Demography is destiny

The other day, at the train station, I had one of those societal question moments, which usually happen when I’m surrounded by a crowd willing the same thing (the arrival of the train) or different things (silence vs music). This time, I was struck by the ratio of grey-white hair over the rest. There were so many seniors that day in the train station! Subsequently, I realized that all these people would probably love to have lower stairs, faster elevators, personnel attending their needs etc. which is very different from what I need at my age, which is literally nothing but the train to be on time.

As I had to vote this weekend (in Belgium), I realized that all these people were probably driven by interests quite different from mine and that it would be interesting to understand which these were, and if they would cause inter-generational conflicts in the future, threatening the stability of society?

As a society, we do depend on each other. I depend on these seniors stepping now onto the train, as they depend on me. The mechanism that was put in place at the initiation of the welfare state is called intergenerational solidarity. It is the concept of regrouping the mutually beneficial monetary and non-monetary exchanges between generations. I pay taxes for the pension of these elders now sitting in front of me (a backward transfer) and they paid taxes to build the infrastructures we are using today, that is the railways (a forward transfer, in their time). This mechanism is great, and allows a greater level of welfare for everybody, since I wasn’t there to pay for the railways, and they now need me to pay for their pensions. However, the underlying assumption is that demographics are nicely balanced. As we all know, this is not the case anymore in the OECD countries and other developed countries. Currently, four men like me are supporting one elderly. This ratio will fall drastically over the following decades, reaching a ratio of 3 to 1 in the late 2030’s, and a ratio of 2 to 1 by 2050. How are we going to solve this economic problem?

A recent event has generated a lot of turmoil and debate over the intergenerational conflict. Take a second to think about it. [one second]. The Brexit of course, one of the only events where an entire population decides about the long-term fate of a nation. After the Brexit, social medias were clattering with critics towards older citizens, for having voted for “something that is not going to really affect them”. And they were right to point fingers… Evidence from different sources indeed shows that elder people were more likely to vote in favour of Brexit. See for yourself on the following graph from Lord Ashcroft polls.

Of course, there is great danger in generalising this data, and there are many other factors such as level of education, origins and voting history which play a huge role in this.

The Pew Research Center provided us with nice insights about the political differences in the United States among generations. Generational differences have long been a factor in the US, but it is nowadays stronger than ever. It has been shown that younger people are a more liberal/democratic generation: they are supportive of same sex marriage, they are more aware of racial discrimination, they tend to see immigrant strengthening the country rather than the opposite.

How do we solve this political division between the old and the young?

And lastly, on the emotional level, a study from the OECD surveyed 21 European countries asking the following provocative question: “Are older people a burden on society?”. Most of the citizens disagreed with this statement. Only 14% agreed, and guess who these were? The older citizens themselves. Interestingly, in countries where those over 65 receive a high proportion of their income from the state, people tend to agree that older people are a burden for society, while it is the contrary in countries where the proportion of their income depends less on the state.

How do we solve this emotional problem?

Three questions remain for you to think about: an economy question, a policy question and psychology/sociology question.

I invite you to comment or to send me an email to suggest potential answers/leads.

Charles Emsens