The population structures in Latin America and the Caribbean are changing and the challenges are not few. For example, 11 percent of the population over 60 years of age depends on other people for their daily care. Both the magnitude and the intensity of the dependence increase with the age of the population, mainly affecting women. And while from 1965 to the present the working-age population grew more than the dependent population, the opposite will happen between 2020 and 2100.
What does all this mean? It means that the region is in full demographic transition, meaning that it is going from having high fertility and mortality rates, with many births but few survivors, to another reality in which families have few children and almost all survive.
This process happens in two stages: first, mortality decreases and families continue to have lots of children, with some generations being very numerous for some years, until, in the second stage, the fertility rate decreases.
What Is the Impact of These Transformations?
As a consequence of these demographic changes, for a few years the share of people of working age is higher in comparison with the share of persons in dependent status, such as children or older adults. This period is known as a demographic “bonus,” and it represents an opportunity that must be taken advantage of in economic terms.
Increased numbers of persons of working age can translate into increased economic growth in a country and in social security contributions that finance essential public services such as health, education, or pensions. In addition, it is essential for the proper functioning of the economic budgets of governments that many young people make their tax contributions to health systems. In general, the young population requires few services, beyond preventive ones.
But the demographic bonus is not a guarantee. In order for it to generate returns, it is necessary for countries to promote the adequate conditions that allow these young generations to:
- Join the labor market in productive activities
- Contribute to social security systems
- Maintain healthy lifestyles that do not put excessive pressure on health expenses when they are elderly.
When the Demographic Bonus Ends
When the larger generations age, the bonus expires. When that happens there are, proportionately, more persons in dependent status and fewer persons of working age. In addition, contrary to what happened before, dependents are older adults and not children.
Then the demographic “bill” begins to take shape and comes due: regardless of whether or not the advantages of the demographic bonus have been exploited, when the population ages, the account must be paid. Moreover, the elderly population requires more health services and care to perform even basic daily activities such as eating or bathing. In addition, the challenge to sustain pensions is no small task. With a lower proportion of people working, there is less state revenue from taxes and, therefore, fewer contributions to social security systems.
Are We Older, Sicker, and Poorer?
The outlook is not reassuring for countries that did not take advantage of the demographic bonus phase when they could – that is, those countries whose bonus generations did not contribute directly or indirectly to the health system during its productive stage. Most likely, those countries will encounter weak institutions with insufficient funding to meet their growing health needs.
If these generations do not arrive at old age in good health, the demands on medical services and support could be even greater. This is the case of Mexico and Chile, where health conditions among those over 60 have deteriorated significantly, a trend that is worsening.
In addition, if the most numerous generations do not elect during their youth to have a pension later in life, neither the families nor the governments will have the necessary resources to pay for the demographic “bill.”
In many countries of Latin America and the Caribbean, the demographic bonus has begun to wane and the proportion between the working-age population and the dependent population is reversing. There is already an increase in the number of elderly people, while there are increasingly lower birth rates. However, there is still time to respond to this changing situation, and some countries could take advantage of the demographic bonus to deal with the bill that will come due later.
A fundamental requirement to do so is to invest in preventive health to promote healthy aging. The countries with the oldest populations are at the precise moment when they need to design and strengthen public policies that promote access to quality care services coordinated with health services. If countries take these steps, will it still be possible to reduce and postpone the demographic health bill?
How is the demographic situation in your country? Have you taken advantage of the bonus, or do you have to prepare for the bill? Tell us in the comments section or at @BIDgente on Twitter.