Demographic crisis looms for Europe's emerging markets

By bne IntelliNews July 16, 2015

Francesca Moll and Henry Kirby in London -

 

Europe’s emerging markets face “heart-stopping” demographic challenges, according to a report published by a leading British university. Academics at Green Templeton College, University of Oxford, predict that the share of Russia’s population older than 65 will double over the coming decades, growing from 13% to 26% by 2050.

Emerging markets everywhere - not just in Eastern Europe and Central Asia, but also Asia and Latin America - will “soon have more old people than young people”, as they endure “a demographic transformation unprecedented in human history”.

Emerging market populations are ageing “six times faster than in higher-income countries”, according to “Ageing in Emerging Markets”, a report published by the Emerging Markets Symposium at Templeton Green College, sponsored by C&C Alpha Group. Governments are “not planning adequately for increasing longevity” and “are relying on out-dated or imported policies", the report warned.

“While populations in Western Europe transitioned from being relatively young to relatively old in 150 years, emerging markets … will make similar transitions in about 25 years,” said Ian Scott, Executive Director of the Emerging Markets Symposium. “Borrowing existing policies from developed economies that have aged more slowly will not work”.

Calling for the adoption of “national ageing policies in emerging markets” - including scrapping mandatory retirement ages - the report highlights that in Poland and Turkey, over-65s will comprise 32% and 21% of their respective populations by 2050, up from just 14% and 7% in 2010. The share of over-65s in the US will be just 20% by the middle of this century compared to 14% in 2010, the reports says, with America ageing at a much slower rate.

While stressing demographic challenges to come, the authors also cite data showing that, over recent decades, emerging markets have generally aged less slowly than their Western counterparts, including in CEE/CIS.

From 1990 to 2010, the number of Russians, Ukrainians and Kazakhs over 65 grew by 24%, 17% and 12% respectively, compared to a European Union average of 34%. In Estonia and Lithuania, while over-65 numbers rose by a relatively low 24% and 18%, these countries working-age populations also fell by 15% and 13%, worsening their dependency ratios.

The report warns of “growing disjunctions between longevity and retirement ages” in emerging markets”, highlighting that “some people now spend more time retired than working and many more will do so in future”. The “viability of social security systems will increasingly be threatened, as longevity continues to rise”.

Current social provisions across many emerging markets will be rendered “risible anachronisms”, the authors predict, while recommending “more realistic” minimum retirement ages and incentives for employees to continue working beyond such minimum ages.

Pointing to “large informal economies” in emerging markets, and a general lack of pension provision, the report stresses that “many people …will have little choice but to work until they die”, while recommending greater social security provision to vulnerable older groups.

While warning of fragmented and underdeveloped healthcare systems, the report highlights a move away from traditional ideas of family-orientated care in some emerging markets. In Turkey, 42% of the population feel that “the government” should “bear the greatest responsibility for the elderly”, according to a 2014 survey, with just 22% citing “their family”. In Russia, these figures are 63% and just 10%.

The authors suggest, though, that emerging markets have “an opportunity to learn from high-income countries that have squandered the potential economic contributions of older people”. Less burdened by “tradition, convention and constraints to change", the emerging markets may be better placed to “capture the knowledge, experience, productivity and capacity” of older workers. Considering demographic shifts, the report concludes, “many people see the clouds but miss the silver lining".

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