YOU MAY KNOW that the world’s population is aging — that the number of older people is expanding faster than the number of young — but you probably don’t realize how fast this is happening. Right now, the world is evenly divided between those under 28 and those over 28. By midcentury, the median age will have risen to 40. Demographers also use another measure, in addition to median age, to determine whether populations are aging: “elder share.” If the share, or proportion, of people over 60 (or sometimes 65) is growing, the population is aging. By that yardstick too, the world is quickly becoming older. Pick any age cohort above the median age of 28 and you’ll find its share of the global population rising faster than that of any segment below the median. By 2018, 65-year-olds, for example, will outnumber those under 5 — a historic first. In 2050, developed countries are on track to have half as many people under 15 as they do over 60. In short, the age mix of the world is turning upside down and at unprecedented rates.
This means profound change in nearly every important relationship we have — as family members, neighbors, citizens of nations and the world. Aging populations also alter how business is done everywhere. The globalization of the economy is accelerating because the world is rapidly aging, and at the same time the pace of global aging is quickened by the speed and scope of globalization. These intertwined dynamics also bear on the international competition for wealth and power. The high costs of keeping our aging population healthy and out of poverty has caused the United States and other rich democracies to lose their economic and political footing. Countries on the rise amass wealth and geopolitical clout by refusing to bear those costs. Older countries lose work to younger countries.
To see this process at work, look at China. In its march to prosperity, the country has encouraged hundreds of millions of its young people to move into cities. Chinese metropolises — some, like Beijing, ancient but newly sprawling, others, like Shenzen, built from scratch — are where the factories are. Foxconn Technology Group, for example, the giant electronics manufacturer that builds components for Dell, Hewlett-Packard and Apple in gigantic plants in Shenzen and elsewhere in urban China, will soon employ enough people to fill 60 percent of the jobs in Manhattan. Foxconn has close to 920,000 workers, nearly all of whom are under 25; in August, the company announced plans to add 400,000 more workers in the next year. But China’s is a kind of Dorian Gray economy, its young and footloose global identity hiding a grayer reality. By and large, older workers have been excluded from its remade, globalized economy. They are left behind in their rural villages, or they are pushed from their urban homes into the ghettos of dour apartment blocks on the urban edge to make room for the new apartments and offices occupied by younger urbanites and the companies eager to hire them. Discrimination — “age apartheid” might be a better term — is one way to describe what’s going on here: no country sorts its population more ruthlessly by age.
The problem for China is that it is rapidly approaching the point after which it will no longer be the relatively young country we see today. In 2015, China’s working population below the age of 65 will begin to shrink. Meanwhile, the number of people over 65 will be rising to 300 million by 2050, a threefold increase. Richard Jackson, the director of the Global Aging Initiative at the Center for Strategic and International Studies, notes that China will be older than the United States within a generation, making it the first big national population to age before it joins the ranks of developed countries. One of China’s biggest fears, expressed repeatedly in public pronouncements, is that it will grow old before it grows rich.
To avoid this fate, China is doing all it can to lure the world’s production and capital while its work force is young. In large part, it does this by denying meaningful pensions and health care to its people today. Not only do the vast majority of elderly Chinese have little more than their meager savings, but today’s workers have pensions so measly as to be irrelevant. To keep the cost of manufacturing in China low for the rest of the world, the young Chinese work force is, for now, rarely provided more than token pensions, health care or disability insurance. In aging, developed countries, older workers with long tenure are usually at their peak in terms of pay and the cost of their benefits. Here in the United States, for example, health care costs for workers who are between 50 and 65 are, on average, almost two times what they are for their peers in their 30s and 40s. When the median age of workers climbs in the United States, so does the cost of insurance their employers must buy for them. China’s leadership clearly believes its young workers would lose their allure if the future costs of old age were added to their costs today. When state-owned companies trimmed their ranks of tens of millions of workers following the country’s transition to a market economy, older workers — many only in middle age — were often let go with small pensions and replaced by younger workers. So what China offers now is workers with short tenure and negligible benefits (as well as something of a free social safety net in the form of all the relatively young, physically fit grandparents who move in with their children to care for their grandchildren).Continue reading the main story
Companies that move production to China or buy goods from Chinese suppliers gain the leverage they need to rewrite the terms of employment with their older workers at home or the ability to push those workers off the payrolls altogether. In a 2006 analysis of how aging work forces influence global flows of capital, the economists Ronald Davies and Robert R. Reed noted that because “older” economies have smaller work forces and higher wages, they push investment to younger economies, which offer higher rates of return. And high costs in older economies reach beyond wages — into taxes, which are used to pay for age-related public spending like social security. China’s youthful labor force thus helps the country maintain its low-cost economic ecosystem and attract foreign investment that seeks the higher returns a “younger” economy offers, whether or not any particular pot of foreign money goes to employ young people.
China is not the only country in which a young labor force attracts global businesses and investors. Much of the developing world, particularly in Asia and Latin America, operates the same way. An outspoken champion of outsourcing, Nandan Nilekani, a former head of Infosys, the Indian technology giant, is well known for promoting India as a place to corral young workers in an otherwise aging world. Call it “global age-arbitrage.”
THE OTHER PART of the feedback loop, the role globalization plays in speeding up how fast a country ages, is tied to the two big reasons that populations grow older. First and most obviously, more and more individuals are living longer than ever before. Average life expectancy is increasing nearly everywhere. Longer life is itself a kind of byproduct of globalization, the result of the worldwide exchange of public-health technology, medical breakthroughs and, perhaps the most life-giving development of all, the spread of literacy. Every person who can read has access to the world of health information, including Internet sites and government pamphlets on diseases. Countries educate their people in order to make it possible for them to enter the mainstream of global commerce and that extends their life spans — making the countries older.
Above all, however, for communities or countries to age, people must have far fewer children. Today, almost no place in the developed world has a total fertility rate of 2.1 children, the replacement rate needed to keep a population from declining. The population of nearly every developed country is expected to shrink before midcentury. When emerging nations gear up for the global economy, they tend to take two steps that encourage smaller families: they extend educational and employment opportunities to young women, and they urbanize. Urban women postpone having children until they are prepared for and established in their jobs. Rearing children in the city is also more expensive. Cities serve the global economy, and the global economy drives people to cities. (According to the U.N. Population Fund, about half the world’s population was urban in 2007, but by 2030 nearly 80 percent of it will live in the cities of the developing world.) The world gets older.
Such urbanization and globalization can take hold with remarkable swiftness. Japan was one of the youngest countries in the world until around 1950, and now its population is arguably the world’s oldest. (Its median age will exceed 56 by midcentury, up from 43 today.) The median age in Western Europe today is just over 40; it will rise to near 50 by 2050. Population aging did not always happen so quickly. France was the first country in the world to see its share of 65-year-olds double, from 7 percent to 14 percent; this took about 115 years, starting in 1865. But China will experience the same doubling in 25 years.
One exception is the United States. The country is subject to the same two big trends — longer lives, smaller families — that are aging much of the world’s populations, but we are not growing old as fast as countries in East Asia and Western Europe. Our median age will climb only 3 years, to 40, by 2050, a rate slowed by the arrival of young immigrants, including millions from Latin America.
Of course, immigration for one country means emigration from another — and an older population left behind. Spain, which rivals Japan as the world’s oldest country, was for much of the 20th century one of the youngest nations in the West. Before 2000, it had virtually no foreign-born residents. Today, nearly 12 percent of Spain’s population is foreign born. Among the arrivals are hundreds of thousands of Ecuadoreans (many of them female caregivers for elderly Spanish) whose absence at home increases the median age of Ecuador’s population. More than one in 10 Ecuadoreans has left in search of work, and the loss of so many of the country’s youngest and most enterprising workers means Ecuador has little chance of developing. Recently, its president initiated the Welcome Home Program to lure emigrants back with tax breaks and money to start businesses.
How do globalization and an aging population affect the American workplace? According to the Economic Policy Institute, 2.3 million American jobs were lost to China alone between 2001 and 2007. Susan Houseman, an economist at the Upjohn Institute for Employment Research in Kalamazoo, Mich., notes that older employees in manufacturing jobs who are low-skilled have been among the most vulnerable workers of all. And when older workers lose their jobs, they search longer for new ones than people do in other age groups. They find it hard to remake themselves with new skills and grow less employable over time and more desperate to accept low pay. This, along with the prospect of additional outsourcing abroad, drives down the earnings of those older workers who manage to stay employed. Looking at data ending in 2002, a team of researchers including economists from the World Bank and the National Bureau of Economic Research found that older workers suffered greater income losses because of foreign outsourcing than women and union workers.
Keep in mind that these results predate the recent recession and the even more difficult times that have resulted for older workers. The ranks of the unemployed who are 55 and older grew 331 percent over the decade that ended last December. U.S. unemployment levels for workers over 50 are now at their all-time highs, nearly double what they were three years ago. AARP’s Public Policy Institute reports that from December 2007 to February 2010 the number of workers 55 and older who gave up looking for work rose more than fivefold, to 287,000 from 53,000. Far more people have retired early than anyone predicted. In 2009, there were 465,000 more applications for Social Security and disability benefits than there were the year before, as employers made it clear to older workers that they were not wanted. This increase was nearly 50 percent greater than what the Social Security Administration expected.
One conundrum for aging societies is how to keep older people employed at a time when economic conditions favor the young, whether nearby or far away. The workplace left to itself comes up with some solutions, but they require older workers to accept more “flexible” conditions, which often means joining the so-called contingent work force of part-timers, self-employed contract workers and temps hired through agencies. According to the AARP Public Policy Institute, 21 percent of workers over 65 are part time, compared with 16 percent for the overall work force. Self-employment is also climbing among older workers, and Americans over 50 are the most active group of entrepreneurs, often out of necessity. This partly explains an apparent contradiction: at the same time that unemployment among older workers is at a peak, the percentage of older people with jobs is also near a high, because more people must work to make ends meet.
In the United States, the transformation of older workers into a giant contingent work force is just getting started. This year, as baby boomers begin to hit 65, the “elder share” of the U.S. population begins a sharp climb. From 2010 to 2030, the number of Americans between 25 and 64 will climb by 16 million, but two-thirds of the increase will consist of people 55 and 64. Countries that are older than the U.S., that are further along in reshaping their workplaces, give a glimpse of the future. In Japan, retirees from the biggest companies are well provided for, but for many of the rest — workers at smaller companies, the self-employed — the fear of outliving their money is real. One in five elderly Japanese lives in poverty. So the Japanese stay on the job when they can. Since 2006, the number of Japanese still working after the customary retirement age of 60 has risen by more than 11 million. Most are officially retired but are back at their companies, under contract. They typically earn about half their former wages.
WILL THE WORLD ever grow young again? Perhaps, but not anytime soon. Today, many of the places that are growing old the fastest are in the developing world, largely because that’s where urbanization is most rapid. It is hard to conjure a situation in which people move back to the countryside and again have larger families. Instead, if past is prelude, today’s young countries like China will be the countries that in the not-distant future go shopping for younger workers in younger places. Those places will be transformed by satisfying an older China’s needs, and the cycle will repeat itself: when the world finds its next young place, that country may well age even more quickly than the formerly young countries that preceded it.
The rough adjustments that global aging imposes on populations can sound bleak. Nonetheless, the challenges do not trump what we gain by living longer. Remember, too, that smaller families enable parents to make greater investments in themselves and the children they do have. Still, as the world gets older, we need to anticipate how this extraordinary change might undermine our communities, weaken nations and push able older people to the side. There are also sobering geopolitical consequences to consider. It now looks as if global power rests on how willing a country is to neglect its older citizens. Faults in the welfare states of the West are highlighted by the world debt crisis. Fiscal woes driven by age-related expenses plague every level of government in the United States. Europeans take to the streets, strike and close down governments struggling to cover unsupportable pensions. The most advanced countries owe trillions in age-related public expenses. The most straightforward solutions, like higher payroll taxes to pay for benefits, raise the cost of doing business and chase off investors and producers to lower-cost economies. Mark Haas of Duquesne University has argued that aging forces all high-income democracies into triage mode. They can pay for income support and services for their elderly and drastically reduce financing for schools, defense, infrastructure and everything else, or they can decide older people will have to make do with far less.
China has gained new financial clout in relation to advanced industrial nations because it has grown rich enough as the youthful factory of the world to act as the developed countries’ banker. Yet the Chinese government says the country is still too poor to put a more comprehensive social safety net in place. Perhaps, but it is the financial sacrifices of its people that give China the means to lend trillions of dollars to the United States and other industrialized nations. That’s a bargain China may be happy to accept, but it, too, is caught in the irreversible dynamic of aging, and its demographic denouement is coming. By then, the United States will be older than it is now, but younger than most of the rest of the developed world, younger than much of the developing world and far younger than China. If we understand how aging populations and economic forces interact, perhaps we can make the most of our age and our youth.Continue reading the main story