Demographic Shift. A Focus on Need-Based Policy.

Aggregating data from all countries, the typical age of a person is approximately 30 years. Does this mean that the average age within each country is 30? Let’s take a look at two graphics showing the average age of individuals in African and European nations: (1)

Why are African populations so much younger than European populations? What factors might result in a nation having a higher or lower average age and how should legislators consider average age when making policy decisions?

Before I continue building this article, I want to bring up some summary data. The nations with the highest average age include: Monaco with 55.4 years, Japan with 48.6 years, Germany with 47.8 years, Italy with 46.5 years, and Greece with 45.3 years. (2, 3) The nations with the lowest average age include Niger with 14.8 years, Uganda with 15.7 years, Angola with 15.9 years, Mali with 16.1 years, and Chad with 16.1 years. (4) For some context, the average age in the United States is approximately 38.1 years.

Let’s look at this data graphically: (5)

While the average age in Europe is 42, the average age in Africa is 18. Furthermore, within Asia, average ages differ greatly by country: Japan has an average age of 47.3 while Afghanistan has an average age of 18.8. This difference in average age means that while only 25.5% of the population in 2020 came from Sub-saharan Africa, this proportion will increase to approximately 43.7% in 2100.

To further explore the causes and repercussions of deviations in average age, I will narrow my focus to two nations: Japan and Italy.

So why is this data so important: what are the factors that result in a nation having a low or high average age?

Let’s start with a low average age.

Most nations with a low average age also have young, developing economies. (6) These nations tend to have newer healthcare systems and underdeveloped economies, resulting in individuals in these nations having lower than average incomes. (7) Newer healthcare systems in these nations are less likely to provide long-term care for chronic conditions, decreasing the average lifespan. Conflict also tends to be more prevalent in these nations driving the average age down as a result of higher adult mortality. The correlation between GDP per capita (economic output per person) and fertility rate is highly documented. GDP per capita is an economic measure of total national output divided by population; a higher GDP per capita signifies a more developed economy, longer life expectancy, higher literacy rates, better health outcomes, and higher standards of living. (8)

Thus, the graphs below should come as no surprise; GDP per capita is inversely related with fertility rate and because nations with a higher fertility rate have larger adolescent populations, we see that fertility rate is inversely related with median national age.

Let’s move to higher average age. This is where I will focus my attention.

Most nations with a high average age have developed economies with high GDP per capita values, signifying strong healthcare systems, high life expectancies, and generous salaries. (9) Because these nations have strong economies with opportunities for education and employment, the fertility rate in these nations tends to be lower. Thus, the majority of the population consists of working adults. Furthermore, strong health systems in these nations result in longer lifetimes, further raising the average age.

How does a higher average national age influence other sectors, specifically the economy and healthcare?

• Nations with a higher average age tend to be less economically productive as the average worker age increases. In fact, a RAND study finds that a 10% increase in the proportion of a population older than 60 decreases GDP per capita for that nation by 5.5%. (10)

• Nations with a higher average age also suffer from a shortage of workers as more and more individuals reach a point at which they are unable to work. A decrease in worker supply creates an employment shortage in economies reducing business productivity. (11)

• Nations with a higher average age tend to spend more money on healthcare. Elderly individuals are more likely to require long term care services for chronic conditions. (12) In the United States for example, elderly individuals over age 55 accounted for 56% of total 2019 health spending while only constituting 30% of the population. (13) Nations with older individuals thus must spend more on long-term care, sacrificing investment in other sectors of the economy.

• Finally, nations with a higher average age tend to struggle more with infectious disease. Because immune system strength declines with age, mortality rate from infectious disease is higher in nations with higher average age. (14) Thus, these nations must allocate more resources to deal with different types of disease in order to contain and prevent disease mortality.

Two nations that have a high average age are Italy (46.5 years) and Japan (48.6 years). So what have these two countries done to address the changing needs of their populations?

Included below are comparative graphs illustrating the distribution of population across various age ranges in Uganda and Italy. (15)

The population of Uganda is centered between the age range of 0-20 with the greatest proportion of the population coming from children aged 0-4. The population of Italy is more symmetrical with a center between the age range of 35-54 and the greatest proportion of the population between ages 45-49.

Let’s focus first on policies implemented by the Italian government.

• The Italian government has implemented a pension reform plan increasing retirement age, incentivizing employment amongst older individuals, offering retirees flexibility in terms of pension options, and using the “Fornero Formula” to calculate pension benefits based upon points accumulated throughout employment. (16)

• The Italian government has increased funding for long-term medical care, using taxes to pay for nursing homes and living assistance programs. (17)

What has the Japanese government done to address this crisis?

• The Japanese government is considering increasing immigration to effectively expand the nation’s workforce and reduce average age. (18)

• The Japanese government is also increasing investment into technology that may support the growing population. This technology will help elderly individuals with daily tasks while also providing individuals with an opportunity to retire later in life. (19)

• Lastly, the Japanese government has expanded healthcare insurance for elderly individuals, similar to what was done by the Italian government. Funded using premiums and taxes on younger individuals, this system pays for nursing homes and living assistance programs for the elderly.

In both Italy and Japan, an interesting “gender-employment” shift has occurred, possibly as a result of increasing average age. More males in these nations have opted to remain at home while the labor force participation rate amongst females in these nations has increased. (20)

We’ve taken a brief look at the structural changes implemented in Italy and Japan to deal with increasing average age, but can we compare the two nation’s responses to this crisis?

The Italian government has updated their pension system to incentivize elderly individuals to remain employed, developed systems to provide primary and preventative care for the elderly, and built societal programs to create multigenerational communities; on the other hand, the Japanese government has focused on providing comprehensive healthcare for the elderly, increasing employment for older individuals with technology and incentives, and developing support networks in local communities. Both programs appear similar in that they focus on employment, healthcare coverage, and social support. However, while the Italian government’s plan is structured around fiscal reallocation to provide resources to the elderly, the Japanese government’s plan prioritizes expanding the economy by increasing immigration and advancing technology.

While both plans are now reaping benefits, as the Italian and Japanese populations continue to age, the Italian plan will likely require more resources and budget cuts from other economic sectors. The Italian response involves using government funding to pay for employment and healthcare programs for the elderly while the Japanese program involves increasing the workforce and expanding economic production with immigration and technology. Over time, the Japanese program will likely require less maintenance. Immigration into Japan will expand the labor force, increasing production. Additionally, technology increases productivity enabling individuals to produce more, increasing economic growth. It is important to note that these programs were established in the past few years and it is difficult, if not impossible, to definitively state which legislative approach will be more sustainable in the long-term.

Before I close this article, I want to provide some context as to what the US has done in response to this issue. The average age in the US is rising, yet this issue is not nearly as prevalent in the US as it is in Italy or Japan. As it stands, the average age in the US is approximately 38.1 years. However, between 2000 and 2040, the proportion of the US population aged 65+ will double to 80 million and the proportion aged 85+ will nearly quadruple. (21) Thus, the US government has worked proactively developing a framework to deal with rising age; this framework focuses on 6 sectors: retirement, long-term healthcare, technology, immigration, budget, and wellness. (22)

US Social Security and Medicare programs have been put in place to provide financial and healthcare services to elderly individuals. However, as these programs expand to accommodate the growing elderly population, policymakers must work to ensure that enough money is allocated to these programs. American legislators have made additional adjustments to stabilize the economy while providing for older individuals. Programs have been created to incentivize older individuals to remain employed. (23) Legislators have also attempted to increase the budget for living assistance programs while expanding affordable healthcare for the elderly. (24) American policymakers are also experimenting with firm incentives to increase employment and earnings for the elderly as a means of stabilizing the US workforce and maintaining economic growth. (25)

In the future, populations are expected to continue increasing in age. While this is less of an issue for nations such as Niger, Uganda, and Angola, countries with an average age near the mean will soon face the same issue as Italy and Japan.

Thus, the challenges faced by Italy and Japan serve, not as a case study, but as a lesson plan for other nations moving forward. Public health professionals, economists, and policymakers have much to learn about supporting growing populations while maximizing wellness and fiscal stability. As we continue developing innovative strategies to tackle this aging crisis, hopefully we can find an effective means of providing for aging populations while fostering economic growth, maintaining sustainable healthcare systems, and ensuring financial stability for both individuals and society as a whole.