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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