality of life.

Dependency Ratio

Australia

Uganda Japan

Young

Old

Young Young

Working age Working age Working age

Old Old

European Union

Young

Working age

Old

Uganda3.3% p.a.

Australia1.5% p.a.

European Union0.3% p.a.

Japan-0.1% p.a.

Young

Working age

Old

Young

Working age

Old

Young

Working age

OldYoung

Working age

OldNot yetadded

Not yetadded

Not yetadded

A: Gross National Income (GNI) distributed per capita to age categories

B: Inclusion of capacity expansion (on behalf of the not-yet-added) to distribution of GNI

Dependency Ratio

Australia

Uganda Japan

Young

Old

Young Young

Working age Working age Working age

Old Old

European Union

Young

Working age

Old

Uganda3.3% p.a.

Australia1.5% p.a.

European Union0.3% p.a.

Japan-0.1% p.a.

Young

Working age

Old

Young

Working age

Old

Young

Working age

OldYoung

Working age

OldNot yetadded

Not yetadded

Not yetadded

A: Gross National Income (GNI) distributed per capita to age categories

B: Inclusion of capacity expansion (on behalf of the not-yet-added) to distribution of GNI

Depopulation DividendsGerman perspectives (Kluge et al. 2013): • Smarter? - greater proportion with higher ed.• Cleaner? - fewer greenhouse gases.• Richer? - concentration of inheritance.• Healthier? - greater proportion of life in wellness.• Happier? - more leisure in the life cycle.

In summary:Population growth• Delinks GDP from wealth• Doesn’t strengthen workforce• Doesn’t increase productivity• Increases poverty and inequality• Diverts income from wellbeing to infrastructure creation• Reduces per capita resources• Increases climate change and biosphere impacts• Creates increasingly interdependent and brittle socio-

economic conditions.

Remember the Millennium Bug?

• Like ageing, the trigger conditions are inevitably reached.• But the dire consequences are conspicuous only by their absence.• In the mean time, we are turning our backs on real threats.