The Increase of Old-Age Poverty in Aging Societies

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SEATTLE — The world’s population is aging. Many developed countries, in which the aging process is further advanced, are confronted with an increase of old-age poverty.

In recent years, the number of people over the age of 60 has increased in virtually every region of the world, a trend that can be expected to continue, according to a 2015 U.N. report. In Japan, the aging process is the most advanced; it is the oldest country in the world, with a third of the population over the age of 60. Germany and Italy follow with 28 and 27 percent respectively. Economic development entails improved longevity as well as declined fertility rates.

The aging of a population results in the shrinking of the workforce and the burdening of pension systems. In many aging societies, the elderly are at a high risk of poverty. The Organization for Economic Cooperation and Development (OECD) published a report in 2015 comparing the numbers of people age 65 and older living in relative income poverty in OECD countries. In South Korea, almost half of the elderly citizens had an income lower than 50 percent of the national average. Australia and the U.S. also struggled with high numbers of pensioners in poverty. In many European countries, old-age poverty is on the rise, too.

The OECD countries with the highest rates of old-age income poverty are:

  • South Korea: 49.6 percent
  • Australia: 35.5 percent
  • U.S.: 21.5 percent
  • Japan: 19.4 percent
  • Turkey: 18.4 percent
  • U.K.: 13.4 percent
  • Germany: 9.4 percent
  • Italy: 9.3 percent

South Korea owes its record in old-age poverty to a lack of financial assistance from the government; In 2012, the Korea Herald reported that less than a third of the elderly benefited from the public pension system. A basic pension was introduced in 2014, but the $200 provided per month does not cover living expenses. Due to the poverty rates, homelessness among the elderly is on the rise in the country. Among developed OECD member states, South Korea also has the highest suicides rate among the elderly.

South Korea previously relied on the Confucian principle of children taking care of their elderly parents, and only established a pension system in the 1980s. The government hopes that the system will be able to cover more of the country’s aging population as it matures. In the meantime, the government tries to alleviate the economic hardship of its pensioners by improving employment opportunities.  For example, businesses that employ a certain amount of elderly people are subsidized. The mandatory retirement age has also been raised to 60. In 2012, South Korean men worked until they were 71 years old on average.

Japan had an early reaction to its demographic shift. In 2001, the country implemented a comprehensive long-term care insurance (LTCI) system, in which six million people are currently enrolled. Although he applauds the LTCI, assistant professor at Nagoya’s Fujita Health University Ken Kato believes that there is still a need to do more. Additionally, the system, funded mainly by taxes and compulsory premiums for everyone over 40, will be increasingly expensive as the population continues to age.

Many countries have already implemented natalist policies in order to address low fertility rates as one of the causes of societal aging. Liberal natalist policies aim to reduce obstacles to motherhood, attempted by France and several Scandinavian countries by providing parents with free state-run day care. Conservative natalist policies, on the other hand, offer financial and social incentives for bearing children, like tax breaks or cash bonuses. Singapore implemented these measures, but the fertility rate continues to drop. According to Jonathan V. Last, author of the book “What to Expect When No One’s Expecting”, most natalist policies – liberal or conservative – have had little to no success in the past.

Migration is also commonly cited as a way to bolster shrinking workforces. A U.N. report from 2001 found that “levels of migration needed to offset population aging (i.e., maintain potential support ratios) are extremely large, and in all cases [several European countries, Japan, South Korea, Russia and the U.S.]entail vastly more immigration than occurred in the past.” In the European Union, 13 million migrants per year would be needed until 2050 to achieve this goal. Even with the large influx of migrants in the past years, these numbers are far from being reached.

A study comparing the demographics in Europe and Japan issued by the European Union in 2013 suggested that only a combination of increased fertility and migration “will most probably provide a (demographic) solution for policy-makers to deal with population decline and aging.” Immigration into Japan is very restricted and is not likely to increase significantly. The study’s author, Giampaolo Lanzieri, believes that the population will continue to decline and age rapidly, while Europe’s population will age at a much slower pace.

There are several different approaches, but not one easy solution to the demographic shifts and their economic effect on the world’s elderly. While migration policies and the promotion of higher birth rates might ease the aging process, it is not likely to be stopped soon. This suggests that these measures must be combined with big investments into effective and comprehensive retirement and medical care systems to alleviate global old-age poverty.

Lena Riebl

Photo: Flickr

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About Author

Lena Riebl

Lena is from Leipzig, Germany, and is currently an exchange student at Ohio University in Athens, Ohio. Her academic interests include American Studies, history and international politics. Lena is a soup enthusiast: if she could only eat one food for the rest of her life, it would be potato soup!

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