China and the Challenge of Premature Aging

by Richard Jackson

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

China stands on the threshold of a stunning demographic transformation with profound implications for its future prosperity and stability.  For the past three decades, China’s unusually favorable demographics, with a rapidly declining dependency burden and a rapidly rising share of the population in the working years, have helped to propel its spectacular rise in living standards.  Beginning around 2015, however, the demographic climate will change abruptly.  The elderly share of the population, now just 8 percent, will double to 16 percent by 2030, and then triple to 24 percent by 2050—making China an older country than the United States.  Along the way, China’s working-age population will also peak and begin to decline.

The most direct and certain impact of the demographic transformation will be a growing old-age dependency burden.  As China ages, a rising share of total economic resources will have to be transferred from working-age adults to nonworking elders.  In 2010, there were 7.8 Chinese working-age adults available to support each elder.  That ratio is due to fall to 3.8 by 2030 and to 2.4 by 2050, which means that the average burden that must be shouldered by each worker will more than triple.  Much of this burden falls on families today.  But in a rapidly aging and developing China, a larger share is bound to show up in public budgets and higher tax rates.

Figure 1. Proportion of seniors in China and the US, 1950 to 2050.

Even as the old-age dependency burden grows, economic growth will slow.  Over the three decades of the reform era, China’s working-age population has expanded at 2.0 percent per year.  By the 2030s, it will be contracting by 0.7 percent per year.  Contrary to common wisdom, the scope for internal migration to offset slower growth in the working-age population is limited.  Until recently, China was able to boost GDP growth by shifting millions of underemployed workers each year from the non-market rural sector into full-time, low-skilled manufacturing jobs that are integrated with the global economy.  But as China’s industries move up the global value-added scale, a serious mismatch is emerging between the skills of its remaining surplus rural labor and the demands of the jobs being created in the growth sectors of its economy.

Slower economic growth in turn has the potential to trigger social and political crisis.  The incredible speed of China’s development is already straining the economic and social fabric. Urbanization is weakening the extended family while industrialization is degrading the environment.   Worker mobility and turnover are rising and the income gap between the rich and poor is widening.  Social services are spotty and civic authority is strained.  Such stresses, bearable in a youthful society in which incomes are rising rapidly, may become less tolerable in an aging society in which economic growth is slowing.

Figure 2. Average Annual Change in Chinese Working-Age Population Size, by Decade

The rapid aging of China’s population could act as a multiplier on the stresses of rapid modernization.  While today’s developed countries became affluent societies before they became aging societies, China’s age wave will be arriving in a society that is still in the midst of development—and that has not yet had time to put in place the social protections of a modern welfare state.  Less than one-third of China’s workforce is now earning a formal retirement benefit of any kind, public or private.  Despite China’s lofty national savings rate, only a small minority of workers are accumulating sufficient financial assets to support themselves in retirement. The majority may have to fall back on the most traditional form of old-age insurance: children.  But many will have only one child, and among these many will not have a son, who in Confucian culture bears the responsibility of caring for aged parents.  Imagine, in China’s cities, tens of millions of today’s midlife adults maturing by the year 2020 or 2030 into tens of millions of indigent elders who lack pensions, lack access to health care, and lack adequate family support. Or imagine, in China’s countryside, entire towns of demographically stranded elders. Meanwhile, China’s yawning gender imbalance and the enormous bachelor surplus to which it is giving rise will threaten to become another source of social unrest.

China has been “peacefully rising” while its demographics have leaned with economic growth.  But by the 2020s, when China’s age wave arrives in full force, demographic trends may be weakening the twin pillars of the current regime’s legitimacy—rapidly rising living standards and social stability.  It is hard to gauge how great the risk of social and political crisis is, but the Chinese government, with its new mantra of “balanced development” and its increasing alarm about the dangers of the rural-urban income gap, the shredded social safety net, and environmental degradation, appears to be taking it seriously.  Throughout China’s long history, periods of strong central authority and empire building have alternated with periods of social and political chaos.  China’s premature aging may usher in the next turn of the cycle—or, as the regime attempts to avert this outcome, a new authoritarian clampdown.

As it happens, the 2020s is also the decade in which China is expected to displace the United States as the world’s largest economy.  “Power transition” theories of global conflict suggest that this moment could be fraught with danger.  The fact that it coincides with the arrival of China’s potentially destabilizing age wave may make it even more perilous.

Richard Jackson is a senior fellow at the Washington-based Center for Strategic and International Studies, where he directs the Global Aging Initiative.

Population Aging – More Security or Less?

by Jack Goldstone

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

Populations in the rich world are aging fast.  Some scholars have argued that this will create a ‘geriatric peace,’ as the traditional great powers will no longer have the financial resources or manpower to contemplate large-scale wars.  Others have argued that population aging will particularly benefit the United States.  Because of immigration, it is claimed, the U.S. will enjoy a younger and faster growing population than either its fellow rich nations, or its main challenger, China.  As Europe and China both age rapidly, the younger U.S. will enjoy a further period of relative world dominance.

I think it is wise to be skeptical of both propositions.  In regard to the geriatric peace, it does seem likely that rich nations will be less inclined to invest in their military capacity.  But this is a problem for the U.S., as it is America’s main alliance partners – Europe in NATO, and Japan and S. Korea in the Far East – that will be reducing their military spending.  This will be a problem, rather than benefit, for the U.S. if America continues to face its main military challenges from disorders in young and populous developing nations (e.g. Iraq, Afghanistan, Yemen, Libya, and Somalia).  ‘Boots on the ground’ will be harder to come by from America’s traditional allies in the future.

In addition, it should not be presumed that the U.S advantage in youth and population growth relative to Europe or China will be maintained.  Fertility among US-born Americans is only slightly higher than in Europe; and that advantage has been fueled by immigrants (mainly Hispanic).  Recently, teenage birth rates in America have fallen to an all-time low; this usually implies a long-term decline in fertility as youngsters are deferring child-bearing. Immigration also has been the main source of America’s relatively rapid population growth.   Yet according to a recent PEW research report, net migration to America from Mexico has fallen to zero since the onset of the recession.  In addition, fertility in Mexico is falling fast, and is now lower than that of Hispanics in America.  In coming decades it is likely both that the stream of migration from Latin America, and the fertility of immigrants and their descendants, will fall rapidly, sharply reducing the growth advantage of America.

Finally, it should be noted that America has two further aging challenges that are greater than that of Europe.  First, because the U.S. had a larger baby boom than Europe, it faces a much larger absolute gain in the percentage of elderly.  Where Europe faces an increase of 50% in its over-60 population by 2050, the U.S. faces an increase of 100%.  Europe will suffer from a decline in its under-60 population while the U.S. will retain some growth; hence Europe is more concerned about having enough workers to cover pension funding.  Yet the second factor is crucial – the United States spends a much larger portion of its GDP on health care, and those costs have been rising fast, relative to those in Europe.  As America experiences a huge surge in its elderly population, the difficulties of keeping a lid on health costs will increase; without a major reform, the costs of health care of the elderly in the US will pose as great or greater a limitation on state spending on defense as is found in Europe.  Just one example – the number of those aged over 80 will skyrocket in the U.S. and a significant portion of those (perhaps one-fifth) are likely to suffer from Alzheimer’s or other forms of dementia, requiring expensive nursing care.  The Alzheimer’s foundation estimated that his care alone could cost $1 trillion per year by 2050 if measures are not found to reduce the incidence or cost of Alzheimer’s in the senior population.

These considerations make clear that the U.S. cannot simply be smug about aging and presume it hands security advantages to America.  The number of those that will be 60 or older (perhaps 25% of the population and 33% of all adults by 2030) will be so large, absolutely and proportionately, that they will need to be viewed as a resource, not just an economically inactive and/or dependent group.

There are several ways to respond to America’s and the rich world’s aging in ways to enhance economic and military potential.

First, American should seek to broaden and intensify its military alliances with younger and more populous democratic states – India, Brazil, Mexico, Indonesia, as well as the existing NATO link to Turkey.  These “TIMBI” states all have growing labor forces and populations and will be capable of providing ‘boots on the ground’ for operations in other still younger and fast-growing states where military operations are likely to arise.   Whether through an expansion of NATO into a DATO alliance (Democratic alliance and treaty organization) that is committed to provide manpower to pro-democracy military actions, or through separate but parallel organizations, the U.S. needs to have close working partnerships with countries who will fill in the gaps left by the decline in military and fiscal resources of its traditional European and Far East allies.

Second, the use of healthy seniors in the civilian labor force must be encouraged and facilitated, through phased retirement and later full retirement ages.  This will reduce the dependency burden of resourcing retirement and health care for workers outside of the labor force, freeing government resources to sustain military spending where needed.

Third, the skills and experience of seniors should be valued and put to use.  Seniors, not just youngsters, should be preferred recruits for the Peace Corps, as the managerial and technical skills of senior Americans will be in great demand and of substantial value in helping developing countries train their own professional, technical, educational, legal, and managerial ranks.  America risks losing a huge repository of skills and experience when the baby boomers retire; some of this should be retained in the workplace in the US, but some should also be deployed on behalf of the US abroad.  Just as the Peace Corps built bridges and informal support for the U.S. around the world for an earlier generation, the same could be done through drawing on U.S. senior workers for a new wave of U.S. support for development initiatives.

Jack Goldstone is the Virginia E. and John T. Hazel, Jr. Professor of Public Policy in theSchool of Public Policy at George Mason University, Fairfax, VA, USA. 


Population Aging: a Demographic and Geographic Overview


             by Richard Cincotta

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

This GT2030 blog, focused on population aging, begins with this introductory essay aimed at familiarizing readers with some of the demographic and geographic particulars of this phenomenon, and with several key demographic terms. The term most in need of definition is, of course, population aging. Strictly speaking, aging is any shift in the population’s age structure (the distribution of individuals, by age) that produces an increase in the median age (the age of the individual for whom one-half of the population is younger). Generally, advances in a population’s median age are associated with increases in the proportion of seniors (aged 65 years and older), and declines in the proportion of children (younger than 15). Sustained population aging leads to a relatively older workforce, slowed workforce growth and slowed growth among school-age children.

While various age-specific patterns of birth, death and migration can induce change in the median age, over the past century two demographic processes have contributed most powerfully to country-level population aging. First and foremost is declining fertility (fertility is usually measured by computing the total fertility rate (TFR), an immediate estimate of the number of children that women are bearing over their reproductive lifetime). The second most influential factor has been increasing longevity. Not all trends associated with modernization, however, contribute to aging. Declines in childhood mortality have served to slow aging’s pace or make it retreat, as have waves of youthful immigrants (until the immigrants themselves age) and occasional baby booms.

Is an advance in the median age bad news? That depends on “where you are” the broad diversity of age structures suggested by today’s lengthy spectrum of median ages—which in 2012 stretches from around 16 years (Niger, Uganda, Mali) to around 45 (Japan, Germany).  For states in the youthful phase of the age-structural transition (median age 25.0 years or less; see Figure 1), the near-term net economic, social, political outcomes of aging are overwhelmingly positive. Getting to the next next age-structural phase—the intermediate phase (>25.0 to 35.0)—is crucial; it is associated with very high support ratios (working-age adults per child), diminished risk of intra-state conflict, the accumulation of human capital, and higher savings (among “saver” societies). Moreover, there are growing indications that states might develop more quickly by sustaining their intermediate phase—which, for very-low-fertility states, has been rather fleeting (for example, China recently departed the intermediate phase after entering 25 years ago). In fact, states that have achieved near-universal secondary education and sustained a lengthy period of economic prosperity and liberal-democratic stability, including the US, have done so during their population’s presence within the so-called age-structural sweet spot: starting in the their intermediate phase and finishing during the first half of the mature phase (the mature phase ranges from >35.0 to 45.0 years).

This forthcoming essays in this blog are focused “beyond the sweet spot.” It is concerned with the challenges and possible outcomes of “advanced aging”—a condition never before encountered—that will evolve in the so-called post-mature phase (median age >45.0 years) of the age structural transition. Countries approaching the end of the mature phase, most in Europe and East Asia, are accumulating large proportions of seniors, most of whom are moving out of the workforce, drawing on pensions, drawing down personal savings and other accumulated assets, and accepting transfers from their children, other relatives, and other public and non-profit sources. As they age, seniors face an increasing risk of morbidity due to chronic illness and declining physical mobility, as well as an increasing risk of poverty.

While improvements in healthcare and nutrition promise to compress the late-in-life period of high morbidity and permit the extension of workforce participation, the projected declines in the number of working-age adults per retiree (the old-age support ratio) in European and East Asian states over the coming two decades is unprecedented. These projections suggest that those states heading for a post-mature future need to deftly manipulate a full range of social and fiscal policy levers in order to mediate, and adapt to, the cost burdens that are poised to descend upon their pension and healthcare systems. Simultaneously, most of these states will likely wrestle with the challenging and politically delicate task of encouraging the reestablishment of near-replacement-level TFR.

As of 2012, only Japan and German have attained the 45-year median-age mark—and just within the past year or two. Significantly, both countries face “negative momentum”; in other words, because of several decades of annual TFRs below 1.5 children per woman and steadily increasing life expectancies, these and other very-low-fertility states are projected to continue to age for the foreseeable future—until old-age mortality dissipates their populations’ currently broad bulges of seniors and middle agers, and fertility or migration significantly enlarges their childhood and young adult cohorts. In other words, advanced aging is not a momentary inconvenience.

By 2030, advanced aging will have spread widely through Europe (see figure 2: world maps, 2010 and 2030). Current projections by demographers at the US Census Bureau’s International Program Center (International Data Base, June 2011) suggest that the populations of 29 states (each over 1 million residents) will experience a median age over 45.0 years by 2030. Of these, the Census Bureau indicates that 26 will be located in Europe, and 3 in East Asia (Japan, Taiwan and South Korea). Despite China’s rapid pace of aging, US Census Bureau projections place its 2030 median age at 43 years, very close to the UN Population Division’s medium fertility-variant projection for China. The UN Population Division, using a somewhat different set of projection assumptions to produce its medium fertility variant, projects that by 2030 this post-mature group of countries (median age >45.0 years) will consist of 19 states: 14 European, 4 East Asian (including Singapore), and Cuba.


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.

 

A Guide to the Essays: Population Aging to 2030

Welcome to the National Intelligence Council’s Global Trends 2030 Blog, “Population Aging to 2030”, due to be posted from July 30-Aug 3, 2012. Two thematic questions motivate this blog:

  • Will population aging, by 2030, contribute to undermine, rearrange or unravel the current international political and economic order? 
  • How will China’s rapid aging affect its position in that order by 2030?

To produce this blog, a set of political demographers, economic demographers, political scientists and historians, all of whom have been engaged in population-related research, have been asked to submit brief essays on issues that are germane to these questions. Over the next week, sets of these essays will be posted on the GT2030 blog, grouped by themes:

Richard Cincotta & Jonathan Potton

The Stimson Center, Washington, DC

A Snapshot of the Global Trends 2030 Report

Track Record of Global Trends Works

Before launching work on the current volume, the NIC commissioned an academic study of the four previous Global Trends studies, going to back to the first edition in 1996-97. The purpose of the review was to examine the Global Trends papers to highlight any persistent blind spots and biases as well as distinctive strengths. A subsequent conference focused on addressing shortcomings and improving on the studies’ strengths for the forthcoming work. The academic review and conference were used by us in designing the present project.

The key “looming” challenges that our reviewers cited for GT 2030 were to develop:

  • A greater focus on the role of US in the international system. Past works assumed US centrality, leaving readers “vulnerable” to wonder about “critical dynamics” around the US role. One of the key looming issues for GT 2030 was, “how other powers would respond to a decline or a decisive re-assertion of US power.” The authors of the study thought that both outcomes were possible and needed to be addressed.
  • A clearer understanding of the central units in the international system. Previous works detailed the gradual ascendance of nonstate actors, but how we saw the role of states versus nonstate actors was not clear. The reviewers suggested that we delve more into the dynamics of governance and explore the complicated relationships among a diverse set of actors.
  • A better grasp of time and speed. Past Global Trends works, “correctly foresaw the direction of the vectors: China up, Russia down. But China’s power has consistently increased faster than expected . . . A comprehensive reading of the four reports leaves a strong impression that [we] tend toward underestimation of the rates of change . . . ”
  • Greater discussion of crises and discontinuities. The use of the word “trends’ in the titles suggests more continuity than change. GT 2025, however, “with its strongly worded attention to the likelihood of significant shocks and discontinuities, flirts with a radical revision of this viewpoint.” The authors recommended developing a framework for understanding the relationships among trends, discontinuities, and crises.
  • Greater attention to ideology. The authors of the study admitted that “ideology is a frustratingly fuzzy concept . . . difficult to define..and equally difficult to measure.” They admitted that grand “isms” like fascism and communism might not be on the horizon. However, “smaller politico-pycho-social shifts that often don’t go under the umbrella of ideology but drive behavior” should be a focus.
  • More understanding of second- and third-order consequences. Trying to identify looming disequilibria may be one approach. More war-gaming or simulation exercises to understand possible dynamics among international actors at crucial tipping points was another suggestion. We will let our readers judge how well we met the above challenges in this volume.

For a snapshot of the outline to the Global Trends 2030: Alternative Worlds, click on “Le Menu”