What was one impact of the increased western population on the nation?

One of the great achievements of the twentieth century is a dramatic rise in life expectancy. For example, life expectancy in the US has increased from 45 in 1902 to 75.7 in 2004 (link). Even in the past 50 years, life expectancy has risen in most western economies. However, increased life expectancy combined with declining birth rates have caused many to worry about the impact of an ageing population. Frequently, we hear about ‘a demographic time bomb’ and the fear future generations will struggle to meet an ever increasing number of retired workers and pension commitments. But, are we correct to be worrying about an ageing population?

Firstly, in the UK, the ratio of people of working age to people over 65 could fall from 3.7 to 1 in 1999 to 2.1 to 1 in 2040. (BBC) This suggests a very big increase in the dependency ratio and is consequently a cause for concern because with current spending pension commitments, it will place a higher burden on the shrinking working population.

However, others argue it is a mistake to base calculations solely on a fixed retirement age of 65. If life expectancy increases dramatically, you would expect a sensible policy is to allow some increase in the retirement age, e. g. keeping the same % of your working life for retirement. The UK government has already made tentative steps to raise the retirement age and increase the role of private sector pensions. These policies will make an ageing population more manageable.

In recent years, the impact of an ageing population in the UK has also been mitigated by a rise in net migration levels. Though with the UK’s exit from the EU, there is an expectation net migration levels will fall. An side-effect of this policy, will be a faster rise in the dependency ratio.