Aging Challenge

Several countries face an aging challenge now and in the near future. The OECD provides some basic data, figures and projections. All data to calculate the aging challenge are more subject to change than they used to. The Covid-19 rise in mortality rates has implications as the number of premature deaths of the elderly (65+) has risen even in the economically advanced countries. The so-called old-age dependency ratio is a widely used indicator to assess the charge or pressure on the working-age population (20 to 64) to finance those in retirement (65+). demographic ratio is defined as the number of individuals aged 65 and over per 100 people of working age defined as those at ages.
Major factors that have an impact on the ratio are mortality and fertility rates as well as migration, but also participation rates in employment for those younger than 20 or older than 65 years of age. Seminal shifts in participation of women in the labour force contribute also to reduce the old-age dependency ratio. An influx of about 1 million of refugees who have immediately a work permit like Ukrainians in Germany have a substantial impact as well. Life expectancy is expected to rise again after the years of reduction due to Covid-19. In 2024 and 2027 these ratios do not move too much. Extending the time horizon to 2050, when people born in 1985 would start to retire shows more reason for concern. Whereas in 2024 France, Germany and Italy are still fairly close to each other (2.4 percentage points), the gap starts to widen as of 2027 (5.5 percentage points). In 2050 Italy is projected to have an old-age dependency ratio of 74.4%, about 20 percentage points higher than France.
Okay, in the long-run we are all dead, says an economist joke, but changes to increase fertility or allowing more migrants in are not in sight for Italy. Therefore, the urge to react is increasing there. Younger generations might not be able or willing to foot the bill of high pension expenditure in Italy. Compared to Italy or even Japan the pressure on France is much less pressing, contrary to the national government’s opinion and policy initiatives to increase retirement age without parliamentary majority.
Source for projections and figures: OECD (2023), Old-age dependency ratio (indicator). doi: 10.1787/e0255c98-en (Accessed on 04 October 2023).