Demographic Time Bomb ?

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FionaK
view post Posted on 16/5/2011, 04:55 by: FionaK




One of the really significant narratives in this country concerns the implications of an ageing population. The fact that people are living longer has been noted: and it has been accepted that this is an enormous problem for our society. Indeed, it has been strongly suggested that this is the reason we can no longer afford to to maintain a "welfare state", much less extend its reach. As is often the case this has been presented as fact without much in the way of analysis: and having been so presented it has been used to justify a number of policy initiatives which are recognised to be nasty but are said to be essential, else the sky will fall.

So I would like to find out more about this. I have read around the subject for some time, in an unsystematic way. Getting the facts is hard: interpreting them is even harder.

The first thing I noticed when I looked into this is that the media talk about the aged population in isolation. It is reported that the numbers of older people are increasing, and the length of time they (we) live after retirement age is also increasing. They then go on to say that this will place an increasing burden on medical and social services, and they talk in terms of "bankrupting" the society and other very alarming outcomes. This has become the "fact" and a great many social policy changes have been predicated on this wisdom: not least the raising of the retirement age.

The raising of the retirement age as a response to this demographic time bomb was the second thing I noticed as odd about this story. It seemed to me that if the population was ageing, and that necessarily entailed greater costs, it did so on the assumption that these older people would be using the services. Therefore it followed that they were ill or infirm or otherwise in need of care and support. So how can we make them (us) work? They (we) are not fit to work, obviously.

Of course that problem is answered by the anxiety about the cost of pensions. They (we) are not really going to bankrupt us through illness and dependency, in the physical sense: they (we) are going to bankrupt us because they will require an income which they (we) are not generating. So we have to make them (us) work longer. It is deeply unfortunate, but we just cannot afford to have a lot of people who consume without producing.

So far so good. But then I thought about the unemployed. Up until about 1979 the idea of having a million people "out of work and claimng benefits" was completely unacceptable in this society. One of the very successful political slogans of the late 1970's was "Labour isn't working" and it was said to be one of the major reasons for the defeat of the labour government in 1979. People were not prepared to tolerate that level of unemployment, and they punished the government which presided over that rise. So it is curious to note that by 1986 the figure had risen to 3.1 million: and apparently there was no alternative to this. It was necessary to make a stronger economy "in the long run". Astonishingly the people accepted this: but there you go.

www.parliament.uk/documents/commons...99/rp99-111.pdf

The figures are hopeless because the definition of "unemployment" keeps changing: it is not an accident of terminology that the BBC now cite the figures as "out of work and claiming benefits", because that reflects a very major alteration to how the count is kept. It is very hard to compare the position between years, for that reason. As an example: the right to non-means tested benefits for the unemployed used to extend to one year: that was cut in half some time after 1979. So the figures for unemployment before and after that change cannot be compared. Anyone who has a partner in even a moderately paid job is no longer counted when the benefit runs out: and the count is affected by the cut to the time the benefit is paid. I am unable to discover how many people this applies to: and it is only one of many changes made.

In 2011 the percentage of the population aged 65 and over in the uk was 16.5%. That is not the highest in the world nor anything like it: Germany, Italy, Switzerland, Denmark and about 15 other countries all had higher rates in that year. I do not know if they are panicking about this: probably, since the concerns do seem to map across europe in quite surprising ways (and the policy responses are also often similar). But I do not know. No matter.

www.nationmaster.com/graph/peo_age_...e-65-years-over

What is evident is that these are percentages: and that means that the birth rate affects them. It happens that fertility in the uk was unusually low in the 1970's and that it has been increasing since 2002. That is a trend which is replicated in many european countries. But the headlines here do not seem to include those figures when scaremongering about the demographic time bomb. That is curious, because the importance of the numbers of older people rests on the "dependency ratio": and so the total number which matters includes children, and the unemployed, and the chronically sick, and other groups who, for one reason or another, are not in paid employement. And that is why the figures for the unemployed are mentioned above. You cannot leave them out of this discussion: but we do.

A low birth rate in the 1970's means fewer people now aged between about 30 and 40. They are rather a large part of the work force who support all of these dependent groups. Oddly, that deficit has not meant that we have full employment. Far from it. Unemployment has never fallen below a million since 1979, no matter how it is counted. I may be simple minded but it seems to me that this is peculiar. Since 1984 (just about the time those born in 1970 would be getting near entering the work force) the number of people aged over 65 has increased by 1.7 million. If supporting all those extra people were such a problem one might have thought that it would be a good idea to get those folk into work. But apparently not: apparently it is a better (nay an essential) idea to raise the retirement age. Go figure.

www.statistics.gov.uk/cci/nugget.asp?ID=949

Which brings me back to pensions. We can't afford them. The pension funds are in deficit and final salary schemes are being abolished right and left, as we speak. What is not reported is the little remembered fact that many of those schemes were in surplus during the last couple of decades of the last century and many businesses took "contribution holidays" in that period. To the tune of 17.9 billion pounds between 1987 and 2001, for example. We don't hear a lot about that now.

www.ipe.com/news/uk-pension-schemes...lidays_6717.php

You will notice that these were holidays for the employers: very few of the workers were included in these "holidays". Far be it from me to suggest that the employers just got used to not contributing and they came to like it: that cannot be the reason we can't afford pensions now, I am sure :).

But.....http://news.bbc.co.uk/1/hi/business/1259316.stm

And....http://www.taxresearch.org.uk/Blog/2011/03/10/its-not-public-sector-pensions-that-are-the-problem-the-problem-is-that-the-state-is-paying-every-penny-of-private-pensions/

I have no idea how respectable that last link is, btw: but I can't see any flaw in the reasoning myself ( it is well known I can't count though :))

Not only are final salary schemes being abolished because they are too dear (even though they don't cost businesses anything, if the last link is correct): but those decisions are fuelling a furious attack on public sector pensions. And this is divide and rule. Workers in the private sector get a poor and worsening deal on pensions. They look at public sector workers who get a better provision and, amazingly, they do not say " I want some of that": instead they say "That is better than what I get: it isn't fair: take it off them". Or at least that is what we are told they say. I do not know because my sources of information are those same media who have told me about this demographic problem in the first place. As you see, I am not entirely persuaded they are correct about that :)

There is another aspect too. If the argument is that the problem is not pensions but rather the social and medical costs which an ageing population generate we have to show that those exist. That piqued my curiousity as well. I couldn't find figures for the uk on this. But american figures are readily accessible and they show that a very large part of medical expenditure is spent in the last year of life. One of the arguments I have read is that better technolgy means that we are prolonging life at great cost: that does not seem to be true, at least in the US (and one might expect it to be more true there than elsewhere given their committment to technological solutions - or is that a stereotype? probably is). And it is also true that every one of us will have a last year of life: the cost of care in that year does not necessarily rise just because someone is 83 and not, say, 23 at that point: at least I see no reason why it should. So that argument is not convincing to me.

www.thirteen.org/bid/sb-howmuch.html

But even if it is true that older people cost more at the end of life we already know that we are not necessarily spending the money wisely or well. The government is notoriously apt to cut costs by providing "services in the community", and people are rightly suspicious of that because it is often a cover for merely saving money, rather than an honest change in service delivery for better outcomes. But that suspicion does not mean there is no case for a different way of doing things that night well be cheaper. So I contend that we can meet at least some of these problems of increased cost by investing in those options

www.kingsfund.org.uk/topics/endoflife_care/

In another part of the forest there are costs to this policy response which do not seem to be discussed either. One example is the hidden work that older people do. It is significant. In this country child care is very, very expensive. A great many people who are currently in the work force are only there because child care is provided by their children's grandparents. If that were not available they could not afford to work. So if we insist that people work longer we will have more younger people who are are unemployed. They wont show up in the unemployment figures, for reasons outlined above: but they will feature in the dependency ratio. It is possibly a "two for one " deal: two grandparents still working for one parent unable to do that. But that tracks through to child poverty and it also has costs.

Likewise, given a situation where there is not full employment, every older person in work means a younger person who is not. That is an exaggeration, but in a situation of competition for jobs it is at least partly true. I fail to see how that improves the dependency ratio: but I quite see how it saves money. Unemployment benefits, even when they are due, are significantly lower than the state pension. So if an older person works an extra 5 years then they have an income and pay tax: and some younger person gets the dole (or a very low paid job and tax credits - also lower than the state pension usually) for that same 5 years. Or the young person gets the job and the older person gets broo money instead of a (higher) pension.

In short I do not know what the dependency ratio is going to be in the future: and neither do those who are pushing this panic. I do not see many facts which support the idea that this time bomb is a problem; or what size of a problem; or whether there are other ways to deal with it if it is a problem. But the outcomes I see are quite clear: business does not need to pay pensions so that folk can live with dignity and enjoy leisure for a reasonable period instead of dropping dead shortly after they retire: Profit! There will be competition between generations for scarce jobs - we already see this being fostered in the press: the "baby boomers" are a selfish lot who have made sure they are all right jack forever: and are now foisting their folly onto the young to sort out ( tell that to "baby boomers" who happened to be miners or ship yard workers and who have never found work since those things were closed) - and that will nicely deflect them from any focus on the real source of their woes: Profit! A deterioration in the quality of public services like health and social care can be explained away as inevitable in face of the demographic problem and no-one will look too closely at other reasons which might be more relevant: Less Tax! etc

[sings]when the poor hunt the poor over mountain and moor/ the rich man can keep him in chains [/sings]

I suspect that is what this is really all about. But then I would, wouldn't I :)

Edited by FionaK - 20/9/2013, 23:55
 
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36 replies since 16/5/2011, 04:55   690 views
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