Logoveev A.A. Financial University under the Government of the Russian Federation

Scientific tutor: associate professor of chair of IE&IB of the FU Silantieva E.A.

The ageing population as a problem of the European and Russian economies

The article is devoted to the growing problem of the change of the age structure in most of the world, particularly in European countries and the Russian Federation.

In the article the author will provide a comparison analysis of the demographic situation in European counties, projection of the situation and some conclusions from the analyzed data.

Key words: age, population, age structure, fertility, mortality, national economy, demographics.

Population ageing is a global demographic phenomenon, which means that the median age of any given country keeps rising from year to year [1]. This may be caused by the rising life expectancy, due to technological progress in medicine, and social care, and dropping fertility rates, due to women seeking a career, the changes in the lifestyle of the Western culture and the equalities of women’s rights.

This is the result of long-term demographic changes, changes in the nature of reproduction, fertility, mortality, their relationships, and partly migration from country to country. Life expectancy growth was observed in Europe. The scientific and medical breakthroughs, expressed in the creation of antibiotics and the spread of immunization procedures contributed to the growth of the expected length of life. The fall was caused by the use of antibiotics, which were unknown before the war, better diet – a product of economic growth – and a large fall in the incidence of cardiovascular disease. The components of the mortality fall are as follows. The widespread introduction of antibiotics further reduced adult mortality. Specifically Russian life expectancy rates grew in the 1980s during the prohibition introduced by Mikhail Gorbachev.[2]

The most important task of population policy is accounting for the effects of demographic trends and ageing.

With each decade the issue of the ageing population attracts more and more attention from governments, international organizations and various other supervising bodies. Issues related to population ageing and the increasing number of older persons has played a prominent role in the three major international population conferences organized by the United Nations at the end of the XX – beginning of the XXI centuries. The International Conference on Population and Development, which was held in 1994, recognized that the social and economic impact of population ageing is both an opportunity and a challenge to all societies. Population ageing is an unprecedented occurrence. Due to this fact, there is no strict procedure developed so as to how the governments and social organizations should act and react to this trend in the changes of the social structure. Increases in the proportions of older persons (60 years or older) are being accompanied by declines in the proportions of the young (under age 15). It is estimated, that by 2050, the number of older persons in the world will exceed the number of young for the first time in history, at least, such are the United Nations forecasts.

Population ageing is profound, having major consequences and implications for all forms of human life. In the economic area, population ageing will have an impact on economic growth, savings, investment and consumption, difference in labor markets, pensions, taxation and intergenerational transfers. If we consider the society and its sociological problems, population ageing affects the healthcare system of countries, causes changes in family compositions, in the forms of families and their interrelations. Living arrangements, housing and migration are some of other problems that are affected by the global population ageing. In the political arena, population ageing can influence voting patterns and representation. The conservative views of the older generation, for instance, can overwhelm the views of the younger generation, especially in developed countries. Thus, to a certain extent, the author assumes that there will be a contradiction in the political aspect of the life of the country.

Globally the population of older persons is growing by 2 per cent each year, considerably faster than the world population as a whole. For at least the next twenty-five years, the older population is expected to continue growing more rapidly than other age groups. The growth rate of those 60 or older will reach 2.8 per cent annually in 2025-2030. Such rapid growth will require far-reaching economic and social adjustments in most countries. As the pace of population ageing is much faster in developing countries than in developed countries, developing countries will have less time to adjust to the consequences of population ageing. Moreover, population ageing in the developing countries is taking place at much lower levels of socio-economic development than was the case in the developed countries. Today the median age for the world is 26 years. The country with the youngest population is Yemen, with a median age of 15 years, and the oldest is Japan, with a median age of 41 years.

As it has been said earlier, the growth of life expectancy and falls in mortality and fertility rates lead to the ageing of the European society. Mortality was reduced due to the decrease in infant mortality (caused by government intervention and the changes of the ages of women giving birth) and the fall in adult deaths of infectious diseases. The fall in fertility was a “Europe-wide phenomenon” [3], caused by the rise of the opportunities accessible to women on the labour market and the society in general. The raising of children had a very high cost, because it was perceived that children prevented their mothers from being able to build a career become successful in business.

Another aspect of the changing populations is its influence on pensions. We can look into the experience of various European countries. The general scheme of European pensions was based on the principle that taxpayers pay for someone else’s pension and the same people will get their pensions from other taxpayers when they retire. This scheme connects the existing country’s labour force and the number of pensioners in need of payments. It also results in the fact that the reduction of funds results in the increase of the pension age, thus reducing the number of pensioners to level them up with the labour funds. But, as the number of pensioners increases and is much higher than the age of working people, we are at a contradiction and problem: the ever shrinking number of taxpayers must fund the pensions for the ever increasing number of retirees [4]. But there are some positive economic aspects to this issue. The demand for manual employment, which could not be undertaken by older people, is falling relative to the demand for service employment, some of which could. When the population ages, the participation rate increases. In addition to that, many older workers have high levels of human capital, a high level of experience and good traditional education. Population ageing did not lead to a reduction in expenditure on education, as it might have, because educational expectations rose.

As the wellbeing of the European society was rising, the cost of a human life was valued more than ever before, especially more than before The Second World War. So, people started to pay attention to the society, human rights and other similar factors. For example, European social security programs appeared only towards the end of the Industrial Revolution, but spread after the Second World War. And in the XX century, as worldwide integration occurred, attention to peoples’ lives also increased, and thus people lived longer and healthier lives, whereas before that people practically were left to themselves without outer help. As government involvement expanded, the population could count on its help and therefore live longer. In all European countries a decrease in worked hours per year was observed, and this decrease reflects the improvements in European working conditions. We can deduct that this innovation was introduced by the governments, because no employer would deliberately reduce working hours for employees because it would be inefficient for production and would result in the reduction of the output.

There occurred a decline in total fertility rates across absolutely all European countries from 1950 to 2005. Even Portugal, which had the highest fertility rate in 1950 (3.08), by 2005 achieved levels, which were the same in all countries (1.5 – 1.9). As China grew its population, Europe did not, partly because of the spread of women’s rights and the openness of the labour market for women. As women’s rights spread across the world, they now had to make a choice – either children or build up a career. This way, many women chose a career over children and the fertility rates lowered. Fertility remains low up to present day, and the European population growth index (fertility minus mortality) is close to zero, which shows that the population is not growing naturally.

The share of those aged 60 and over has risen from only 8% of the world population (200 million people) in 1950 to around 11% (760 million) in 2011, with the dramatic increase still ahead as those 60 and over aged people is expected to reach 22% (2 billion) by the year 2050.[5]

These are some statistical data calculated by the World Economic Forum [6]:

· At the global level, the share of those 80-plus has edged up from 0.6% of world population in 1950 (15 million) to around 1.6% of world population (110 million) in 2011, and is expected to reach 4%(400 million) by 2050.

• The global population is projected to increase 3.7 times from 1950 to 2050, but the number of 60-plus will increase by a factor of nearly 10, and the 80-plus by a factor of 26.

• Between 2010 and 2050 the total population will increase by 2 billion, while the older population will increase by1.3 billion.

• Women account for about 55% of the 60-plus group, rising to 64% of the 80-plus group, and 82% of the 100-plus group. On average, women outlive men by nearly 4.5 years.

Population ageing presents a cultural problem. The dramatic increase in the numbers of people who are making it to their 80s, 90s and beyond is generating a profound mismatch between the cultural norms that guide us through life and the length of our lives. Humans are creatures of culture. We look to culture to tell us when to get an education, marry, start families, work and retire.

In the early 1970s the share of pensioners in the Soviet Union was only 12% of the total population. Now retired people can account for more than 25% of the population of Russia (over 38 million). The percentage of elderly people is growing from year to year due to natural wastage - the nation is aging rapidly, and the trend seems inevitable. Because of the high mortality and low fertility in 2050, Russia's population could reach a total of 100 million people (instead of 142 million, the current population) [6]. It is considered that the Russian life expectancy figure is a special case, with deaths from excessive drinking falling substantially when Gorbachev increased the price of vodka in 1985 - 1986. During this brief period, life expectancy grew by three years for males and one year for females. It also briefly rose (by 5.7 and 3 years) during the economic crisis of 1991–4. In other words, the further reduction in cardiovascular disease depended partly on individuals changing their behavior.

Table 1. Population of Russia, 1926 – 2010.

	1926	1939	1959	1970	1979	1989	2002	2006	2007	2008	2009	2010
Total population	92681	108377	117534	129941	137410	147022	145167	142754	142221	142009	141904	141914
Population of a given age:
Younger than working age	36854	42072	35094	37145	31974	35995	26327	23317	22718	22497	22541	22854
Working age	47830	56923	68609	72752	82959	83746	88942	90328	90152	89752	89266	88360
Older than working age	7945	9362	13827	19987	22436	27196	29778	29109	29351	29760	30097	30700

Source: Russian Bureau of Statistics. [7]

We can see from the table that the overall population has been increasing from 1926 – 1989 and was at a relatively same level from 1989 onwards. But the number of people older than the working age has been constantly increasing. Using simple mathematical operations, we may calculate that in 1926 the percentage of people older than the working age of the total population was 8,57%. In 2010 the same figure was 21,6%. This is a great increase. We may only conclude that this trend is likely to continue.

Now we shall consider some countries of Europe. Table two has statistical information on all countries in the European Union, grouped into indicators of 1990 and 2010, a twenty-year span.[8] Each country is denoted by a two-letter code. Upon considering this table, we can see that in absolutely all countries the portion of the population aged 0 – 19 years decreased, at different rates, but nevertheless decreased. At the same time, the portion of the population aged over 65 increased in all countries. Though the portion is not as in Russia (21,6%), Italy and Germany have relatively comparable indicators. Germany and Italy had the most growth of old population. Germany is the most developed country, which bailed out Greece during the crisis was most affected by this problem. But, apart from Germany and Italy, the problem of population ageing is seen in every country of Europe, it is a ubiquitous occurrence.

Population ageing is a global economic, demographic and social trend, which affects most countries of the world. Technological advances of recent decades, such as the invention of antibiotics, heart disease medicine and etc. etc. have been able to let people live longer lives. If in the XIX century it was considered normal to die at 50 or 60 years old, now people may live up to 80 or 90 years and nobody would be shocked, everyone is used to it. This is regarding the increase of life expectancy.

But the change if the life perceptions have changed during the last 50 years. The social place of the woman has changed dramatically. Women have equal rights; they can pursue jobs and careers, not stay at home and be housewives. This delays the birth of children, some women decline children altogether in favor of research and careers.

These two forces act reinforcing each other, leading any country into having an older population. Russia and Europe are no exception, with a high percentage of people on pensions, and radical policies are to be implemented in order to change the situation. Basing on the statistical information, we saw that indeed, this is an ongoing problem, which affects most counties in the world and has to be given a large portion of the world attention.

List of references:

1. Medkov V.M. Demography. - M.,:Infra-M. 2003.

2. Nikishin A. “Vodka and Gorbachev” – M, All-Russia, 2007

3. Broadberry S. Cambridge Economic History of Modern Europe. Cambridge: Cambridge University press, 2010.

4. Conway E. UK's aging population is a bigger economic threat than the financial crisis // The Telegraph, 12.02.2010,URL: www.guardian.co.uk Date of access 15.10.2012

5. “World Population Ageing 1950-2050” United Nations Report, 2010 URL: http://www.un.org/esa/population/publications/worldageing19502050/, date of access 02.10.2012

6. “Global Population Ageing: Peril or Promise?”, World Economic Forum, 2012, URL: http://www.weforum.org/reports/global-population-ageing-peril-or-promise date of access 02.10.2012

7. Russian Bureau of Statistics (GKS) URL: http://www.gks.ru/wps/wcm/connect/rosstat/rosstatsite/main/, Access date: 15.11.2012

8. Eurostat. Demography report 2010, URL: http://epp.eurostat.ec.europa.eu/portal/page/portal/product_details/publication?p_product_code=KE-ET-10-001, Date of access 15.11.2012