The Aging Population

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Table of Contents

Introduction
Challenges posed by an aging population
Impacts on labour
Impacts on government spending
Impact of an aging population on healthcare
Government measures
Benefits of an aging population
Conclusion
References

Introduction

There has been a general trend of increase in the life expectancy of the population of many countries. This has been brought about by the governments taking measures to improve the quality of healthcare. Diseases which used to kill people in large numbers are now much more reduced; thus, the reduced mortality may be a factor that contributes to the increase in the proportion of the aged group.

However, there has also been reduced fertility of the people who live in most developed countries. Though in most developing countries the fertility rate is still high, these countries are expected to experience reduced fertility rates gradually until they reach a point where most of the population will comprise of mainly the aged.

Improvement in the healthcare systems of developing nations also leads to reduced mortality, thereby making the aged to comprise a sizeable population of the nations. However, increase in the aged population creates many economic and social conditions which government must be able to anticipate and devise mechanisms to help solve the issues.

Challenges posed by an aging population

The aging population poses many different challenges. Here we discuss the challenges posed by an aging population with four perspectives in mind.

Impacts on labour
Impacts on healthcare
Impacts on government spending

Impacts on labour

The increase in the proportion of the people who are old leads to a decrease of the number of people who are within the working age. This greatly affects the labour market of the concerned countries. Generally, the working age is approximately 15-64 years; and as the ratio of the aged population increases, the number of people who are retiring increases. However, the number of people who join employment to fill the vacancy left by the retired people is less than the number of people who have left employment.

This decline is due to the low fertility rates of the population (Groshen and Kliitgaard, 2002, p 2). This leads to a reduction of the workforce which is available to for economic development. Another important dimension to the problem is the fact that since most of the workforce is occupied by the aged leads to reduced output. This reduced output of the workers ultimately leads to reduced economic growth

Impacts on government spending

The aged population does not normally work for the government; they mainly depend on the social services provided by the government. These social services provided by the government are mainly the social security services and pension schemes as well as medical insurance cover targeting mainly the old population.

The pension given to the old is normally funded by the people who are in active employment; that is, the contribution that the working population makes to the scheme is used to pay the benefits of the retired people, a system known as the Pay-As-You-Go (PAYG). Therefore, reduction in the number of people who join employment leads to a reduction in the funds available to cater for pension fund payments.

Given that the proportion of people who are leaving employment through retirement is expected to increase greatly especially when the population which was born during the baby boom (1946-1964) reaches the retirement age (Zaidi, 2008, p 7), the government would be forced to look for funds from alternative sources. Therefore, the increased ageing increases the number of people who depend on the government to cater for expenses.

Medical insurance provided for the old is mainly categorized into two groups; Medicare and Medicaid. Medicare is specifically designed to help the provision of healthcare to people who are 65 years and above, and covers the cost of in-patient healthcare. Medicaid covers medical expenses of the poor regardless of whether they are aged or not.

It mainly covers for long-term and severe ailments of them. However, the main burden of the government due to Medicaid is the fact that most of the citizens in the middle-class do not have a sizeable saving to protect them from any health eventuality when they are old. These people will use all their assets in case of any eventuality, making them to qualify for Medicaid and leading them to be admitted into nursing homes.

However the increase in the cost of social insurance for the aged specifically medicare an medicaid has attracted so much political debate with the government being urged to curtail the increase so as to reduce the financial burden of the policies.

Impact of an aging population on healthcare

The aged people are usually faced with many ailments due to reduced ability of the body to fight against certain diseases. The diseases of old age are mainly due to the physiological and psychological changes which have occurred over time. These diseases include depression and certain types of cancer, among others; therefore, these people will occupy more bed space in hospitals. In addition, the aged population requires specialized care and hence more attention to be provided by the nurse or doctor.

Increase in the population of this people will therefore demand the deployment of more doctors and nurses in the hospitals; however, some of the aged people can be taken care of in nursing homes for the elderly. But due to the shortage of nursing homes, these people end up being hospitalized; leading to overstretching of the available facilities (Willis, 2008, p 26) .This increases the government spending on healthcare issues if it does not take appropriate measures.

Nevertheless, increase in the government spending in order to meet financial obligation posed by the increased aged population will lead to increased government debt if the government does not take effective measures to avert the problem.

Government measures

In order to address the problem of reduced workforce due to an aging population, most governments enacted policies which encourage people to work longer. This measure will help in increasing the number of people who retire late and thereby help in reducing the government’s financial obligations towards the old (Groshen and Kliitgaard 2002 p 3). Moreover, increased dependency also makes the government to increase taxes so as to cater for its financial obligations towards the old.

The government has set up measures to ensure that the aged continue to enjoy quality lifestyles even after retirement. These measures include setting up Medicaid, Medicare, Disability, Welfare and Supplemental Security Income.

Due to the extra financial burden of meeting the cost of social security of people, the government has proposed an increase in the age that the social security fund can be fully accessed. This reduces the term that a person will receive the benefits, thereby reducing the money that the government spends on social security (Aaron and Orszag, n.d).

Most governments have devised methods to reduce the money paid to the old as social security. This may be in the form of changing the methods used to increase the social security of the old so as to protect them from the effects of inflation. Some governments have also increased the retirement age so that people work longer, hence reducing the dependency on the government’s social welfare services.

The governments have also devised methods of improving the fertility rates so as to counter the challenge of reduced labour force posed by increase in old age population. The government does so in various ways; for instance, the government may give cash bonuses to encourage people to have more children, as well as encouraging immigration. These immigrants should be young than the mean age of the current population, who will be able to enhance the existing workforce (Foot, 2008, p 3).

Benefits of an aging population

Despite the fact that the aging population poses real economic problems to the government, the impacts of an aging population are somehow exaggerated. The aging population may indeed be of benefit to the government if government is able to cope properly with the problems and put appropriate measures.

The older generation who are richer than the rest of the community can get involved in community voluntary activities hence helping in improving the quality of life of the society. In addition, older generation people are also more law abiding than the young people; therefore, the increase in the population will lead to reduced crime as the older generation does not get involved in crime per se (Quadagno, 2010)

Due to the fact that an older generation leads to general reduction in population, the presence of a large proportion helps to combat high population growth and hence reduce the effects of uncontrolled population growth. There will be a reduction in the problems of poor housing due to overcrowding as the aged population will be able to afford decent housing.

This will have reduced impact of the problems that overcrowding causes on the environment. Moreover the aged population is also likely to get involved in voluntary activities some of which may be of benefit to the environment (Quadagno, 2010)

Lack of enough manpower in the labour market is also likely to lead to a reduction in the levels of unemployment and hence reduces the problems associated with unemployment. These include the reduction of poverty levels and crime associated with unemployed population. The increase in the aged population may also lead to reduced government spending on education, a major expense of that the government always foots (Quadagno, 2010).

Conclusion

The economic recession made governments to think of ways to cut back on their spending pattern. Therefore, since increase in ageing population increases the financial burden of the government, the government must devise appropriate mechanisms to deal with the problem.

Moreover, if the government properly understands the problems, it can be able to turn around the phenomenon so that it may be of more benefit to the whole nation. This is mainly through the enactment of proper legislation to help cope with the risks posed by the problems. Moreover, the most effective way of combating the problem would be through the gradual increase in the retirement age of the workforce to cope with the problem.

References

Aaron, H. J. and Orszag, P. R. (N.d). The impact of an aging population. Web.

Foot, D. K. (2008). Some economic and social consequences of population ageing. Web.

Groshen, L. E. and Kliitgaard, T. (2002). Live long and prosper: challenges ahead for an aging population. Current issues in economics and finance, Vol. 8, No. 2. Web.

Quadagno, J. (2011). Aging and the life course: An introduction to social gerontology. Boston: MA: McGraw-Hill.

Willis, E. and Reynolds, L. (2008). Understanding the Australian Health Care System. NSW: Elsevier.

Zaidi, A. (2008). Features and challenges of population ageing: the European perspective. Web.

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