New World Bank report looks at both the challenges and opportunities of an aging population
VIENNA, June 17, 2015 – Societies are aging across Europe and Central Asia, but individuals are not – a demographic trend driven primarily by declining fertility rates rather than increased longevity, says the new World Bank report, Golden Aging: Prospects for Healthy, Active and Prosperous Aging in Europe and Central Asia.
Launched today in Vienna at the Ministry of Finance, the report finds that the social and economic consequences of aging societies are complex and diverse – but not necessarily negative. The report identifies significant opportunities in a range of policy areas which, if fully seized, can help societies foster more active, healthy, and productive aging.
In demographic terms, Europe and Central Asia is the oldest region in the world. In Central and Eastern Europe, the average age of the population is 10 years higher than the rest of the world, while relatively young countries such as Turkey and those in Central Asia are catching up fast.
In many countries across the region, people are adapting to the new demographic shift, but there is also much concern and apprehension. A common perception is that pensions and health systems will come under pressure because an increasing number of elderly people will be dependent on the contributions of fewer workers to sustain these systems. The report suggests, however, that if governments enable individuals to participate more and longer in the labor market, dependency ratios could in fact remain quite stable.
“A long-held belief is that aging populations tend to go hand-in-hand with economic decline,” said Hans Timmer, World Bank Chief Economist for Europe and Central Asia. “However, a smaller size of young cohorts opens the opportunity to equip them with better quality education and more capital, ultimately boosting their productivity.”
Furthermore, productivity does not inevitably decline with age, while skills often shift with aging. This report shows that firms can take advantage of these changes and increase the application of production techniques that use age-appreciating skills more intensively.
Aging societies are not destined to experience a stagnation or decline in living standards. However, the behavioral changes that help reduce dependency and sustain productivity do not necessarily happen automatically. A supportive environment, including the right incentives and policies, can facilitate this transition.
Indeed, in Europe and Central Asia, bold adaptive action is needed across many policy areas to support active, healthy, and productive aging. These areas include much more than reforming the intergenerational transfer and pension systems – they encompass, among others, shifting health systems toward preventive care, primary care, and more diagnostics; reforming educational systems to bolster the cognitive skills needed for productive employment along longer working lives; and reforming labor market institutions to allow women to reconcile family and career goals, and older people to work more flexible hours.
“The report gives an excellent overview of the various challenges European and Central Asian countries face due to an aging society,” said Hans Jörg Schelling, Minister of Finance of Austria. “The problems are, in fact, not new, but European policy makers are still struggling to define the right policy mix to allow for a decent aging of our population today and in the future. The findings of the report are valuable contributions to the ongoing discussion for economists and policy makers alike.”
A successful policy package for aging societies must be sustainable and equitable, covering the whole lifecycle – supporting education, families, work, and retirement. If this happens, the report concludes, societies in Europe and Central Asia can move closer towards what ancient mythology describes as “the Golden Age” – a state of harmony, stability, and prosperity where people live long and healthy lives.
For an online copy of the report and related information, please visit: www.worldbank.org/en/region/eca/publication/golden-aging