By the year 2030, it is estimated that there will be just 2.3 working age adults in the EU for every person over 65.
The demographics of the developed world are changing, and policy is struggling to keep up. British people are living longer – and this is surely to be celebrated. But as life expectancy rises, so does the pressure on the public purse.
People will either face additional health and social care challenges for conditions associated with old age, or will remain healthier for longer, which puts a strain on the state pension system. One way or another, our longevity will cost us.
In the last few days, we have seen two government policy shifts in this area. First, the Home Office said that foreign doctors would be exempted from the cap on skilled non-EU migrants, so they can fill the staff shortages in the health service. Then on Sunday, the Prime Minister announced a £20bn funding boost for the NHS, aiming to tackle the gaping shortfall.
Both are responses to demographics: migration tends to lead to an influx of younger workers (which is why it should be encouraged, and not just in the NHS), while serious debate is needed around the rising health costs of our ageing population.
One solution is to harness technology in the NHS and social care. Another is to rethink how we fund these services altogether – and, indeed, what we fund.
But it is possible that, in the tug-of-war over migration and spending, we are missing a vital part of the puzzle.
New PwC research out today estimates that we could raise UK GDP by £180bn a year – they call it an “economic prize” – by increasing the proportion of over-55 year olds in work. In PwC’s “Golden Age Index”, Britain ranks just 21st out of 35 countries for employment rates for older people – below Japan, the US, and Germany – while Iceland, New Zealand and Israel top the list. If the OECD as a whole matched New Zealand’s success in increasing the employment rate of over-55s, it would add $3.5 trillion to the global economy.
Unlike earlier generations, people aged 65 today can look forward perhaps two decades – much of it healthy – past the official retirement age. This data shows that there is a prosperity dividend to be gained by encouraging this cohort to work longer, both for their own benefit in terms of wealth and wellbeing, and for the sake of the economy.
PwC is right to view this as a prize, but with shifting demographics, it is also an economic necessity. The NHS boost and relaxation of migration caps need to be the start of this conversation. Changing working patterns must be the next stage.