For many young people there is no time like the present when thinking about their life. When we are young we tend to think about how happy we are now and not ponder too much on what our quality of life will be like later. Most people using the OECD Better Life Index are below 65 years-old, and people of working age (20-64 year-olds) make up the largest part of the population, outnumbering the elderly (65+ years) four to one.
But a look into the future gives a very different picture. Life expectancy at birth is already approximately 80 years among OECD countries, a gain of more than 10 years since 1960, and the average fertility rate of 1.74 is below the replacement rate. This means that the population is getting older and it is projected that by 2060 there will be fewer than two people of working age for every one of pension age. So instead of just thinking about how our life is now, we should start thinking about how it will be in the future.
A look at how life is for the elderly of today gives us a mixed picture. OECD Pensions at a Glance 2013 identifies income as a crucial factor in determining how life is going to be in our twilight years. Recently, OECD countries have had some success in this domain, with the average poverty rate among the elderly falling from 15.1% in 2007 to 12.8% in 2010, in spite of increasing poverty rates suffered by the rest of the population due to the crisis. Incomes of people aged 65 years and older in OECD countries reach about 86% of the level of disposable income of the total population. But just as for other issues, there is a gender gap among the elderly. As women live longer, they are more likely to end up living alone on a low income in their old age, and are therefore more at risk of poverty.
Our health and social support networks (friends and family) are other important measures that affect our well-being later on in life. Not surprisingly, the elderly are among the least satisfied with their health. But they are also the least likely hang out with friends, with 20% of people aged 65 and over reporting no contact with friends. Access to public services is particularly important for our older people, as they need more care than the rest of the population.
With spending on long-term care sometimes exceeding 60% of disposable income, we have to find new ways to sustain ourselves in old age. In some cases this has led to some rather drastic solutions. In Switzerland, the prices for care are so high (between USD 5 000 and USD 10 000 a month), some families have resorted to the rather controversial solution of exporting Grandma and Grandpa abroad to more affordable retirement homes as far away as Thailand. Coincidentally, Switzerland also has one of the highest old-age income poverty rates (22%) in the OECD. In Korea, where the population is ageing rapidly, families have come up with a less extreme alternative. They have managed to work around the strains of taking care of their older relatives by using the new Ubiquitous Health House system (uHouse) that relies on Internet technology to monitor their loved one’s health. This allows families and the elderly to maintain privacy and independence while facilitating family care, and is designed to substitute for hospital service.
So as an ageing population and the effects of the crisis continue to put pressure on pensions and the quality of life of the elderly, we should all be asking ourselves, how life will be when we are older?
The hardest job I ever had was as a nursing assistant in a psychiatric hospital. On a typical shift, five or six of us would look after 60 patients or more. This was the usual staff:patient ratio throughout the establishment, except in the section for the “criminally insane”. In such conditions, the care philosophy was brutally simple. As a colleague explained on my first day, “If they move, we give them drugs. If they don’t move, we give them electric shocks”.
The hospital had been built as a lunatic asylum in the 19th century, on a moor that was miles from the nearest village. It looked exactly as you’d expect: a grim fortress with bars on the windows and locks on the doors. Our job wasn’t really to look after our patients, we looked at them to make sure there was the same number at the end of the day as at the start.
Except in the geriatric ward where I worked for a few months. Many of the patients were bedridden, and the nurses took great pride in the fact that not one of them ever got a bed sore. We even healed some horrific wounds that had become gangrenous. Some of the people I met there made me realise that in calling their institutions “asylums”, the Victorians were stressing something positive. An asylum is a place of refuge, maybe a last resort, and some of our men (the regular staff always called them “our men”, never our patients, inmates, cases, clients…) had nowhere else to go.
One man had lived on the road for nearly 30 years, making sure he got sent to prison for the winter until finally a magistrate told him he was too feeble to look after himself. The only place that would take him was the psychiatric hospital. Another man was paralysed by Parkinson’s disease and his wife couldn’t cope. A third had spent his whole life locked up after being abandoned as a baby because he had Down syndrome.
The majority of the men had a combination of psychiatric and other conditions – Alzheimer’s, alcoholism, schizophrenia, various degrees of paralysis, and so on. What they had in common was the need for the long-term care the hospital provided. It’s a need that’s going to grow, with the number of people aged over 80 in OECD countries doubling between now and 2050. The share of the over-80s will rise from 3.9% of the population now to 9.1% in 2050, and from 4.7% to 11.3% in the EU-27.
The OECD and the European Commission have just produced a report on monitoring and improving quality in long-term care. If you’re worried about growing old, A Good Life in Old Age? will do nothing to reassure you. “…at least one in two people admitted to hospital from a care home setting are at risk of malnutrition… at least 30% of older people in acute hospitals and 40% of older people in care homes meet the clinical criteria for a diagnosis of depression… There is no sign of a consistent decline in the incidence of physical restraint use… two-thirds of LTC [long-term care] users in institutions were exposed to one or more medication errors… one old person dies due to a fall every five hours… Pressure ulcers are known to affect a large number of LTC recipients in nursing homes…”.
So, what can be done, other than head north to cast yourself adrift on an ice floe before global warming melts them all? A Good Life in Old Age? suggests a combination of regulation; standardization and monitoring; and incentives for providers and choice for consumers. However, most countries do not collect information on quality systematically, and if they do, their efforts are limited to information on aspects such as staffing and the care environment, what the report calls “inputs” rather than the outcomes for the person’s health and well-being.
The OECD and EU are right about the importance of attitudes and behaviours in the quality of care, even if they use the hideous expression “leveraging consumer choice and centeredness” to say so. Apart from depression, I never came across any of the issues listed above, because the people I worked with were “consumer centred” even if the consumers in question had no choice.
That experience convinced me that it’s possible to provide quality care even in a highly unfavourable setting. The OECD-EU report suggests that there are plenty of solutions to help do so now and in the future.
Regular Insights blogger Brian Keeley is in Beijing, from where he sends this post.
You can sum up the hottest question on China’s economic future in just four words: Hard or soft landing.
At the moment, most people seem to think China’s economy isn’t about to hit a brick wall. Yes, the phenomenal growth rate since the 1990s is slowing, but it’s still at a level most mature economies would envy. After a decade in which GDP rose by at least 9% a year, it slipped back to “only” a bit above 8% by the end of last year, according to the OECD. For the next decade, the OECD forecasts annual growth will hover at around 7%.
To some extent, such a slowdown is inevitable as any economy matures – after all, you can only build so many roads, bridges and airports. But some fear it could be a sign of worse things to come – in other words, the much-feared hard landing. As China is now in many ways the engine of the world economy, that would be bad news not just for Beijing but for the rest of us too.
These questions on the mind of speakers at last weekend’s China Development Forum in Beijing, not least that of Dr. Nouriel Roubini – the economist whose all-too accurate forecasts in the run up to the financial crisis earned him the nickname “Dr. Doom”. Given his track record, it probably wasn’t surprising that he saw a hard landing as “possible” but, he insisted, “not inevitable”. To guard against it, he argued, China must undertake economic reforms, most notably to encourage Chinese to spend more and save less.
Dr. Roubini pointed out that China was the only major exporter to avoid a recession in the wake of the financial crisis. That was due in large part to massive programme of investment in things like infrastructure and property development. But, he warned, that’s not sustainable. Indeed, to some extent, the chickens from this spending are already coming home to roost, most notably in falling property prices and signs of a credit crunch as a result of loose lending.
Combine this with weaker demand in China’s export markets, most notably in Europe, said Dr. Roubini, and it’s inevitable that “the model of growth has to change”. That makes reforms essential, he stated, and those reforms must aim to turn the Chinese consumer into a much more powerful driver of the country’s economy.
So, why do Chinese prefer to save rather than spend? There are many reasons, but one of the most important is the lack of an adequate social security net. Fall ill or lose your job in China, and you quickly realize the benefits of having a few yuan under the mattress. There’s a similar problem when it comes to pensions, a major concern for China’s ageing population; the one-child policy means many elderly parents and grandparents will have to rely on just one or two breadwinners for support.
Another factor is China’s currency, which is widely perceived as undervalued, although there’s debate over the scale of this. A relatively weak currency is good for China’s exports, but it makes imports more expensive than they should be, further weakening Chinese consumers’ spending power.
The valuation of the yuan is controversial, but in many respects much of what else Dr. Roubini had to say is not. Just last week, China’s outgoing Premier, Wen Jiabao, said the need for reforms was urgent, while China’s most recent five-year plan focuses a lot of attention on expanding the social security net and on reducing inequality.
Such concerns have been widely echoed in OECD work and were repeated again at the weekend in Beijing. Speaking at the forum, OECD chief Angel Gurría called for a bigger share of profits from state enterprises to go on social spending, and for more resources to go on education and training. Such measures would deliver both short and long-term benefits for workers and the economy, not least in the form of a more highly skilled workforce.
Encouragingly, there may already be some signs that China is beginning to rebalance its economy towards a greater dependency on domestic demand. An OECD report released at the forum pointed out that real household incomes rose by 10% in 2011 (and by more in the countryside), while the share of overall consumption in GDP increased for the first time in a decade, albeit only slightly. Nevertheless, there’s no question that the task ahead will be challenging. As Yang Weimin, a vice-minister for economic policymaking, stated at the forum, “these things cannot be achieved overnight”.
The OECD’s Chinese-language site – 网站 (中文)
“Don’t Stop Working!” Not our advice, but the headline on a Slate article about one of the world’s longest-running sociological studies. Back in the 1920s, the American psychologist Lewis Terman gathered together 1500 exceptionally bright boys and girls and began a study of their lives that would continue for eight decades. Today, only a few of Terman’s “Termites” are still alive, and final conclusions from the study are being published.
One aim of the research was to find out what makes some people live longer than others. The findings are interesting: For instance, the death of a parent in childhood had relatively little impact on longevity, but parental divorce did. Adults who were gloomy and neurotic as children also tended to die relatively young. But so did those who had been extra cheerful, perhaps because of a devil-may-care attitude towards smoking and drinking in later life. The real winners in the longevity stakes were the conscientious kids, those who as adults maintained “a fairly high level of physical activity, a habit of giving back to the community, a thriving and long-running career, and a healthy marriage and family life”, as The Wall Street Journal puts it. Hence Slate’s advice to keep on working.
That may also be music to the ears of governments, which increasingly want to see people working later in life. As the latest edition of OECD Pensions at a Glance reports, around half of OECD countries have already started, or are planning to start, raising “pensionable ages” – the age at which people qualify for a full pension. By 2050, the average in OECD countries will reach just under 65 for both sexes – that’s nearly 2½ years above the current age for men and 4 years for women.
A key reason for this move lies in the fact that we’re living longer. As a result, most of us will be living off pensions for much longer than our grandparents did. In 1958, a man who reached pensionable age could look forward to living for around another 13 years; by 2050, that number is forecast to rise to just over 20 years. The figures for women are perhaps even more striking: 17 years in 1958, but 24½ years – almost a quarter of a century – in 2050.
Paying for all this risks being a major strain on the taxpayers of the future, especially as there will be relatively fewer of them than today: In most OECD countries, declining birth rates mean that non-working over-65s will account for an ever larger slice of the population. In 2000, about a third (33%) of people in OECD countries were aged over 65; by 2050, that number is forecast to exceed 41%.
So, in all probability we’ll all have to go on working a bit longer. Not everyone’s happy with that: In France, unions argue the burden will fall unfairly on blue-collar workers. But it’s interesting to note that the higher retirement ages of the future will in some ways take us back to where we were: Over the second half of the 20th century, the average pensionable age in OECD countries fell by two years, before beginning to rise again in the 1990s. If the forecasts are accurate, by the time we reach 2050 it will be only about 3 months above what it was in 1948, or 64.6 years.
Coinciding with the China Development Forum in Beijing, the Insights blog is focusing on China this week
How many wedding dresses does it take to change the world economy? That’s right, lots. And how? High saving rates in certain countries, notably China, contributed to housing price bubbles and the global financial crisis. Shang-Jin Wei of Columbia Business School and Xiaobo Zhang of IFPRI have an intriguing explanation as to why China’s saving rate is so high (around 50% of GDP in 2007 just before the crisis started): blame it on the brides.
Or rather, blame it on “competitive saving”, one of the unintended consequences of the one-child policy, introduced in 1978 to slow population growth. The government claims that thanks to the policy, the population is three to four hundred million fewer than it would have been, but since families prefer boys, many of the missing millions are girls, including victims of female infanticide and sex-selective abortions.
The normal ratio of boys to girls is around 106:100, an evolutionary corrective for the fact that male babies are more likely to die. In China, however, the ratio is much higher. The exact figure is not known, but estimates range from 119:100 to over 130.
What is known though, is that there are now tens of millions more young men of marriageable age than women. So to improve their son’s chances, a family saves to be able to buy a nicer, better furnished house than rivals and give the young newly-weds a good start in life. According to Wei and Zhang, even families who don’t have a son to marry off have save as much, since prices are driven up. Families with sons save more than those with daughters, and savings rates are higher in regions with higher gender imbalances.
Another unintended consequence is the rapid ageing of the population. In 1975, just before the one-child policy started, there were six children for every person aged over 60. By 2035, there will be two over-60s for every child. Population ageing is happening all over the world, but it is happening much earlier in China’s economic development than in OECD countries.
As Richard Jackson and his colleagues at the Center for Strategic and International Studies point out, when the elderly share of the population was the same in the US as it is China today, per capita income was four times what China’s is at present. Some Chinese express the fear that the country will grow old before it grows rich.
China’s growth has depended on what some media like to call limitless supplies of cheap labour. But the working-age population will peak in 2015, and will shrink by almost a quarter by 2050, with an even sharper decline for people in their 20s and 30s. Total population will still grow, because people will live longer, and China will have an older population than the US in 2050.
Given that this elderly population will not be able to count on large numbers of children to support them, how will they live? The government’s goal is universal coverage for the basic pension system by 2020 and it has also taken a number of steps to encourage schemes to complement this.
Yet public pension coverage remains far from universal, and has large unfunded liabilities for early retirees from the state-owned sector. Moreover, benefits are not fully portable, so workers often have to choose between job mobility and retirement security, and the rate of return on personal pension plans is too low to replace a salary.
At the same time, the decline in the working-age population may allow employees to negotiate better pensions as part of their pay packages. Labour shortages have already been reported in some regions, partly because rural migrants who went home during the worst of the recession don’t want to come back. Last week, the Guangzhou Daily reported that the local authorities had raised the minimum wage from 860 yuan to 1030, a higher rate than Beijing even.
All this is leading to calls to abandon the one-child policy. Especially since China is now suffering from a phenomenon that has cursed every country that ever existed at every epoch in world history – kids today are not as nice as us. Or, as the People’s Daily complained last month: the one-child policy is breeding brats.
2010 年代的中国：经济增长再平衡和强化社会安全网 (Chinese version)