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Imagine if you could look back over a 200-year history and explain the factors driving major trends in economy, health care, infrastructure or social policy. Better still, imagine if you could forecast a set of plausible futures for countries simply by looking at its population projections. All this is possible with rich data on demographics to understand critical behavioural patterns driven by the masses.

So, the next time you glance at a cluster of dry population statistics, take a moment to consider how demographics data could be the driver behind the pressing challenges we hear about each day — shrinking public budgets, unemployment, social unrest and climate change. Indeed, economists, politicians and researchers are now paying attention to such powerful demographic forces and their underlying effects in ensuring a more sustainable future for all of us.

A good start in understanding the history and forecasts of the world population is the United Nations World Population Prospects reports. Demographers usually examine four pertinent trends: the current age structure of populations, birth rates, life expectancy and migration. According to the UN, the world population is projected to increase to 9.7 billion in 2050, up 31 per cent from 7.4 billion today. Of all the world’s major regions, only Europe will see a steady decline in its population over the remainder of this century, with its population expected to decline from 738 million people in 2015 to 646 million in 2100. With such information, it is no wonder that ageing is on the policy agenda of many European countries.

Lower birth rates

Population growth is highly dependent on birth rates and small changes in that over a period of time can create sizable differences in total population in the long run. In recent years, fertility rates have dropped in virtually all areas of the world, even in Africa where birth rates remain the highest of any major area.

The UAE is no different; with research by the Dubai School of Government stating that the fertility rate among UAE nationals in Dubai is only 3.1 per cent. According to the researchers, rising costs of living are cited as the most prominent reason for decreasing birth rates, followed by the rise in women’s employment rates.

Declining birth rates have major implications for governments since they affect the size of the workforce in the future and consequently the income tax paid and productivity gains generated by workers. The welfare system is, and always has been, an inter-generational transfer of wealth. The taxes paid by today’s workers and their employers are used to pay the monetary benefits targeting pensioners, the disabled and children. And so governments monitor birth rates very closely in order to maintain the strength of the labour market and economy.

Many countries have formulated policies to increase fertility rates. For example, countries such as France, Sweden and Singapore offer cash transfers to parents to offset some of the direct costs of having children.

Parents receive a cash gift upon the birth of their child in addition to a child allowance that is paid until the child reaches a certain age (16-18 years). Most studies indicate that cash transfers or tax rebates improve fertility rates.

Other policy solutions include the provision and affordability of childcare services. Many studies and researchers assert that childcare is probably the family policy with the most impact on fertility rates.

It is not surprising to know then that even though the governments of Denmark, Sweden, France and Finland spend heavily on childcare as a percentage of GDP, they are also among the European countries with the highest fertility rates. Some governments are also trying to promote policies aimed at reconciling working and family life through parental leave, part-time work, and flexible working hours.

Due to the overall decrease in fertility, a slowdown in population growth is inevitable and causes the percentage of older persons to increase over time. Already, most advanced countries are witnessing the rapid ageing of their populations and a number of developing countries in East and Southeast Asia and Central and Eastern Europe will also experience significant ageing starting from 2020. An increase in the elderly population will put pressure on public finances, as a relatively smaller working-age population supports growing expenditure on health, social care and pensions. Research published by the International Monetary Fund shows the magnitude of this burden: “The G20 countries will have to spend over four times their current yearly economic output to pay for the health care, pensions and long-term residential care associated with ageing over the next four decades”. According to the IMF, that is equal to 15 times the cost of the financial-sector bailouts in those countries. Tim Dyson, a professor of population studies at the London School of Economics and Political Science, says: “In demographic terms, population growth was the main feature of the 20th century. Ageing will be the main feature of the 21st century.”

Governments need to address this burgeoning burden by ensuring the elderly are able to live independently in good financial shape and health. For example, many countries have started implementing preventive health care programmes, such as awareness programmes aimed at boosting self-care. Pension reforms are also underway as several countries are looking into increasing the retirement age, relaxing labour laws to accommodate the elderly workforce, and delaying pension payouts to ensure the sustainability of the entire system.

It does not end there. The use of demographic trends and long-term population projections in public policy planning is essential in a post-2008 global economy and spans the areas of economic investments, infrastructure planning, government housing design, employment and productivity, and sustainable social services.

Governments must invest in high-quality demographics data in order to better deliver services and anticipate future needs.

As Peter F. Drucker once said: “The best way to predict your future is to create it”.

Published in Gulf News.

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