LIVING LONGER...WHOSE BURDEN IS IT?

Living longer is a clear benefit that we enjoy from the time of the rise of the capitalist system  and the Industrial Revolution it engendered, and the liberal (in the traditional meaning of the word) thinking that gave origin and nourished the capitalist system. Prior to the modern age, around the year 1800, life expectancy across the world was roughly 30 years in virtually every country. That is, the average person could expect to leave this world after only 30 years on it.
With the advent of industrialization life expectancy began to rise in those countries that adopted it, mainly in Europe and North America, with noticeable improvements by the end of the 1800s. For instance, life expectancy in Europe rose from about 35 years in 1860 to over 50 years by 1920; similarly, in the Americas it had risen to about 45 years by 1920. The exceptions were countries in the African continent, where life expectancy remained almost at pre-industrial rates until around the middle of last century, when they finally began to show signs of improvement. But the lack of industrialization throughout the African continent meant that those countries failed to reach the life expectancy levels seen in most other regions, as can be appreciated in the table above.

But living longer also means that funds must be available to sustain people during those years when they are no longer working. For some, living comfortably in retirement is not an issue, because they were prudent and saved for a later day. For others, the availability of government or business retirement funds makes life in those years also comfortable if not enjoyable. But for many such funds are either not sufficient or even non-existent, making those years very difficult. But, critically, it's become common practice to expect governments to provide for the old age health and comfort of most citizens. And this is the looming problem for a large number of countries today.

The Burden of the Elderly Population
The percentage of people over 65 years in a given country is a good proxy for the burden they may impose on the working population, and on the country as a whole. We find many countries today that have nearly a fifth, or more, of its population in this age group. The chart shows the top 10 countries with 20% or more of their population in the "retirement" age group.
Note that, except for Japan that leads the chart with 26.6% of its population aged 65+ years, all the remaining countries are in Europe, both Western and Eastern Europe. In fact, analysis of data for all countries in the world reveals that only three (3) of the top 35 countries are not in the greater European region. That is, European countries are the ones that even today are facing a crisis. This is evident and compounded by the permanent stagnation in the economies of most of these countries.

...and it'll get worse by 2030

Although European countries continue to remain the worst as having the largest percentage of their population among the 65+ years group, we find that fifteen years from now, that is by 2030, South Korea (with 23.9% of its population being 65 years or older) and Taiwan (with 23.1% in this age group) fall among the top 35 countries. But the top 10 remain almost the same as in 2015- except two new countries join this group: Slovenia and Malta, both also part of Europe, East Europe that is.

A Looming Problem for Most Advanced Countries
But now the crucial issue is how are these countries, most countries in fact, going to pay for the maintenance of all these retired individuals; particularly when the number of working people continues to fall.
For a country to have a large proportion of its population in the 65+ group is not problematic itself. Solid economic resources combined with good planning foresight, such as in Norway, enables a country to face this potential problem favorably. However, this age group becomes a serious problem when the government financial situation is weak, due in most cases to loose fiscal policies adopted by many of those same governments in previous times. The  eagerness with which their governments went into debt over many years, promising all kinds of benefits and prosperity to voters has resulted in huge debts accompanied with no growth.

On the chart we show the 20 countries with the highest Debt-to-GDP ratio, against the percent of their population that is 65 years and older. We are highlighting in red those countries with both very high debt-to-income ratio and a high percentage of elderly people in their population. The usual culprits show up, Greece, Italy, Spain, Ireland, etc. Curiously, France falls within this group and its numbers are very close to Spain's or Italy's, but the country does not surface on the news as a "problem" country. Why is that?

But Japan and Ireland stand out. Ireland because of its huge government debt that brings the debt ratio to over 300. And Japan because it fails in both counts- currently it has over a quarter of its population in the 65+ group and its debt ratio approximates 250. The latter is the result of a continuous string of governments over the last 20-30 years that have attempted to grow the economy via additional government spending, all to no avail.

The charts below group the countries within their corresponding continent. The charts illustrate the situation in most countries, and can be seen that the vast majority of those outside the European continent are in relatively good shape, except for Japan in Asia, and perhaps the U.S. and Canada in the Americas. These countries have huge government debt that somehow will have to be reckoned in the near future.

Please note that different scales are used in these four charts

What are the Implications?

Countries with high debt ratios, combined with an increasing percentage of elderly population, will face a tough choice in the near future. Some cases, like Greece today, are facing that situation now but can't come to grips on how to address it. Basically, these countries (including the U.S.) have a few choices:

1. Raise taxes to reduce the debt and/or maintain the level of social payments to retirees.
2. Lower the payments to retirees, or do other adjustments such as raising the retirement age. In Greece, for instance, the retirement age has been increased to 67 years, although the country still bears the huge burden of many government employees who retired as early as 50 years.
3. Default on the debt, i.e., declare bankruptcy. Argentina refused payment on its foreign debt in 2002 which, in effect, blocked access to foreign investment. 

None of the choices is politically palatable. The option that countries continue to follow, as in Japan or the U.S., is to pretend the problem is not critical and continue to issue debt to carry on- this is enabled by the central banks, the Fed in the U.S., by printing money. 

Note: the source for the life expectancy data above is "Life Expectancy" by Max Roser, available on line at www.OurWorldInData.org. All other data are from the U.S. Department of Commerce.