The ‘Silver Tsunami’; How did we get here?
The global population is ageing. Nearly every country and region in the world, with some exception in the continent of Africa, is experiencing growth in the number of older persons in their population. Driven by a drop in birth rates and a pickup in mortality rates, the United Nations (UN) notes that this change is expected to be one of the most notable social transformations of the 21st century. Coined as the ‘Silver Tsunami’, this phenomenon will have implications on labour, demand for goods and services, housing and transportation, healthcare services, and policy decisions, just to name a few. It will also invariably change social structures, family structures and inter-generational ties. In the first installation of this three-part series, we take a look at the drivers that have pushed the global population in to ageing over the past century, and what the global age structure will look like in time to come.
Strong socio-economic and healthcare systems have pushed the world into ageing
Population ageing is occurring alongside broader social and economic changes taking place throughout the world. Declines in fertility, increase in mortality, changes in patterns of marriage, cohabitation and divorce, increased levels of education among younger generations, and continued rural-to-urban and international migration, in tandem with rapid economic development has dramatically reshaped the global age structure.
The average life span of a human has improved from around 40 years in the early 1900’s to 70+ years at present. It is a human success story indicating better public healthcare systems, medical advancements, and economic and social development over diseases, injuries and early deaths; all which have limited human life span throughout history. As per the UN, global population ageing has been recognized as one of the four global demographic “megatrends”, including population growth, international migration, and urbanisation, which are expected to have continued and lasting impacts on sustainable development.
The first signs of population ageing were witnessed in industrialised and developed nations. These countries (such as Japan, Germany, Switzerland etc.), marked by their low mortality rates and low birth rates, have ageing populations which account for over a quarter of their total populations. Strong healthcare systems and access to education resulting in lower fertility rates were the key drivers, while these nations also saw a strong pick-up in life expectancy during the 1960s and 1970s.
The main driver of changes in the global demographic structure is the decline in fertility rates. Improving access to education and employment opportunities, advancing gender equality, promoting family planning and reproductive health, have led to reduction in birth rates over the past 50-60 years. On the other hand, improvement in mortality rates and survival into older ages are also contributing to population ageing. This refers to both improvement in life expectancy at birth and also rapid improvement in life expectancy at older age.
Interestingly, major historical events have also played a significant role in shaping the composition of the world’s population. Events such as WWI and WWII produced significant demographic shocks across the globe, resulting in reduced global fertility rates and a lower ageing population in the 1990s. However, post 1950s fertility rates did pick up, only to start a slow decline as a result of improving healthcare and socio-economic conditions. As a result of the decline in fertility rates beginning in the 1980s, the rate of growth of the ageing population will begin to slow down post 2030. While there have been no major global events such as WWI and WWII which have drastically affected population trends, the UN notes that the reduction in fertility rates globally is the next biggest phenomenon which will alter the global age structure.
Declining fertility rates and longer life expectancy pushes global population into ageing
North America and Europe were the first to see fertility rates beginning to drop as early as the late 19th century. However, by the 1960s, the rest of the regions, with the exception of Africa, began to witness a steep decline in fertility rates. Asia, in particular, was also affected by the one-child policy in China, which makes up the largest population in the region. Africa on the other hand, continued to see strong fertility rates all the way up to the 1990s after which, rates gradually continued to decline. However, it still remains the region with the highest fertility rates. All-in-all, average global birth rates have fallen to ~2.5 births per woman from ~5.0 in the 1950s.
As noted earlier, improvement in life expectancy has also contributed to population ageing. This is not just life expectancy at birth but also significant improvements in life expectancy at older ages. With better healthcare services and medical advancements, life expectancy across all regions have been on the rise since the 1950s, with the global average now standing at ~72 years compared to ~47 years in the early 1950s.
Africa however, will continue to have a life expectancy level 10-16 years below the other regions going through to 2050. As per the UN, high under-five mortality rates and disease conditions, particularly the HIV/Aids epidemic seen in the 90s, resulted the African region losing at least two decades of potential improvements in survival rates.
As such, life expectancy at birth is now expected to reach a global average of 77 years by 2050, with developed nations going as high as 83 years.
The UN notes that improvements in life expectancy at birth is driven by mortality decline at various ages. Hence during the past decade, mortality reductions at 65 years accounted for nearly 25.0% of the global gain in life expectancy. Improvements in survival at 65 or over accounted for more than 50.0% of the total improvement in longevity in Oceania, Europe and Northern America, while reduced mortality at younger ages has aided life expectancy in Africa, Asia and Latin America & the Caribbean.
Increase in life expectancy is also highly dependent on the ability to prevent or postpone mortality caused by diseases associated with old age, in particular Non-Communicable Diseases (NCDs). Globally, ~70.0% of deaths are caused by NCDs. As such, developing nations continue to be at an advantage with access to better healthcare, while developing nations will see higher pre-mature deaths due to the greater risk of being exposed to harmful products (ex: tobacco and alcohol), unhealthy diets, and limited access to healthcare.
Population momentum to add another ~2.8bn to global population through 2050
Apart from fertility and mortality, population momentum and migration will also play a role in changes to the population structure. Population momentum is the growth of a population due to its age structure. Hence, a population with a sizeable youth cohort will result in further growth as they enter their reproductive years (15-49). As per the UN, a nation with such an age structure will continue to see population growth for a further 70 years even if the country has reached the replacement fertility rate.
As per UN estimates, the world is expected to add another ~2.8bn to the overall population through 2010-2050. Of this, population momentum alone is expected to add ~1.8bn people to the world accounting for nearly 63.0% of the growth. Of this ~1.8bn, ~1.1bn will be from Asia (~440mn from India alone) and ~460mn from Africa. Africa’s growth will mainly come from its above average fertility rates while interestingly, Asia will have a negative impact from fertility due to below replacement birth rates in China. Population momentum is also what will add ~1.8bn into developing nations through 2010-2050. However, as these populations begin to age and transition to low fertility rates, population momentum will turn negative post 2050.
Developing nations on the other hand, will add population through improved life expectancy and migration. Migration from Asia, Africa and LatAm will aid population growth in Europe, North America and Oceania, over and above the improvement in life expectancy.
Serious implications ahead for nations
The UN estimates the global population to reach ~8.5bn in 2030 and ~9.7bn in 2050. With a projected addition of over one billion people, the UN estimates Africa (in particular countries of sub-Saharan Africa) to account for more than half of this growth, and the region’s population is projected to continue growing through the end of the century. By contrast, populations in Asia, Latin America and the Caribbean, and Europe and Northern America are projected to reach peak population size and to begin to decline before the end of this century.
As such, the UN estimates that by 2050, the global population will begin to age with fertility rates falling below the replacement rate. By 2100, the population will be skewed mainly towards an ageing population.
However, what does this all mean? An ever-ageing population will result in a large number of social and economic concerns over the next 15-20 years. Some nations are already feeling the impact, including China, who recently announced that they will now allow married couples to have up to three children. There is also a notable decline in fertility rates in developing countries, which are not yet ready from an economic stand point to deal with an ageing population.
It also calls for an urgent need for changes to economic and social policies across the globe, particularly in developing and low-income earning nations. Apart from this, the social implications are enormous, with many older people likely to face loneliness, abandonment, and the need to take care of themselves, in the absence of care takers and family. These are also most likely to lead to mental health concerns in the long-run.
Stay tuned for our next installation in this series which will take a deeper look at some of the economic and social implications, and why there may still be time to address the ‘Silver Tsunami’.
Mangalee Goonetilleke is the Co-Founder and COO of ReMAtics, a freelance platform specialising in financial research, writing and analytics. She brings 12 years of experience in the equity research industry. Mangalee holds a Masters in Business Administration in Finance from the University of Southern Queensland Australia and is an Associate Member of the Chartered Institute of Management Accountants, UK.