For better understanding the impact of RPA on the future of global economics, one should start by acknowledging the drastic demographic changes we are about to experience and their economic effects.
The “demographic earthquake”
A report published by the United States Census Bureau in March 2016 (He, Goodkind, & Kowal, International Population Reports, P95/16–1, An Aging World: 2015) makes it very clear that the world population is ageing. Life expectancy has had a spectacular growth after World War II, so this is not what’s new in the story. The novelty regarding the bad news of an ageing population arises from the sharpening inequality between the number of newborns and that of people older than 65. Less and less infants are born, while more and more people live over the age of 80.
From 2020 onwards people over 65 will outnumber children under 5. This doesn’t seem to be an outlier phenomenon at all, rather the beginning of a new demographic trend. By 2050 the percentage of people 65 and over will be more than twice the percentage of young children, this is, 15.6% compared to 7.2%. So, it’s not just that each and every one of us gets older, we are collectively growing older.
Zoom in on Australia
The sharpest disequilibrium between the young and the old is in wealthy countries, where life expectancy is highest.
According to the abovementioned report, Australia ranked 6th worldwide in 2015 with respect to life expectancy at birth for both sexes (82.2 in 2015, expected to reach 84.2 in 2050). It is also among the countries with the highest life expectancy at age 65 — around 20 years for both sexes. Moreover, according to a World Bank study, the median age of the population has been on constant rise since the 70s; from 2035 it is expected to be over 40. This means that there will be more and more elderly people around. How is their situation expected to evolve?
Currently, 14.5% of Australians over 65 (both sexes) receive long-term care. This percentage is higher than that of people over 65 who form an active part of the labour force (16.8% of the men, and 7.8%). At the same time, Australia is among the 5 OECD members whose poverty rates for older population exceeds 20% (more precisely, Australian poverty rate for people over 65 was 36%).
The global alarm signal applies equally well to Australia. What are we to make of this? What implications does the trend have? And what potential solutions are out there?
Economic effects of the demographic change
The ageing population is going to shift the global economic balance. It is likely to have a negative impact on the global economy, primarily because of the sharp decrease in labour force and of the rise in age-related government expenditure. If the population gets older will they still be able to work? Due to biological reasons, probably not for too long. Consequently, as labour force shrinks due to actually less demand for work, economic growth will probably be slower.
Szu Ping Chan, a business reporter for The Telegraph, synthesizes the core of the long term economical issue by saying that “The bloc will move from having four working-age people to pay for every pensioner to about two within 50 years”. Chan warns that “without change, countries may find themselves sleepwalking into a new reality of permanently lower growth and higher debt”.
The prospects of future demographic development and its economic implications call for action. The problem amounts to finding answers to two interrelated questions:
Who will work?
Who will care for the elderly when they are not able to work anymore?