Old age isn’t so bad when you consider the alternatives

13 May 2013

Standard Life Investments, the global investment manager, highlights that despite the capacity of demographic trends to exert a pervasive influence on economic development, focus on such factors has tended to be overlooked in most macro analysis. While most of the time population trends are not a major concern, periodically they move centre stage and garner a much wider audience.

The latest edition of Global Perspective looks at how demographic trends can have a major impact on how economies develop, for example through changes in the labour force or increased care costs for the elderly. Recently, pensions have been in the front line as efforts are made to align contributions to the realities of changing population profiles. Although the ageing process itself cannot be reversed, the consequences of that aging can be affected by appropriate initiatives.

Douglas Roberts, Senior International Economist, Standard Life Investments, said:

Douglas Roberts

"Demographic pressures generally move very slowly and therefore attract only passing attention. We are at one of those confluences today where demographic considerations are rising to the top of most government in-trays.

"The tendency is to put off policy responses until action is really necessary. It is not too late but major economies need to recognise the fault-lines and act decisively. For the US the fiscal deficit is top of the list, for Japan a freeing up of its attitude to immigration and female participation, for China a higher birth rate, for Europe and UK pension reform and longer working hours. Parliaments, though, will face difficulties in bringing about such sensitive changes. The baby boomers, in or close to retirement, are likely to continue to hold sway on how things evolve as they will have political clout, at least in democratic economies, due to their lasting weight of numbers."

In the current economic cycle, the aging of major economies is coming at a most inopportune time as countries still have to cope with the ravages of the Global Financial Crisis.