Briefing to the Senate Special Committee on Aging May 21, 2007

Briefing to the Senate Special Committee on Aging

May 21, 2007

Adele Hayutin, Ph.D.Director, Global Aging Project Stanford Center on Longevity

ahayutin@stanford.edu

Why Population Aging Matters: A Global Perspective

Labor Force Implications and Pension Vulnerabilities

2Most advanced economies face shrinking workforces. The U.S. is an exception.

Source: United Nations 2004 medium variant forecast

Working-Age Population Growth, 2005-30

Working-Age PopulationGrowth, 2005-30

Moderate Growth (0% to 25%)Rapid Growth (25% to 50%)Too Fast (50% to 100%)Dangerously Fast (100% to 171%)

Shrinking (-29% to 0%)

3

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Working-Age Population; 2005=1.0

France

Italy

US

UK

GermanySpain

Note: Working age = 15-64Source: United Nations 2004 medium variant forecast

Shrinking labor forces will be the norm throughout Europe with only a few exceptions.

4

0.00.20.40.60.81.01.21.41.61.82.0

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Working-Age Population; 2005=1.0

Note: Working age = 15-64Source: United Nations 2004 medium variant forecast

China

Philippines

Pakistan

South KoreaJapan

US

India

South Korea and Japan face steep labor declines while Asia's young countries will see strong gains.

Mexico

5

0

5

10

15

20

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Rapidly declining worker-retiree ratios will be especially burdensome for low-income countries.Ratio of Working-Age Population to Retirement-Age Population

South Korea

India

China

Japan

Notes: Working age = 15-64; retirement age = 65+Source: United Nations 2004 medium variant forecast

US

Mexico

6There will be fewer and fewer workers per retiree.Ratio of Working-Age to Retirement-Age Population

16.2

15.711.912.0

14.8

10.85.4

11.94.1

9.3

3.33.4

13.310.7

8.57.3

7.08.2

5.3

5.82.9

4.12.7

2.01.9

9.76.64.74.53.73.53.43.33.02.92.62.61.61.41.4

11.9

7.6

15.1

6.6

3.3

0 2 4 6 8 10 12 14 16 18

AfricaPakistan

PhilippinesIndia

IndonesiaIran

VietnamBrazil

USMexico

UKChina

S. KoreaItaly

Japan

205020302005

Source: United Nations 2004 medium variant forecast

7

Source: United Nations 2004 medium variant forecast

The US has a growing supply of future workers.

0

50

100

150

200

250

300

1950 1975 2000 2025 2050

Age Mix (millions)

15-64

<15

65+

23%

0

50

100

150

200

250

300

350

400

1950 1975 2000 2025 2050

Total Population (millions)

<15

65+

15-64

8Japan and Germany face large workforce declines.

Source: United Nations 2004 medium variant forecast

Age Mix (millions)

0

25

50

75

100

1950 1975 2000 2025 2050

Japan

-33%

15-64

<15 65+

0

15

30

45

60

1950 1975 2000 2025 2050

Germany

-19%

15-64

<15 65+

9China's workforce peaks in 2015, while India faces continued strong growth.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1950 1975 2000 2025 2050

15-64

<15

65+

Source: United Nations 2004 medium variant forecast

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1950 1975 2000 2025 2050

China India

Age Mix (billions)

15-64

<15

65+

10

0.0

0.2

0.4

0.6

0.8

1.0

1950 1975 2000 2025 2050

More Developed Countries

15-64

<1565+

Source: United Nations 2004 medium variant forecast

Older countries face shrinking workforces; young countries face quadrupling of the older population.

0.0

1.0

2.0

3.0

4.0

5.0

1950 1975 2000 2025 2050

Less Developed Countries

15-64

65+

<15

Age Mix (billions)

11

10.1%

7.7%

4.9%

3.7%

2.2%

1.9%

1.8%

1.7%

1.3%

1.9%

0% 2% 4% 6% 8% 10% 12%

ChinaBrazil

IrelandS. Korea

JapanUS

GermanyUKEU

Mexico

Source: The Conference Board and Bart Van Ark, 2002 & 2004*Data for China and Brazil 1995-2001

Average Annual Growth in Labor Productivity, 1995-2003*

In most cases, productivity gains will be too small to offset large workforce declines.

12

Population in millions by five-year age bracket; males on left, females on right.Source: US Bureau of the Census and Bureau of Labor Statistics

Increased labor force participation could boost labor supply & help reduce dependency burden.

10 5 0 5 10

Total Population = 275.3 millionTotal Labor Force = 140.9 million

85%

85%

83%

59%

19%

42%78%

7%

Age100+95-9990-9485-8980-8475-7970-7465-6960-6455-5950-5445-4940-4435-3930-3425-2920-2415-1910-145-90-4

U.S. Population and Labor Force Participation by Age, 2000

13Labor force participation of men aged 60-64 has declined despite their increased life expectancy.

-14%

-29%

-51%

55%

30%

30%

37%-77%

-80% -60% -40% -20% 0% 20% 40% 60%

JapanCanadaSweden

USUK

SpainItaly

GermanyDenmark

NetherlandsBelgium

France

Source: David Wise, U.S. State Department Summit on Global Aging, March 15, 2007

% Change, 1960 to early 2000s

%Chg in Labor Force Participation Men Age 60-64

%Chg in Life ExpectancyMen at Age 65

PUBLIC PENSION INCENTIVES TO LEAVE THE LABOR FORCE FOR MEN IN 11 COUNTRIESPercent of men age 55 to 65 not working

Source: Gruber J, Wise DA, eds. Social Security and Retirement around the World. Chicago, IL: University of Chicago Press, 1999. Reproduced from Why Population Aging Matters, NIA 2007.

15The "youth bulge" is greatest in Africa and the Middle East.

Source: United Nations 2004 medium variant forecast

Young Adults (15-29) as % of Total Adults, 2005

0% to 25%

25% to 35%

35% to 45%

45% to 55%

Over 55%

Young Adults (15-29) as % of Total Adults, 2005

16Urban populations are projected to grow fastest in the poorest countries.

Source: United Nations, World Urbanization Prospects 2003 Revision

Urban Population Growth, 2005-30

1.0% to 1.5%

1.5% to 2.0%

2.0% to 3.0%

3.0% to 4.0%

4.0% to 6.0%

Urban Population Growth, 2005-30, Percent per year

< 1.0%

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