Social security and the challenge of demographic change

From 29 November to 4 December 2010, the International Social Security Association (ISSA) will meet in Cape Town, Republic of South Africa, to mark the event of the ISSA World Social Security Forum. The Forum provides a unique opportunity for decision-makers from all regions to share knowledge, recognize good practices and discuss key policy challenges as these relate to the design and delivery of national social security programmes. One key policy challenge identified by the ISSA's worldwide membership is demographic change. For this important reason, among the events planned for the Cape Town Forum, a plenary will focus specifically on demography. To coincide with the preparations for the World Forum, and to complement the wider and longer-term endeavours of the ISSA to promote knowledge sharing, the International Social Security Review has chosen to produce this double special issue on “Social security and the challenge of demographic change”.1 The expectation is that this set of papers will make a contribution to supporting social security policy-makers, practitioners, analysts and researchers in all countries as they work towards developing and implementing tailored policy responses to the multifaceted challenge of demographic change. The world is undergoing demographic change, and population ageing is a central element of that. Population ageing, defined as the growth of older age groups (aged 60 or older; aged 80 or older) as shares of the total population, is occurring in all regions of the world. In particular, 1-3 show the percentage of population aged 60 or older by region for the period 1950 to 2050; the percentage of population aged 80 or older by region for the period 1950 to 2050; and life expectancy by region for the period 1950 to 2050.2 Overall, the number of individuals aged 60 or older is projected to reach 1 billion by 2020 and will approach 2 billion by 2050, representing 22 per cent of the world's population. The number of the “oldest-old” (aged 80 or older) is projected to rise from around 90 million today to more than 400 million in 2050, representing 4 per cent of the global population by 2050. Remarkably, global life expectancy has increased from 47 years in the early 1950s to 68 years in 2010, and is expected to reach 75 years by 2045. This process of population ageing is historically unprecedented; however, the phenomenon is not uniform across countries. The extent of ageing varies most between the more- and less-developed regions.3 In the most-developed countries, one-fifth of the population is already aged 60 or older, with the expectation that this share will rise to more than 30 per cent by 2050. In many developing countries, less than 10 per cent of the population is aged 60 or older. Although the pace at which different populations will age also varies, the proportion of those aged 60 or older in developing countries is projected to at least double in the coming four decades. For example, by 2050, those aged 60 or older will represent 20 per cent and 30 per cent of the populations of India and the People's Republic of China, respectively. For all countries, more- and less-developed alike, the recognized phenomenon of elderly females outnumbering elderly males will continue, albeit in a less pronounced manner than in the past. As a consequence of improvements in health at all ages, the male death rate is expected to decline.4 Share of population aged 60 or older, by region Source: ESA (2009). Share of population aged 80 or older, by region Source: ESA (2009). Life expectancy at birth, by region Source: ESA (2009). Three main factors serve to explain past and projected changes in the share of the population aged 60 or older. Declining fertility rates is the first, because this change reduces the proportion of young people in relation to the elderly. An increase in life expectancy is a second factor, and is seen both in developed and developing countries. On a global scale, this trend prevails despite the negative impact of the HIV and AIDS pandemic in some low- and middle-income countries and also despite a decrease in life expectancy, particularly among males, in some countries of Central and Eastern Europe and the former Soviet Union during the 1990s. The third main factor is past variations in birth and death rates. The impact of the ageing of the post-Second World War “baby boom” generation on high-income country population pyramids is an excellent example in this regard. Similarly, advances in primary and maternity care in developing countries that contribute to improved maternal and child survival and subsequent temporary increases in fertility rates will inevitably lead to a bulge in the numbers of the elderly as these cohorts age. It is important to note that these outlined demographic changes are taking place in the context of existing social security laws, institutional structures and benefits programmes. Although the scale and scope of social security provision can vary greatly between countries, the demographic changes already in play will affect nearly all countries significantly, with ramifications for national labour markets. That the most predominant mechanism for financing social security worldwide remains social insurance, wherein covered workers and their employers are mandated to pay contributions, demographic change that leads to a decline in the size of the formal labour market is likely to have a negative impact on the financing of social security provision. This is especially so for pay-as-you-go (PAYG) social insurance programmes, where current contribution revenue from the active population (workers and employers) is the main source of income used to finance current benefit expenditure destined for the non-active population. In the worst-case scenario, if the ratio of active contributors to current beneficiaries declines to a point where the value of expenditures on beneficiaries exceeds the value of income from contributors, then, in the absence of sufficient other income from reserve funds, returns on investments or State subsidies, the PAYG programme will be unable to meet its commitment to finance current benefits. However, such a possible eventuality is not restricted to the impact of demographic change alone. Financial disequilibrium can also result from contribution evasion and underpayment, in particular if this coincides with structural changes to the labour market that lead to high levels of unemployment and/or a serious decline in the size of the covered active population. For example, in Serbia and Bosnia and Herzegovina, large-scale informal employment has contributed to the current very low ratio of active social security contributors to pensioners (1.25:1). As a comparative measure, this current ratio is lower than the projected ratio for the countries of the European Union (EU) once the baby boom generation has retired (1.4:1) (ISSA, 2010a). Financial disequilibria of the kind found in Serbia and Bosnia and Herzegovina should be viewed as extreme events. More generally, to explain the common challenges for social security that from current global of demographic change, main be increased rates of and The papers in the issue to the impact of these on the of national social security programmes. In this leads to a of important the responses to which will vary to the country or particular of programme in To will demographic change impact the of to finance existing social security social insurance contributions, the of by and mandated To will demographic change impact to finance the of social security programmes, not for the of the global population are to the and income health and care of populations in ageing To can existing social security programmes, which for the social and of populations of the of the be and for the social and by To the ageing of national the ageing of impact the and delivery of social security To demographic change impact commitment and towards social the value social security is a element of the to all the For many of the for and in particular, such as to finance social security in the coming is not a this by the International in relation to Europe as early as with in in a From to Population change and social security in Europe The that an of the challenges by demographic ageing for European social security in the The however, that the in the 1950s population ageing not in policy particularly the of to the issue of especially the to be in the It not be the of the a period by and high levels of that the of the of social security important and the of the challenges of for social security financing It is to that despite this rise in in the some to to the demographic challenge a challenge that be and to a generation of In more is possible to a of events. years the From to the World its policy the age the policy to by the the that the of the and of security for people are the policy have and the focus of serious a contribution to taking of the demographic challenge of and more than in the the different responses by the and the World to the challenge of demographic change and to the social policy of older populations have to policy focus by both of on the national to the longer-term health of have In of all and of the that the years of the not result in structural change in a of social security remains to be seen in manner the most serious the to of demographic change active and It also remains to be seen for will to is possible for in of For is that structural the of be to the challenge by population ageing for the of defined benefit PAYG in the of a is at the of the PAYG However, also high decades. An important element of the are the that be to the PAYG with a of to the a in contribution revenue for the PAYG are to finance the defined benefits of current pensioners in years to of older workers those aged or older at the of the are from the It is not in the current context of these will challenge in of the and make at the health of existing defined benefit PAYG more Population ageing is a in most and is a on the longer-term that be or As a consequence of in some countries of towards the have for and to the challenge demographic change to different national social security and this is from the years of on this One is not at least as as will not be because the of demographic can be It is that demographic change at an wherein the of changes in that This is not the of found in demographic To the the of demographic be more and than is the for other social and For on the number of key of demographic change the death the fertility rate and can be more and than is this for changes for example, the factors that contribute to the growth rates and of national the in the in have to the subsequent negative social and that have the global more national and despite the of demographic to changes in they a of in population For example, from a global can be with that the and number of older individuals will It can be with that the global population, the number of will It is also a proportion of the world's population will in However, as the impact of demographic change on the and of social security is a of at the of social security an important challenge is a of all and their This is particularly for developing countries where institutional to and benefits in an and manner also be these challenges have a on to that benefit However, demographic change be this As most national social security are from current national a of national a of mandated social security and is to finance benefits and revenue should be and to and in should be are on of the ratio of population to the total non-active or population young and It is that changes to population age which will the and not the ratio on a longer-term that the manner in which social security are and the revenue is be As at least the the challenge for social security with the that the of social security is of with demographic structures and the pace of population a challenge to is the possible changes in For example, despite the that populations in nearly all countries are ageing, is less many are likely to active in the labour market if the opportunity to To this countries have policy to older workers the the number of years of work to be for a and the for an early benefit more to contribution the of defined contribution or defined contribution with the of individuals to work to is As the from in and has defined contribution have not their to workers to contribute more to social In to returns and high low levels of have contributed to the that many benefits. This is particularly for and groups that a high number of (ISSA, More generally, and despite these and other and by countries, older workers to early from the and unemployment benefits. In many countries the age at which workers employment is than the age. This in the in many countries as a of to high levels of In a for social security between and the trend in the and a rise in the age at which workers from age to age this is lower than age the most common age for and in a of countries the age for and and such as and the are that of to that of and to employment and to as as improvements in life expectancy all the of than for life expectancy in with more and employment and lower levels of social security contributions, all to a of in in age (ISSA, 2010a). the trend in the rise in the age at which workers employment is more generally, this will be important for at least the of older workers is likely to and their for social security in they will also to contribute to social a of labour will national that in will expenditures those to social security programmes. On these important to the likely of policy on to the and that older workers from active on the other that to by older workers to is the to which improvements in health and a on primary health will ageing be by a health and and work tailored to the of older As labour a is the kind of work that will be for and older workers to the global labour market towards more and with increases in temporary and work and For all countries, the longer-term of these are likely to be to the of social security and and the of and benefits. of these national which has a for social security financing on more than labour factors that contribute to the and of by of the which to returns on the of health and of the the and of rate rate in and of the This of to that in policy to the challenges of demographic change, all social security be as of a change not a to financing in also a of the social For the of the the and of and the to be to and social be the social a number of such as demographic a increase in the older population to that of the population, impact the social security of national income across In ageing will be less to in benefits some countries in as of to with young Although is to that benefit lead to rates of fertility (ISSA, the to to national in some countries, the to population decline for benefits programmes. is the demographic towards older impact the of social in the design of social security For most countries, all that lead social security to the of social a policy However, remains to be seen such a as on the of to levels of provision as on the of to promote is the of in many countries the rate at which the global will in the to which will impact the for by will have a on all of the This is of particular for developing countries that will most the challenge of by that 75 per cent of the global population aged or older will in developing countries However, despite these that can be with a of is that all countries will social security that are and their institutional and of this special issue is to papers that discuss all of the as as with the of the challenges of demographic change for social security that are already and that will countries have some of institutional social In the scale and scope of these social security In countries social security provision is for work and and for a number of countries, and per cent of the In social security in countries in and South to less than 10 per cent of the population and a number of and work these a of countries have levels of in of the that are covered and the proportion of the population that has to such On the of global is that 20 per cent of the world's population has to social security and is to 2010, countries, the institutional structures and of social security vary as In some countries, social security are and by the In social security is to the covered or region and the State be in a context that and provision. these institutional and and the of social security programmes, and not least the of the of social and in these also and if of a all to the of national social security provision. and despite national social security worldwide are by a number of common the demographic to ageing is of the most The of common policy challenges social security is because the and of possible common policy and the of good practices to possible these are sufficient to change, which some of and As the health care in the the of social security is and The that the of social security is if a a a common found across the papers in this issue is of a for a of in policy This is not to or to is on the that the is the size of its elderly and 2010, such is a for that can and Although population ageing is the of fertility as as increased with the of past variations in birth and death rates and is a phenomenon that all the of most national social security For these a which is national is the to the for to to income security for the elderly. in for policy a challenge is to that is a In this the of the by and is in financing all of social security In their for and that the challenges of financing and social security to the all the current policy for with ageing not in the and focus on demographic and the for the of the the people their to to a of One factor that to the of a ageing is that are less than of other countries at and at lower levels of a ratio of to people will not be by as high a share of workers as in other countries. The also that from will be to finance for elderly. Although the focus on the point that the factors that will make to also that other of social will also be to the scope of this and can to the possible policy the rate of a to and and The is in that of the as as of the policy of to the challenges for social security by demographic change. In the second national and discuss ageing and security in the context of the factors that are the of elderly to on to their and the that the of such in with increased has to an increased of the elderly the particular by workers a of the informal and with to both and health the of of and and and other social countries can they discuss these from a social with particular to also for for other countries. an is of in implementing social programmes, with important to the to be from and investments in and is as to to the of benefits and to meet the of individuals population However, India a number of challenges with to programme not least of which is the challenge of a of in a number of key This issue the challenge is more by a contribution the ageing of in a process that will the of of of all in social security to this the that of social security is ageing and are to workers will be factor is that numbers of make the for the that are to be by are as as their so will be In this policy responses such as the of be in to from and to the that the will not of all in the coming the to this on practices from a approach to the and of that to labour practices with the of The to be and already be to some of the most is for the International Social Security Association (ISSA) to its and for to play a in to to this and the to in to particular are will and will is also important the many different challenges of the social security of The manner in which the of and social security is has The has the and national of can for the of social security in that are ageing to that is more and which the policy of social security can to social for the number of and most in a that increases in the of of age the age of ageing increase labour and the of social security However, a context of institutional and social on the of the increases to the age is and as a likely to be a to population and 2010, In is on this that policy in are the of a number of older workers in the workers are of so and so for In the global South in particular, many are and have to social security in the or In this and a of the of in relation to their to benefit from social in their the extent to which are by or that to benefit from some social security with also in the of other to the are in the of not social security social insurance and national a of are not across or between different of The of to benefit at from the that are in place in the country of and in the country from their and their of are particularly The point that in many countries, the absence of for the of and institutional to social in the a more than the of of to benefits. that to be as different from where the social are more for all countries can to benefits and Social security is not a of to benefits and is and and these the make in their to different population groups and For all countries the of is to as the the of the of the to generation that a be with and The is by that from for social and other the of and to in all and to the elderly in It is this that and population ageing are by demographic in labour income and their on and on and the institutional to such around the world. The of these used to be the worldwide trend the of and of have to a of the elderly. The on from of an of countries that from and and that have chosen different a set of that show the different of and the and the manner in which these across countries. The used a of and total and leads to a set of of these on different The that labour and that demographic will be in and a possible of many of the important of the that the of this special the contribution from provides a of the of social security and health care and of to to the as as demographic challenges of an ageing world. policy make the for a policy approach to the labour market and health care challenges that are expected to population as social security and health care should be more with of and so will be a for all individuals to be by policy as and these are that to employment promote active ageing and and which to and the of health that the for security and health and care to population ageing are already in place in many countries. To an important these are by as national The however, is that the manner in which these are in the to the challenges of population ageing, to be by defined by a In of the that as the likely of a share of income by which will be by the of and/or institutional However, such change is not expected to an in the of the State in the of national social That the of the State is expected to to social security in the is a key policy to from this special In the however, in to to the current and policy challenges that social more and and as as more institutional is For this reason, a second of this special issue is to the of improved and and the of institutional of the to the of to comparative not least to and to and common challenges and to policy in this is the contribution to this special issue by which specifically on the of on and health care provision. of of the elderly around the world provides a very for their scope and the among and is of the to which of is The of this set of from the that on among the different possible comparative the and health of the and the of that The of on health in these both the and the of to approach the policy challenges of ageing from a The from such will be to the design of that to the of the elderly in a of that the to in the will be very to As a contribution towards sharing, this special issue also a of and national demographic and social security to the The of the is the are to complement and the provides a source of key as as of that will of the Review to their of the policy the and of is expected to contribute to the of all social security among all in should contribute to in and social security to the coming all to and national of social a for and State This is likely to be especially so as the of in particular to those most in Although the extent of all of the demographic challenge for social security to be defined and to which this set of papers to is that the delivery to and of social will less and social security

Economic growth · Economics · Political science · Social change · Social security · Employment and Welfare Studies · Global Health Care Issues · Social Policy and Reform Studies

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