When poking into the future, whatever the subject, demography provides perhaps one of the most useful starting points. One simple reason is that some, though not all, demographic trends are relatively easy to predict. For instance, we can form a pretty good idea today of who will be potential new entrants into the labour market 20 years from now simply by analysing who is attending infant schools today.
Another reason for looking at demography first is that several major economic, social, political and environmental policy issues, such as pension reform or health spending, depend to a large degree on demographic trends. Moreover, the demographic changes that are expected to take place over the next 50 years will be greater in magnitude than at any other period in the history of mankind. It would be no exaggeration to say that demography may well become the dominant force that will shape world development and dominate the international policy agenda of the 21st century.
Upsurge in world's population
In the United Nations' latest long-range population projections (1998), the "most probable" medium-fertility scenario assumes that the fertility rate will stabilise at slightly above two children per woman. Under that scenario the world population will nearly double from 5.7 billion in 1995 to 10.4 billion by the end of the 21st century, reaching 10.8 billion in 2150. Most countries classified today among developing countries are expected to experience a "demographic transition" from a combination of high natality and high mortality to a post-transition state of low natality with low mortality. This change will result in a substantial surge in population.
By contrast, developed countries which are already in their post-transition phase will experience almost no growth in population. Hence, most of the increase will be in the developing world. That means a major geographical shift in the distribution of the world population, as the proportion living in the currently developed world decreases from roughly 20% in 1995 to around 10% by the end of the next century. Moreover, declining fertility and mortality rates will, in this scenario, eventually lead to dramatic population ageing in all countries. In the medium-fertility scenario, the population aged 60 and above will increase from 10% of the total in 1995 to 30% in 2150 world-wide.
Particularly significant from a policy perspective is the fact that the fastest increase in the world's population is expected to take place in the first half of the 21st century (from 5.7 billion in 1995 to almost 10 billion in 2050). The next fifty years will therefore be a period of maximum strain on resources and the environment, as well as being a period of economic potential and opportunity.
Ageing in developed countries
In developed countries, ageing will cause the number of young (person aged 15-24) to decline in absolute terms from 176 million in 1975 to 135 million in 2020. At the same time, the older segment of the population will increase markedly. In 2030, the proportion of those aged 65 and over in OECD countries will range from 33% in Australia (13.9% in 1960) to 49.2% in Germany (16%).
Needless to say, the economic, social and political effect of such changes will be far-reaching. On the economic front, the combination of population ageing, increasing life expectancy and labour-force trends will reduce the amount of time that society devotes to employment. If no adjustment takes place in labour force participation, men will spend 33 years in employment by 2030, versus 50 in 1950. This, in turn, could result in lower growth in per capita incomes. One OECD study estimates that, over 1998-2050, such losses could be in the order of 10% for the United States, 18% for the EU and 23% for Japan.
Ageing will of course place an extra burden on the public purse. First, the dramatic increase in the dependency ratio -- that is the number of under-15s and over-64s compared with the working-age population (15-64) -- will put unsustainable pressures on the financing of pay-as-you-go public pensions. Dependency ratios over 1998-2050 are expected to increase from 52% to 65% in the United States; from 49% to 78% in the EU; and from 44% to 86% in Japan. Second, the increase in the number of old people, particularly the frail elderly, will increase the demands put on the provision of health and social services. (See article on health.)
The political implications are significant too. Ageing will clearly influence the structure of the electorate in favour of elderly voters, who stand to win a greater share of public expenditures at the expense of schools and child care. Tensions between the generations may arise as a result.
A demographic transition in developing countries
The challenge posed by population changes in developing countries will be quite different. Most developing countries are expected to experience their "demographic transition" in the next hundred years: the combination of high natality/high mortality giving way to one of low natality/low mortality, which is the position most OECD countries are in. But because mortality declines faster than natality, populations in transition expand rapidly at first. Then the natality rate declines, slowing population growth down. Latin America is a good example of this. Its population is expected to reach 810 million by 2050, up from 447 million in 1990, and then stabilise as the birth rate falls.
Meanwhile, India's population will rise to 1.5 billion by 2050, up from 853 million in 1990. China's will also reach 1.5 billion, up from of 1.14 billion, while the rest of Asia's will climb to 2.4 billion, which is more than double its 1990 level of 1.1 billion. The slowest transition -- hence the largest rise in population -- will take place in the least developed countries. Africa's population is expected to increase from 642 million in 1990 to 2 billion in 2050, and reach almost 2.7 billion in 2100.
A major question is how to create employment for the expected large inflow of young people to the labour force -- about 700 million over 1990-2010, which is more than the entire labour force in the developed countries in 1990! Indeed, by 2025, the labour force in developing countries will have almost doubled to 3.1 billion compared to 1.7 billion today. On the positive side, the demographic transition could represent a window of opportunity for many developing countries, if they take advantage of their low old-age and child dependency ratios to invest in health, education, human capital, and ensure that their fertility and mortality rates continue to decline. Such investment would spur economic development and it would lighten the burden of population ageing in later years.
Still, even in countries which successfully manage their demographic transitions, social upheaval appears inevitable. Massive migration will be triggered by changes in economic structure, and rural-urban migration in particular will continue for several decades unabated, stimulating ethnic conflicts, pollution and urban unrest. The situation will be worse for the poorer countries, which, because of their slower transition towards lower natality, will experience the largest increase in population. This could drive up poverty and force people into shanty towns or marginal lands, with disastrous environmental consequences. By contrast, in some countries, notably China, the demographic transition could be too fast, resulting in significant demographic imbalances, notably between sexes and age groups. Trying to solve these problems and all the others posed by population increase over the coming years will be a tall order. How much more difficult it will all become if corruption in politics, bribery and tribalism spread more widely too.
The Future of the Global Economy: Towards a Long Boom?, OECD, Fall 1999.
The Macroeconomic Implications of Ageing in a Global Context, by Turner, Dave; Giorno, Claude; Serres, Alain de; Vourc'h, Ann; Richardson, Pete, OECD. Economics Department, Working Papers, No. 193, OECD, Economics Department, Paris, 1998.
The Demographic Underpinnings of Current and Future International Migration in Asia, by Hugo, Graeme, in: Asian and pacific migration journal, vol. 7, no.1, 1998.
©OECD Observer No 217/218, Summer 1999