Economic and Sociocultural Implications of Population Aging.docx

**Economic and Sociocultural Implications of Population Aging** The notion when a person may be considered "old" is largely cultural. For one who lives in a young population with a low life expectancy, for example Burkina Faso in Africa where life expectancy at birth was 48 years in 2000, one may b...

**Economic and Sociocultural Implications of Population Aging** The notion when a person may be considered "old" is largely cultural. For one who lives in a young population with a low life expectancy, for example Burkina Faso in Africa where life expectancy at birth was 48 years in 2000, one may be considered old at 50. But in Japan with its life expectancy at birth of 81.5 years in 2000, a 60-year old is not necessarily "old." But regardless of age or life course stage at which the culture may define one to be old, the concerns of older people are the same across cultures. Foremost of these are the issues of diminished earning capacity and increasing risks of having health problems. Another issue concerns changing roles in society, such as grandparents assuming parental roles in the lives of their grandchildren. The consequence of having aging population can be measured demographically in the slowing down of the population growth rate and changes in the population age-sex structure. The economic and social implications, on the other hand, derive from the requirements of older people that must be addressed by any society. When there is an increase in the numbers and proportions of older people in the society, there is an increased in demand for services by a sector that for the most part is no longer economically active. **Economic Implications** In developed economies whose trajectory toward an aging society many, many decades ago when birth rates started to gradually decline, there was time to evolve social safety nets to guard against poverty in old age. This was done largely through the public pillar of the social security system whereby younger economically active members contribute to public funds through taxation and thereby provide pensions to those who are retired from the labor force. This ensures that older people meet their basic economic requirements through a system of public transfers such as the pension system and medical insurance, among others. Since most employed people work in the formal sector, most are able to contribute to this fund. Many developed economies used and continue to use a pay-as-you-go system. This is a system of collecting funds by taxing the working age population of today to pay the pension of the retirees of today. The amount of pension in developed societies is pegged to inflation and constitutes a fixed percentage of the last income prior to retirement. The amount of pension is therefore enough to cover basic expenses even if inflation rates become high. The system of public transfers worked well in these economies up to a certain stage in their demographic transition. While the economically active (i.e., those in the working ages 15 to 64) remained the dominant bulge in the population pyramid, these economies profited from having relatively fewer dependents (i.e., those who are not yet economically productive or the age 0 -- 14 years olds, and the no longer economically productive, the 65 year olds and over) and a large productive labor force. But as populations continue their aging trajectory, some of these systems of public transfers are on the verge of collapse. More and more people are now entering retirement age while the labor force continues to shrink. The new entrants to the working age population are progressively fewer owing in turn to fewer births. Returning to the concept of a pay-as-you-go system, there are indications that this system is not suitable for a population in an advanced state of aging because the number of working people who are contributing to the pension of the retired is proportionally smaller and they will need to contribute more to maintain the level of retirement pension required by today's pensioners. Moreover, the shrinking birth rates, future entrants to the labor force are projected to be even smaller than the current ones. This problem is now faced by some European societies like Germany and France. In most developing countries, the public pillar of the social security system is still largely in the budding stage. In the Philippines the Social Security System (SSS) and the Government Service Insurance System (GSIS) were established only early in the early '60s and covered only formal sector employees in the private and public sectors, respectively. Moreover, pensions are not automatically pegged to inflation rates. Thus, for those who contributed to the System when they were still working, pensions are not nearly enough to cover their basic economic needs after retirement. Because of the young population structure of the Philippines, there is no strain that comes from having too many old retirees relative to the working population. But the main problem is the amount of contributions that can be exacted from the working age population, given generally low wage levels and the large size of the informal sector that is not covered by this system. Based on survey data, only about 10% of elderly people who have reached retirement age in the Philippines were receiving pension in 1996. From the foregoing discussion, it is apparent that whether the population is aging or not, the economic needs of the elderly have to be addressed somehow. Using the public sector is only one way. Generally, developing countries with young populations rely on the traditional social support system of family and kin networks -- mainly children. The most common living arrangement is co-residence with kin, most often grown up children. The family group covers all the consumption needs of its members. As the productive capabilities of the old decline, they are supported by the work of their children, as they once supported these children and their own parents. This cultural ideal works for the most part but there are people who fall through the cracks in this informal system -- those who never had children, those whose children have died or moved, and those whose children do not earn enough to support their aging parents as well. Exacerbating the problem of economic insecurity is the cost of health care which tends to rise in old age. Developed societies have a formal system of health insurance to finance health care at all ages, not just for the elderly. This has the effect of pooling risks and distributing the actual cost of health care among those who pay into the system. By making enrolment into the health insurance system compulsory for all and requiring substantial contributions from members, the health insurance system can have a more comprehensive coverage of health-related costs for all the insured -- young and old alike. Again there is evidence of stress in the medical insurance system in societies with large aging populations because there are now more old people who require health care than there were when these systems were originally designed. Advances in medical science also make health care more costly. Longer life expectancies and more invasive (and expensive) life saving procedures usually translate to higher health care costs all around. Yet while the changes in the population structure brought about by aging put stress on the health care system by jacking up per capita health care expenses disproportionately among the old, the strain is mostly borne by the system rather than by the individual. In developing countries, health insurance, like social security, is also still in a developing state. While private health insurance has made inroads in countries such as the Philippines, the numbers enrolled are small and insignificant. Thus, for the majority, most if not all health care costs at any age are borne by the sick person and his/her family. It is not surprising then that among the major sources of worry among the old in the Philippines, health and health-related expenses rank very high indeed. In the Philippines, PhilHealth, the mandated health insurance system for all formal sector employees and optionally for informal sector employees, covers only a small proportion of total health care costs because its reimbursable expenses are limited to hospitalization costs, and even then, only to a proportion of total hospitalization expenses. For elderly with chronic illnesses such as diabetes or hypertension, the cost of maintenance medicine is borne totally out-of-pocket. The 20% discount on medicines mandated by the Senior Citizens Act offers financial relief only to those who have the means to buy medicines in the first place. **Sociocultural Implications** As old people grow increasingly older, they lose some of their abilities to function independently and will have to depend on others sooner or later. In most cases, whom to depend on is culturally prescribed. These are likely to be one's closest kin: spouse, children, siblings, other relatives, friends, probably in that order. In Asian countries with a Confucian ethic like in China, Taiwan, Vietnam, and Japan, the primary source of support in old age is the oldest son. Other Asian societies like the Philippines and Thailand have no such gender preference. The nature of dependency of older people on younger kin is very much dictated by cultural norms as well. In most societies in Asia and Africa, older people depend on their families for much of their needs -- economic, social, and emotional support and assistance with activities of daily living. A lot of research has focused on the Asian model of elderly care that centers around cultural notions of filial piety, social reciprocity and repayment of debts of gratitude (utang na loob). These cultural beliefs translate into practice through such tangible forms as living together with one's own children when one reaches old age, almost as a matter of course. The elderly in Asian societies are fully integrated in the life of the household they co-reside with. Living alone or with one's spouse only are rare occurrences. In other cultures, specifically in the developed countries of the western hemisphere, the elderly appear less dependent on family networks for economic, social and emotional support, compared to their Asian counterparts. Different values underlie cultural notions of the ideal relationships between parents and children in old age. For example, because of lifelong habits of autonomy and individuality, the elderly strongly value their privacy and their independence. In turn, this desire is respected by family members. The elderly in these cultures prefer not to co-reside with a child or other kin. Living alone or with one's spouse only are the ideal living arrangements. In these societies, too, the possible loss of independence, of the ability to live by oneself and take care by one's basic needs as a consequence of aging, are among the foremost worries of older people. Furthermore, there are other beliefs and values surrounding the nature of the relationships between citizens and the State which bolster nonreliance on the family for support in old age. In European societies, there is a long standing belief in the social contract between the citizen and the state whereby in exchange for paying taxes, the State guarantees care of citizens in need, regardless of age. This is the underlying principle behind the welfare state. Given this preconditions, it is not surprising that the kinds of living arrangements for the elderly evolved by these western societies are generally not dependent on family networks. When population aging proceeds at a rapid pace in societies where the cultural ideal is for children to take care of their own aging parents, some complications are bound to arise. For one, because of long-term fertility decline, the number of available children to provide support to aging parents are now much lower. Moreover, there are other changes in society that normally accompany fertility decline. Modernization fosters higher labor force, participation of women, and can deprive older people of traditional caregivers. In Japan, for example, the traditional role of the daughter-in-law as the primary caregiver of the oldest son's elderly parents is now increasingly challenged by working women unable or unwilling to perform such a role. It does not help any that with increased longevity, the prospect of caring for older in laws involves a prolonged period of time during which the caregiver is also aging herself. It is not uncommon for a 60-year old woman in Japan to be caring for a 90-year old mother-in-law while she herself may have no married son whose wife she can expect to care for her in time. Increased longevity, moreover, does not routinely guarantee that the life years gained are spent in healthy state. Many chronic diseases that plague the elderly can cause impairment in functioning that will require help from others. In times past, the period between onset of disease and death was normally short. In current times, advances in medical science allow many of those with chronic illness to prolong their lives if they manage their disease well. Having to care for an elderly household member who has a chronic disease and is in some state of functional impairment can lead to stress and strain in the household even when it is generally accepted duty of children to care for elderly parents. It is even more problematic for those who do not have children at all or those whose children are not available or are hardly able to meet their own basic needs.