Author Archives: jonathanpotton

Aug 3 2012

The Ethnic Future of Western Europe to 2030

by Eric Kaufmann

[Population Aging to 2030, Day 5, Essay 2 of 2]

A surging global South and aging North has produced significant South-North population pressure: roughly 60 million from the third world resided in the developed world by 2007.  Net immigration into both the EU 15 countries and the United States is over one million immigrants per year, but inflows to Europe appear to be overtaking those to the USA. (See figure 1) In 2006, the gross inflow into the EU 27 countries was 3 million and the net influx 1 million, of which 60% was from non-EU countries, and a quarter each from the rest of Europe, the Americas, Asia and Africa. Migration theory tells us that one of the strongest drivers of immigration is the presence of networks of co-ethnics in the country, who can provide the financial support, social networks, local information and sometimes marriage partners necessary for newcomers to establish themselves. Thus a disproportionate number of newcomers to Germany, Holland and Belgium are Turks and Moroccans, while those from Pakistan and Bangladesh favor Britain, and Somalis or Iraqis may find their way to Norway and Sweden.

Figure 1. Immigration to the EU-15 countries (net) and to the US (gross), 2007
Source: Coleman, D. (2011) ‘The Changing Face of Europe’, in J. A. Goldstone, Eric Kaufmann and Monica Duffy Toft (eds.) Political Demography: How Population Changes Are Reshaping International Security and National Politics (Oxford University Press, 2012). This excludes illegal immigration, believed to be about 500,000 annually in the case of the US. The EU data include immigration from other EU countries. Net annual immigration to EU countries from outside the EU is about 1 million.

Might the numbers come down? Everywhere in Europe since 1987, Far Right anti-immigration parties have been making headway. Centrist parties have got the message and are also talking tough on immigration. No European government campaigns on the kind of open immigration platforms one finds in Canada, or among liberals in the United States. But it is difficult in practice to reduce numbers because of the influence of pro-immigration business lobbyists, family reunification provisions and asylum regulations. Denmark and Holland have successfully reduced their intake by imposing stiff language and marriage requirements for prospective citizens. Denmark’s annual intake, for instance, dropped from 9,300 to 3,900 between 2001 and 2006.

But these are outliers. Overall, immigration to Europe remains steady at around 1 million per year. The fastest aging societies – Italy and Spain – have admitted the largest number. Spain, which contained fewer than 200,000 foreign-born as recently as 1985, now has 4 million non-EU born residents and another 2.2 million EU-born. In 2009 alone, over 300,000 entered Italy. This suggests that as Europe ages, it may increase its immigration flow.

Migrants from Eastern Europe – typically the younger, most dynamic elements of their (aging, declining) countries, are an important aspect of the post-2004 immigration flow. They are generally preferred to those from outside Europe. Britain contains over a million residents from Eastern Europe (both EU citizens and non-EU). Ireland also contained many prior to the economic downturn. Spain is home to numerous Romanians and Ukrainians. East Europeans are among the most mobile elements of the immigration flow, and some have returned home since 2008 due to adverse economic conditions. Still, most have stayed on, many with their families, and this can be seen in the makeup of various states’ populations. Thus most west European countries are, like the United States, about 10 percent foreign-born, with East Europeans comprising perhaps 10-20 percent of that total.

Immigration has been a technique of nation-building pioneered by France in Napoleonic times, given that country’s historically low birthrate compared to its chief rivals Britain and Germany. Yet it is noteworthy that immigration is not a long-term solution to the aging problem: immigrants’ age and their family sizes converge to host levels, thus the number of immigrants required to maintain a given age structure multiplies exponentially. In fact, merely to maintain their working age population sizes, the 15 pre-accession EU countries need to bring in 1.5 million net immigrants per year, roughly twice the current intake. To maintain the same dependency ratio – between those of working age (15-64) and those over 65 – about 13.5 million are needed each year, 20 times the current influx.

The demand for labor in sectors like construction, care for the elderly and services will remain high, and business will continue to lobby for more workers. Therefore we should expect immigration to remain at levels of at least 1 million per year. If anything, as the examples of rapidly aging Spain and Italy show, numbers may rise as Europe grows older. Though the EU contains more people than the United States (500 million vs. 300 million), its total fertility rate of 1.5-1.6 is much lower than that of the US (2.1). Second, in Europe, immigration is concentrated in the west – despite an increasing flow of central Asians to Russia, and Russians and Ukrainians to Eastern Europe.

The pre-2004 EU has a roughly similar population to the US and is a good basis for comparison. The white (non-Hispanic) share of the American population will decrease from about 65 to 50 percent between 2010 and 2050. During this same period, the native-born white share of Europe’s population is projected to decline from 95 to about 85 percent. Note, however, that while the proportion of minorities in the US will increase from a third to a half (a 50 percent increase), it will jump from 5 to 15 percent in western Europe, a 300 percent increase. In addition, approximately half the minority growth in Europe will be Muslim, a much larger share than in the United States. The rate of change is therefore more dramatic and unprecedented in Europe, and will be especially marked in the urban areas where the overwhelming majority of the non-European population resides. If we focus on major west European immigration gateways, the change is even more rapid. England is likely to be 25% minority in 2050 writes demographer David Coleman, and in Sweden, according to Pew’s recent report, Muslims alone will comprise nearly 14% of the population in 2030 and will double in number in most countries over the next twenty years. Muslim birth rates are falling rapidly in Europe, as in the rest of the world, but much of the growth in the Muslim share of Europe’s population is already locked into the age structure of Europe’s population. This will increase the prominence of religion in domestic politics and will add a Muslim voice to the conversation about Europe’s foreign policy direction in the Middle East and South Asia.

Eric Kaufmann is Professor of Politics at Birkbeck College at the University of London.

By jonathanpotton • Posted in GT2030
8
Aug 3 2012

The Impact of Immigration on the Populations of the Developed World and their Ethnic Composition

by David Coleman

[Population Aging to 2030, Day 5, Essay 1 of 2]

International migration is now the dominant driver of population increase in most Western European countries and in the English-speaking world, exceeding natural increase considerably and in some cases approaching the annual total addition to population from births. If current trends persist those populations will become “super diverse” with today’s ‘majority’ population no longer numerically dominant.

Figure 1. Rate of natural change and rate of net migration, selected European countries, 2010

Birth rates in developed countries are relatively low, equivalent to a family size (total fertility) of no more than two and much lower in some Southern and Eastern European countries. Population change is thus driven primarily by international migration, not natural change (the difference between the number of births and deaths). In some NW European countries population growth has been raised to levels not seen since the early 1970s (as in the US Australia and New Zealand). Rates of natural increase in European countries are nowhere over 0.4 per thousand; many are negative. Net immigration, however, approached 9 per thousand in some in 2010 (Figure 1).

Table 1. Comparison between natural increase and net migration in selected European countries.

In some countries (Table 1) the annual contribution of migrants to population growth (net of emigration) has been almost as great as the annual number of births (Switzerland, Italy), including births to immigrants. But migration can swing from one extreme to another in times of economic crisis.

The cumulative effects of immigration since the 1960s have been to raise the proportion of immigrants in national populations from (usually) small single figures to around 10% or more (Table 2). The number of immigrants is often substantially greater than the number of foreigners in any given year. Some countries turn foreigners into citizens almost as fast as they arrive in (e.g. France and the Netherlands) through rapid naturalisation.

Table 2. Number of foreign citizens and immigrants in selected European countries.

Distinctive cultural patterns and needs, residential segregation and socio-economic and other forms of disadvantage have persisted among many immigrant populations. Accordingly, some countries estimate populations of foreign origin beyond the ‘first (immigrant)’ generation. Countries of the English – speaking world ask individuals to specify their ‘ethnic origin’ or ‘ancestry’ in census or survey questions.  In continental European countries with population registers, parallel estimates are made through registration data on nationality and birthplace of individuals and of their parents. In the former, the ethnic ascriptions extend potentially over an unlimited number of generations. In the latter, the ‘third generation’ is assumed to have become ‘native’ (i.e. ‘Danish’, ‘Dutch’, etc.) and disappears from statistical view. According to these estimates the population of ‘foreign origin’ or ‘foreign background’ had increased to about 20% of the national total by 2010.

In the US, the non-European racial diversity represented by the US black population was is not of recent immigrant origin. Usually the major national origin components – Moroccans, Turks, Somalis, etc. are projected separately, and broadly grouped into ‘Western’ or ‘High Human Development Index (HDI)’ (people mostly of European origin) or  non-Western (people of non-European origin) from countries of middle or low HDI.

Figure 2 shows an approximately linear increase of the minority groups to between 20% and over 30% of the national population by the end of the projection period (usually 2050 or 2060). The level of net migration is usually assumed to remain constant, given the difficulty of predicting migration. Those for Norway and The Netherlands are exceptions. In the UK, the favoured variant projection by Rees and his colleagues assumes that return migration will increase pro rata with growing minority numbers, leading to markedly slower projected growth of the minority populations compared with the highest variant from this author. Later projections for Denmark and The Netherlands in the last decade indicate more modest minority growth than earlier ones, following reductions in immigration partly following restrictive policy initiatives.

Figure 2. Projection of immigrant population by region.

The continuation of these trends in low-fertility countries would eventually lead to the numerical eclipse of the former majority population, assuming that the defined groups remain discrete. The latest US projections assume that the US will become the first industrial country to have a ‘majority minority’ population in about 2043, although there the black population is not, for the most part, of recent immigrant origin. Excitable and unscientific projections apart, few projections of European populations have extended far enough into the future to reach a similar outcome. One projection for the UK (assuming the continuation of recent migration and fertility levels) indicates that all ethnic minority populations together would exceed the number of ‘White British’ at around 2070.

A comprehensive analysis made on a common methodology for all the EU countries was published by Eurostat in 2010, on four different scenarios. The most conservative of these estimated that 26.5% of the EU population would be of ‘foreign background’ by 2061, the highest model being 34.6%. Among larger countries, the lowest estimate overall was for Bulgaria (7%); the highest for Belgium, Germany, Spain and Austria, all around 50%.

However, 60 years is a long time in demography and these projections can only illustrate the consequences of specified assumptions. Migration can, and does, go down as well as up- notably in Germany, The Netherlands and Spain in the last few years, and recently from Mexico into the United States. Populations of mixed origins are increasing fast and will have a profound effect on the social scene and on concepts of ethic identity and categorisation.

But none of this is graven in stone. Most depends on migration rates. While their high level may seem inexorable, international migration is the most volatile of demographic components, subject to multiple economic and political uncertainties, and at least in theory subject to policy control. The magnitude of the challenges presented by these trends is very great – to society, national identity, domestic and foreign policy.

David Coleman is Professor of Demography in the Department of Social Policy and Intervention at Oxford University.

References Cited.

Caldwell, C. (2009). Reflections on the Revolution in Europe. Immigration, Islam and the West. London, Allen Lane.

Coleman, D. A. (2006). “Immigration and ethnic change in low-fertility countries: a third demographic transition.” Population and Development Review 32(3): 401 – 446.

Coleman, D. A. (2009). “Divergent patterns in the ethnic transformation of societies.” Population and Development Review 35(3): 449 – 478.

Coleman, D. A. (2010). “Projections of the Ethnic Minority Populations of the UK, 2006 – 2056.” Population and Development Review 36(3): 441 – 486.

Lanzieri, G. (2011). Fewer, older and multicultural? Projections of the EU populations by foreign/national background Luxemburg, Eurostat. http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-RA-11-019/EN/KS-RA-11-019-EN.PDF

Steinmann, G. and M. Jaeger (2000). “Immigration and Integration: Non-linear Dynamics of Minorities.” Journal of Mathematical Population Studies 9(1): 65 – 82.

United Nations (2000). Replacement Migration: Is it a Solution to Declining and Ageing Populations? New York, United Nations.

Wohland, Pia , Phil Rees, Paul Norman, Peter Boden and Martyna Jasinska (2010) Ethnic population projections for the UK and local areas, 2001-2051. Working Paper 10/02, School of Geography, University of Leeds. http://www.geog.leeds.ac.uk/research/wpapers

Aug 1 2012

The Beginning of a History: Advanced Aging and the Liberalness of Democracies

by Richard Cincotta

[Population Aging to 2030, Day 3, Essay 3 of 3]

How powerful is advanced population aging?—powerful enough to place at risk the liberal content of Europe’s democratic regimes? In this essay I’ll argue that it could; that today’s confident clusters of European and East Asian liberal democracies (states rated as “FREE” in Freedom House’s annual survey) will, as they age beyond the median age of 45 years, incur greater risks of losing elements of the political rights and civil liberties that generations of their citizens and political leaders worked hard to attain.

How sure am I of the impending risks? In fact, I’m not sure. There is yet no historic record of states experiencing advanced aging. Despite the well-documented evidence of increasing democratic stability as country-level populations age (Weber 2012, Cincotta & Doces 2012, Cincotta 2008/09 & 2008), current theory cannot hope to forecast political behaviors for countries well beyond the median age of 45—beyond the current demographic frontier and outside the reach of available data.

While no country has yet evolved a deeply post-mature age structure (Fig 1.), by 2030 some will. According to demographers at the US Census Bureau’s International Program Center and the UN Population Division, by 2030, between 19 and 29 states will possess this novel quality. Three or four will be East Asian states. Nearly all the rest will be located in Europe. According to current US Census Bureau and UN Population Division projections, by 2030 both Germany’s and Japan’s populations will range near the median age of 50 years.

Figure 1. Population age structures indicative of four phases of the age-structural transition.

So far, aging (an increase in the median age) has been “good news” for liberal democracy. Since 1972­—when Freedom House (FH) produced its first state-by-state assessments of political rights and civil liberties—the global demographic pattern of liberal democracy has been extraordinarily consistent. Among states with a youthful population (median age 25.0 years or less) the annual proportion of states assessed as FREE (Freedom House status score from 2.5 to 1.0) has been relatively low—around 18 percent, on average, over the past four decades (Figure 2). Around 60 percent of all intermediate countries (median age 25.1 to 35.0 years) and about 88 percent of mature countries (35.1 to 45.0 years) have received the “Free” assessment.

Figure 2. The mean annual proportion of states in each of three age-structural categories that were assessed as FREE in Freedom House’s annual survey, 1972 to 2011.

More importantly, youthful liberal democracies have shown themselves to be inherently unstable. Over the past four decades, youthful states have ascended to FH’s annual list of FREE regimes on 52 occasions. On 51 occasions, youthful states dropped off of that list, retreating to a less democratic or even autocratic regime in the wake of a coup d’état, after elected or unelected leaders have assumed extraordinary executive powers, or when political violence has led to restrictions on individual freedoms. As a group, states that have ascended to the FREE category as either intermediate or mature populations have experienced much greater success at maintaining this rating (Figure 3). In fact, liberal democracies over the median age of 30 years seem the most stable. From this politico-demographic vantage point, Huntington’s third wave of democracy—an empirical wave of successive democratization that began in southern Europe in the early 1970s—owes its accumulation of liberal regimes neither to popular revolution nor to gradual regime-motivated reforms, but to the democratic stability attained as population age structures mature.

But that was then—before any liberal democracies ventured beyond the median age of 45. Only the passage of time will allow an evaluation of the durability of post-mature liberal democracies. For now, political demographers are left to search among the behaviors of aging states for premature indications of democratic setbacks.

Figure 3. The absolute number of states, by age-structural type, that newly attained and lost the status of FREE in Freedom House’s annual survey, from 1973 to 2011.

Do such indications exist? Perhaps. Nearly all of the rapidly aging states along Europe’s southern flank have fallen into some degree of fiscal distress—and the shakiest among them appears to be Greece, now at a median age of 42 years. Under the pressure of civil disorder, Greece’s government has backed away from fiscal reforms and tough austerity measures. Although still assessed as FREE in FH’s most recent annual survey (Jan. 2012), Freedom House downgraded Greece’s political rights score (from 1.5 to 2.0). In Eastern Europe, declines from high levels of liberal democracy have been more obvious and widespread. Ukraine (median age of 40 years) dropped from FH’s FREE rating to PARTLY FREE in 2009. While remaining with FH’s FREE status, both Latvia’s (median age of 41 years) and Hungary’s (40 years) scores have trended toward declining political and individual freedoms over the past two years.

Nonetheless, few political scientists are ready to investigate the possibility that some of this drift away from liberal democracy is related to advanced population aging. Perhaps they should entertain the thought. In the case of Greece, one can easily imagine the rising burden of public pensions and old-age healthcare contributing to public sector deficits and the loss of fiscal flexibility, particularly during a global recession. For Ukraine, Latvia and Hungary, most experts will argue—with justification—that the strength of democratic institutions and liberal traditions in these post-communist states is still weak. That said, some have had difficulty explaining why these particular eastern European states, where the transition from state communism to liberal democracy went relatively smoothly (and enthusiastically), and not others, have experienced significant erosion of press freedoms and weakening of executive-judicial separation.

Could these lapses in “liberalness” be symptoms of the degree of fragility that, in the future, analysts will expect from post-mature liberal democracies? Just as age-structurally youthful democracies bear high statistical risks of a retreat to a less democratic regime type in the wake of intra-state conflict and electoral violence, perhaps post-mature liberal states will find themselves vulnerable to more subtle expansions of executive power and decay of judicial checks.

Significantly, no recent overt signs of illiberalness have emerged from within the world’s oldest aging states: Germany, Japan and Italy. Apparently, these have (so far) taken their rapid pace of aging in stride. Despite its fiscal problems, Italy (the next in line to enter the post-mature category) was recently upgraded by Freedom House—from 1.5 to the highest average rating, 1.0. Still, the history of advanced aging is just beginning, and depths of their future aging challenges have yet to be plumbed. By 2030, roughly 28 percent of all Germans and 26 percent of Italians are expected to be aged 65 and older. For Japan, that figure is should reach 30 percent by the same year.

How well-anchored are liberal political and institutional traditions in the societies of Europe’s and East Asia’s aging liberal democracies? Will these traditions permit prompt and adequate policy responses to aging’s oncoming challenges? So far, we cannot know. After all, we stand at the beginning of a new history.

Richard Cincotta is Demographer-in-residence at the Stimson Center in Washington, DC, and a consultant on political demography for the Woodrow Wilson Center’s Environmental Change and Security Program. From 2006-09, he served as a long-range analyst for the National Intelligence Council.

 

References cited

Cincotta, R. P. (2008). “How Democracies Grow Up: Countries with Too Many Young People May Not Have a Fighting Chance for Freedom.” Foreign Policy (165): 80-82.

Cincotta, R. P. (2008/09). “Half a Chance: Youth Bulges and Transitions to Liberal Democracy.” Environmental Change and Security Report(13): 10-18.

Cincotta, R. P. and J. Doces (2012). The Age-structural Maturity Thesis: the Youth Bulge’s Influence on the Advent and Stability of Liberal Democracy. Political Demography: How Population Changes Are Reshaping Security and National Politics. J. A. Goldstone, E. Kaufmann and M. D. Toft. Basingstoke and New York, Palgrave-MacMillan, pp.98-116.

Weber, H. (2012). “Demography and Democracy: the Impact of Youth Cohort Size on Democratic Stability in the World.” Democratization, iFirst (1-23).

Aug 1 2012

Population Aging and the Future of NATO

by Mark Haas

[Population Aging to 2030, Day 3, Essay 2 of 3]

According to a number of analysts, including the last two U.S. Secretaries of Defense, America’s relations with its partners within the NATO alliance are nearing crisis.  In June 2011, Secretary of Defense Robert Gates warned that NATO faces “a dim if not dismal future” and “irrelevance” as America’s allies remain “unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense.”  The following October, Gates’ successor, Leon Panetta, stated that “we are at a critical moment for our defense partnership,” and he implored America’s allies to increase their defense spending to ensure that NATO remained “relevant.”

While irritation by American leaders toward their European allies over free riding and related calls for Europeans to increase their share of military spending are not new, European NATO countries’ defense expenditures—both relative to the United States and as a percentage of GDP—are at historically low proportions.  For most of the Cold War, America accounted for 50 percent of total NATO military spending.  That figure is 75 percent today.  According to official NATO figures, only three of NATO’s 28 members—Britain (2.6), Greece (2.1), and the U.S. (4.8)—currently spend the agreed two percent of GDP on defense.

Low levels of defense spending are already having major effects on military effectiveness.  In the 2011 campaign to topple Muammar Qaddafi’s government in Libya, the Europeans lacked the weaponry, as well as the reconnaissance, intelligence, heavy airlift, and refueling equipment necessary to defeat a minor power.  As Gates put it, “the mightiest military alliance in history is only eleven weeks into an operation against a poorly armed regime in a sparsely populated country—yet many allies are beginning to run short of munitions, requiring the U.S., once more, to make up the difference.”

Although a number of factors contribute to contracting military spending across Europe, demography—particularly widespread, massive populating aging—is among the most important of these causes.  Due to a combination of increasing life expectancies and very low fertility rates (which are the average number of babies per woman in a country), NATO states are growing older.  The number of retirees throughout Europe is rapidly expanding, while the number of working-age people is quickly shrinking.  In 2030, Europe will have over 50 million fewer working-age people (ages 15 to 59) than it does today, and over 53 million more people over sixty.

These demographic realities will have major effects on states’ ability to project power abroad.  Three outcomes are particularly important.  First, population aging is likely to slow a state’s overall economic growth.  The primary problem is that as societies age, more people exit the workforce than enter it.  A state’s gross domestic product (GDP), in its most basic formulation, is a product of the number of workers and overall productivity.  As a country’s workforce shrinks as more people enter retirement than enter the labor market, so, too, will its GDP unless productivity levels rise sufficiently to compensate for this loss.  Although the last is likely to be the case in most states, workforce contraction will still act as a substantial brake on economic growth for the decades to come.  One study calculates that with shrinking workforces and a 1.5 percent growth in overall economic productivity per year (which is slightly higher than the European average the last fifteen years of 1.3 percent), GDP growth in the next thirty years will average 1.25 percent in France and 1 percent in Germany.  In such an economic climate, significant increases in military expenditures are unlikely.

Compounding this tendency is a second and even more important economic effect of social aging:  the strain that this phenomenon places on state resources.  European governments have made commitments to pay for substantial portions of the retirement and health care costs of their elderly citizens.  By 2030, public benefits to the elderly are projected to rise for many European countries to over twenty percent of GDP, and they will continue to grow after this date.  In order to pay for the exploding costs of aging populations, significant spending cuts in other areas—including for militaries—will be necessary

A third and final way in which population aging is likely to impact states’ defense budgets is by pushing militaries to spend more on personnel and less on other areas, including weapons development and procurement.  As working-age populations shrink, competition among businesses and organizations—including the military—to hire workers will grow.  Consequently, if states’ militaries want to be able to attract and keep the best employees in vital areas of operation, they are going to have to pay more to do so.  Europe’s NATO members are already devoting significantly more resources to military personnel than weapons purchases and research (well over twice as much in most countries).  Without major investments in weapons and military equipment, NATO’s European powers will be hard pressed to project force beyond their borders for a sustained period of time, as we witnessed in the attack on Libya in 2011.

The preceding effects of population aging on European states’ military budgets might spell the doom of NATO from the American point of view.  Because the United States is aging to a lesser extent and less quickly than its European allies, America’s public obligations to the elderly as a percent of GDP will be lower and its working-age population will continue to expand (by over 10 million by 2030).  The U.S., as a result, will be able to continue to devote significantly more resources to the military—both absolutely and as a percentage of GDP—than will European states because the forces pushing for the crowding out of military spending for increased care for the elderly will be weaker.  Gates in 2011 referred to NATO as a “two-tiered alliance,” with the U.S. dedicating roughly 5 percent of GDP to military spending and most of its European allies less than 2 percent, and he described the resentment this bifurcation created in America.  As the aging crisis in Europe intensifies in coming decades, this spending gap is likely to increase, as will the resentment.  America’s aging European allies between now and 2030 are very unlikely to either increase their share of the burden in defense of common interests or become more effective in projecting force abroad.  As NATO’s commitment to deal with shared threats becomes increasingly hollow, the likelihood of U.S. leaders looking for more reliable—likely “younger”—allies will grow.

Mark L. Haas is Associate Professor of Political Science at Duquesne University.

Aug 1 2012

Population Aging and the Welfare State in Europe

by Ronald Lee and Andrew Mason

[Population Aging to 2030, Day 3, Essay 1 of 3]

Many countries in Europe and elsewhere are aging rapidly.  In part this is occurring because of the enormous strides that have been made in reducing death rates at older ages and in part because of low fertility.  Fertility is particularly low in Southern and Eastern Europe where the total fertility rate, the number of births per woman over her reproductive span, is typically around 1.5 or less.  This means that the next generation will be twenty five percent smaller than the current generation unless fertility rebounds.  This is a recipe for both population decline and an old population, one with more elderly relative to those in the working ages.

Population projections are a powerful tool to look into the future.  We can be confident that in Europe the number 65 and older will rise substantially relative to those in the working ages however defined.  Demography can tell us only so much, however.  The economic effects of changes in population age structure in Europe depend on what people do at each age.  This is changing over time and varies considerably across countries depending on health status, values, public policies, standards of living and a variety of other factors.

Figure 1. Consumption (C) and labor income (Yl) by age in Germany, Spain, and Sweden. Source: National Transfer Accounts

The importance of this can be seen by comparing Sweden, Germany, and Spain.  In Spain and Germany labor income declines very rapidly at older ages as compared with Sweden.  Swedes in their late 50s and early 60s are producing much more than Germans and Spaniards at those ages.   Sweden has a different problem, however, which is very high consumption at older ages, largely due to publicly funded health care and long term care.  One could say that Swedes in their 80s are a much greater economic burden, while Germans and Spaniards in their 60s create more strain.

The support ratio, the ratio of effective producers per effective consumer, provides a way of measuring population aging that allows for differences in consumption and labor income patterns.  The support ratio counts people at each age according to what they produce and what they consume as according to the curves in Figure 1.

Figure 2. Percentage decline in the support ratio, 2010-2030.

By this measure, population aging will have the greatest impact in Germany where the support ratio will decline by over 20 percent between 2010 and 2030.  Germany has two factors working against it – low fertility and low labor income among older adults.  The decline in the support ratio in Sweden, the United Kingdom and the United States is projected to be at about half the rate as in Germany.  Spain is roughly in the middle between these two extremes.

The difference between Spain and Germany is primarily a matter of timing.  Germany is aging earlier than Spain because its fertility declined earlier.  Both countries will experience a decline in their support ratio by about 25% between 2010 and 2050, about twice as great a decline as in the other three countries.

A final element in thinking about the welfare state and population aging is that countries differ greatly in the mechanisms on which they rely to meet the needs of the elderly.  In general, countries in Europe rely more on the public sector than in the US or many other countries.

This is clear in Figure 3 which shows the relative contribution of net public transfers, net familial transfers, and asset-based flows to funding the gap between consumption and labor income for those 65 and older.

There is great variation in Europe with Sweden (SE) relying entirely on net public transfer to fund the old-age support system.  In Germany (DE), about two-thirds of the support comes from public transfers while in Spain (ES) it is closer to one-half.  Population aging will place particular strains on the public old age support system in Sweden.

http://ntaccounts.org/web/nta/show/Population%20aging%20and%20the%20generational%20economy%3a%20A%20global%20perspective

Figure 3. Old-age support system for selected countries. Public transfers, family transfers, and asset-based flows as a share of the lifecycle deficit for those 65 and older. Source: Ronald Lee and Andrew Mason, lead authors and editors, 2011. Population aging and the generational economy: A global perspective. Cheltenham, UK: Edward Elgar.

Note that all the European countries that are shown in Figure 3 rely very heavily on the public sector to fund net consumption by the elderly. None relies on help from children, and generally they rely very little on assets, unlike the US. Figure 3 also shows that some but not all Asian countries do rely on families to provide old age support. In these countries population aging will also put pressure on adult children of the elderly.

Ronald Lee is Professor of Demography at the University of California, Berkeley, and Chair of the Center on the Economics and Demography of Aging (CEDA). Andrew Mason is Professor, Department of Economics at the University of Hawaii and Senior Fellow at the East West Center. They are Co-Directors of the National Transfer Accounts Project.