A New ‘New Normal’ In Demography And Economic Growth

August 27, 2013

Phase IV: The New Steady State
The objective of this section is not to provide accurate forecasts of long-term demographic profiles; that's a quixotic task. Instead, we hope that this exercise provides a reference point against which one can compare the previous phases. Further, our claims that Phases II and III are temporary might seem too abstract if we don't offer a long-term end-point, even if it's speculative and surrounded by uncertainty.

Estimating steady-state demographic profiles is not an easy task, because one needs to estimate future age-specific mortality rates and then simulate the size of the different age groups. Fortunately for us, the United Nations has on its Web page a series of model life tables for different life expectancies.14 These tables "are commonly used to derive a variety of mortality indicators and as underlying mortality patterns for estimation and projection by the United Nations and the demographic research community at large." Thus, using data from the table denominated "Survivors to exact ages by sex, model life, and level of life expectancy," we construct hypothetical demographic profiles for different life expectancies.

Figure 5 reports the United Nations projections for life expectancy in 2045-2050 and 2095-2100. By 2050, most developed countries will have a life expectancy close to 85! Brazil and China are catching up quickly and are expected to reach 79 years. By the end of the century, the United Nations expects another jump: 90 years for developed countries and 85 for China and Brazil. Of course, all of this is conjecture; but the trends of the past century would certainly support these expectations, if not more.

Going back to Figure 1, the solid green line ("Brave New World") shows an example of a steady-state demographic profile for a life expectancy of 80 years—roughly the current one in the United States.15 This curve is remarkably flat on the left-hand side of the graph and starts to decline only at age 50 or 60. Over the last 60 years, the roster of young people under age 20 averaged 32 percent of the population (see Figure 4). That plunges to 24 percent in the steady-state age profile. The roster of senior citizens (65-plus) averaged 10.9 percent of the population. This more than doubles to 23.7 percent. If life expectancy ratchets up to 90 or more, these changes only become more pronounced.

To get an idea about stable profiles at other life expectancies, Figure 6 shows a summary of steady-state distributions for four common values: 75, 80, 85 and 90 years. The fraction of individuals aged 65-plus increases quickly as life expectancies go up, while the other two age groups (0-19 and 20-64) decrease accordingly.16



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