The bigger picure of demographics?

This week's cover story in The Economist takes on the very interesting topic of how to deal with the fact that the composition of Western societies is changing; we are quite simply getting older. See the leader here and the corresponding special report here; (both walled for non-subscribers).

For the Economist the issue of the ageing workforce translates into labour/supply market issues. The main argument is that old people should be allowed to work more and longer so that we can take advantage of their abilities in stead of paying them dear pensions to stay at home.

"There are several ways of dealing with a falling supply of labour: work might be shifted offshore, to take advantage of abundant cheaper workers in poorer countries; laxer immigration rules might allow in more skilled labour from abroad; new equipment could enhance the productivity of a better-educated workforce. But one of the readiest sources of skilled labour is closer to hand."

All actors in society must help/reform so that old people who would otherwise been retired will continue to work. This means that governments, employers, and not least old people themselves will have to adapt.

"The question of how to deal with the growing number of retired people has recently been seen as chiefly a financial puzzle: how to pay for the leisure of those ageing layabouts. (...) But the issue is more than just a financial one: it raises social as well as economic questions, and its resolution will involve governments, employers and people.

In the special report more research and examples are presented which elaborate the main argument.

There is no doubt that the issue adressed by The Economist is an important one and the point is well made, in its simplest form that is. With Longevity and Life expentancy rising (where is in fact the ceiling?) it seems quite reasonable to expect old people to work longer; i.e. that retirement age will expand with some kind of proportionality to that of life expectancy. On that note the Economist's articles are right when they point to inertia in Western societies on this matter. Furthermore the simple fact that the workforce is ageing translates in to a demand that society is structured so that it can exploit the ressources and capabilities it actually has. 

But are we getting the bigger picture of Western countries demographic issues here?

To the extent that the scope of the Economist's cover story only to look at ageing populations as a demographic trend in the Western world I can accept the argument. But let me point you to another trend; declining populations. In short; Western populations are not only getting older but also giving birth to fewer children. This is an extremely important perspective and as early as last week The Economist's Europe-columnist Charlemagne had an interesting article about the fertility bust in Europe (walled for non-subscribers) based on a research paper by Hans-Peter Kohler, Francesco, C. Billari José, and José Antonio Ortega entitled "Low Fertility in Europe: Causes, Implications and Policy Options"; (from School of Arts and Science - Pennsylvania Univerisity).   

(from the paper) 

"The global population is at a turning point. At the end of 2004, the majority of the world’s population is believed to live in countries or regions below-replacement fertility, and the earlier distinct fertility regimes, ‘developed’ and ‘developing’, are increasingly disappearing in global comparisons of fertility levels 

(...)

It is clear that current social and economic institutions are not sustainable in light of these trends, and individual’s life-courses already have been—and will continue to be—transformed in response to reductions in fertility and increases in longevity. Adjusting to the demographic reality of the 21st century will therefore constitute a major challenge for policy makers and companies on the one, and for individuals and families on the other side."

Ending my post I will say that we have to realize that the Economist article on the ageing workforce merely scratches the surface of the larger problems pertaining to demographics in the Western world. Admittedly the attempt might have been just that, but by pointing to the low fertility rates which accompany the ageing workforce I am attempting to scracth just a bit further. In fact, moving the age of retirement and prompting old people to work longer might very well mean very litte if we want to get the bigger picture on Western societies' demographic reality.