‘The issues of age challenge the whole society and put the whole society to the test.’
― Simone de Beauvoir

In addition to climate change and digitalisation, ageing is one of the largest challenges facing society in the 21st century. Adverse demographic trends can be observed in almost all countries in Europe, as fertility rates are below replacement level in these countries. In addition to the fact that Europe today is the continent of empty cradles, it is well known that the world’s population is rapidly ageing.

The number and proportion of elderly people are growing in Europe’s population as a result of the decline in fertility and mortality rates. In theory, a longer lifespan may mean a longer productive career. The society can only reap the benefits of the ‘longevity’, long life, if it creates the necessary conditions. Therefore, reforming the pension system is closely tied with employment policy. The greatest impact of ageing can obviously be observed in developed countries, but the populations of developing countries will also become much older in the longer term (for instance, life expectancy has increased by nearly ten years in Sub-Saharan Africa since 2000, where average life expectancy today is 61 years of age).

Workforce ageing also presents a major challenge both in Europe and worldwide, as employees over 60 years of age will soon outnumber young employees. We have to cope with the serious problem that people aged over 65 will represent a large part of the population in developed countries in just a few decades from now, and demographic change leads to the emergence of new needs.

Projections made by the UN suggest that the number of people over the age of 65 will be 1.5 billion in the world in 2050, and approximately one third of the population will belong to this age group in developed countries. Life expectancy is expected to increase to 77 years of age globally, which was only 49 years of age in 1955.

‘There is only one solution if old age is not to be an absurd parody of our former life, and that is to go on pursuing ends that give our existence a meaning.’
― Simone de Beauvoir

Simone de Beauvoir was decades ahead of her time with her book ‘The Coming of Age’ that was published in 1970 and explores old age, as researchers have seriously tackled the issues linked to old age for not more than one or two decades.

Gerontology and geriatrics first emerged in the field of medicine, then the social and political gerontology evolved to study the social and political aspects of ageing and the aged. These disciplines are focused strongly on research. Ageing has biological and social-cultural dimensions. People have vastly different views and expectations with regard to their own ageing process.

An ageing society constitutes a major challenge and poses problems that can be solved through proper long-term planning. Ageing poses a three-fold economic problem: shortage of labour, increase in health costs for older people, and retirement pension funding.

It is not any wonder that increasing the statutory retirement age has been an ongoing issue regarding public pension schemes. However, the whole pension system needs a radical rethink. In the absence of improvement in employment rates — especially of older age groups — and in the absence of productivity growth, it will be difficult to preserve the current level of public pensions.

Thus, failure to raise the retirement age — since life expectancy is increasing — will create an increasing burden on pension funds. The proportion of contribution payers is decreasing, while the number of people entitled to a retirement pension is growing, and health problems furthermore increase with age.  Ageing thus creates an increased burden on health care and elderly care.

Health costs and amounts spent on services to improve the quality of life and the community life of older people also increase with age. Producer and services companies manifestly endeavour to keep up with changing demands.

Thus, health care, industries related to health promotion (healthy lifestyle, leisure activities, including, for example, retirement homes), the pharmaceutical industry and the insurance industry can take advantage of the strong tailwinds of demographic changes. Progress in medicine, biotechnology and robotisation can also improve the situation of the elderly.

Ageing and stock markets

Ageing may cause prolonged stock market declines due to the disappearance of previous investors. The shrinking young population means a lower demand for risk-bearing instruments, as fewer people opt for long-term investments to prepare for retirement.

On the other side, the growing number of elderly people can bring significant growth to companies operating in certain sectors in terms of business opportunities; the ageing of the population is often referred to as a megatrend. Older generations can have greater spending power in markets, and, what is more, a substantial part of the available wealth will also be concentrated in their hands. The private spending power of the elderly is expected to reach 15 trillion EUR this year and to increase rapidly in later years.

Germany has the worst demographic prospects in the EU

The German population stood at 70 million in the 19th century, before the Second World War. Germany today has a population of 82 million, which means that its population has slightly increased. Its population would decrease rapidly without immigration.  According to UN data, Germany would have been the seventh most populous country in 1955 if it had not been divided but was only the twelfth most populous country at the time of the German reunification. Germany is ranked 19th on the list of the most populous countries of the world.

Germany is in the worst demographic situation among the largest member states of the European Union. The analysts at Commerzbank projected that the sharp decline in the population of working age would have a negative impact on economic growth in the forthcoming period.

Fifty years from now, pensioners will make up more than one third of the population. According to statistical surveys, the population is ageing rapidly, while the birth rate is significantly falling. At the present rate, one third of German nationals will be over 65 years old by 2060. Fifty years from now, the number of people aged over 80 may be approximately the same as that of children and young people up to 20 years. In parallel, the population is declining rapidly, and Germany with a population of 82 million is projected to have a population of 65-70 million by 2060.

Unfortunately, ageing may be one of the greatest social and policy challenges of the coming decades, as the working age population is projected to shrink from 50 million to 33 million, which can have a substantially negative impact on the economic performance of the country. The pace of population ageing is particularly fast in the former East Germany. This is due to the significant drop in birth rates following the reunification of Germany.

Regrettably, economic conditions are still significantly worse in most eastern German states than in the west part of Germany, which explains the East–West out-migration of young people. Eastern German states have been hardest hit by unfavourable demographic changes. The outstanding western states, such as Bavaria, Baden-Württemberg and the German Federal State of Hamburg, compare favourably with the eastern states.

The populations of the western states have increased by 60% while the populations of the eastern states have decreased by 15% since the Second World War. The difference between the eastern and western states regarding population continues to grow, as foreign-born immigrants also prefer settling in the western part of the country.  This is mainly due to the fact that West Germany is more affluent and anti-immigration attitude is more common among citizens living in the former East Germany.

Germany is still facing a major challenge and is in great need of a well-developed demographic strategy.

The role of the European Union

Demographic changes are reshaping democracy and have an important impact on social prosperity. The crisis in recent years has put a spotlight on the migration issue, which is a complex and important issue indeed but can be argued to pose several threats to the future of the people in Europe. However, long-term goals ought not to be sacrificed for the sake of short-term benefits.

The European Union has a population of 500 million, well-educated working population, an integrated internal market and coordinated financial resources, it thus can play a crucial role to prepare European societies for these challenges, to provide protection against possible threats and to provide European citizens with a good — or even better — quality of life by the middle of the 21st century. However, it requires EU institutions to reconsider and adjust its priorities and sources of funding to meet real challenges, as well as to find allies among nation states and civil society. If the EU succeed in this, it will set an example to the world.