Skip to main content
penn_relays001
Up Front

Two solutions to the challenges of population aging

Milena Nikolova

Population aging—the increase of the share of older individuals in a society due to fertility declines and rising life expectancy—is an irreversible global trend with far-reaching economic and socio-political consequences. By 2050, the number of people aged 60 and older will more than double from its current levels, reaching around 2 billion. While Europe was the first global region to embark on a demographic transition, most of the expected growth in the number of older people by 2050 will come from developing countries. Population aging will likely lead to declining labor forces, lower fertility, and an increase in the age dependency ratio, the ratio of working-age to old-age individuals. To illustrate, while there were 10 workers for every person older than 64 in the world in 1970, the expected number in 2050 is only four; it will even be less than two in some European countries.

Aging populations pose a challenge to the fiscal and macroeconomic stability of many societies through increased government spending on pension, healthcare, and social benefits programs for the elderly. This may hurt economic growth and overall quality of life if governments need to divert public spending from education and infrastructure investment to finance programs for the elderly. In addition, the recent economic crisis not only increased the demand for social protection but it also drew attention to population aging issues as many countries faced unsustainable public debts. In many nations, the already-high public spending limits the fiscal possibilities for increased aging-related spending in the long run. Therefore, pertinent and prompt policy solutions are necessary to ensure fiscal and macroeconomic sustainability as well as the health and well-being of citizens of all ages.

A Two-Part Solution Focused on Work

For monetary and non-monetary reasons, work is a pivotal element of one’s well-being. Recognizing this could be an essential part of the solution. Paid work contributes not only to material well-being but also to psychological well-being through social interactions and opportunities for personal and professional growth. And unpaid work, like volunteering, care work, and artistic work, can provide these same psychological benefits. Given these positive effects, encouraging and rewarding paid and unpaid work among the elderly could be a pivotal part of the solution to the aging-related fiscal and social challenges.

To enact such a strategy, policy-makers could consider: (i) a gradual retirement scheme allowing

older individuals to lower their working hours yet remain in the workforce and pay taxes until a later age

; and (ii) furnishing options for and rewarding volunteering, care, and artistic activities among older society members.

Phased-in retirement, fiscal sustainability, and well-being

Encouraging older workers to remain longer in the labor force is often cited as the most viable solution to fiscal pressures and macroeconomic challenges related to population aging. Phased-in retirement entails a scheme whereby older workers could choose to work fewer hours yet remain longer in the labor force, including after they retire. And gradual retirement can be beneficial to societies, employers, and workers:

  • First, phased-in retirement allows continuity in tax revenues and reduced expenditure on pensions, which holds particular importance for fiscal and macroeconomic stability;
  • Second, older workers can be valuable to organizations and younger colleagues due to their knowledge and experience;
  • And third, late-life work has positive health and perceived well-being consequences for older employees.

Promoting and rewarding volunteering, care, and artistic work among the elderly


In cases where individuals are unable to take advantage of phased-in retirement—due to health issues, family obligations, or skills mismatch—governments could promote and reward volunteering, care work, and artistic work among the elderly. Such unpaid activities improve the quality of the social fabric, help the well-being of those engaging in them, contribute to the economy, and reduce healthcare and welfare costs.

Volunteering is among the most important pro-social behaviors with many social and individual benefits. For example, about 25 percent of U.S. residents volunteer, providing 7.9 billion hours of service and contributing $184 billion of service. Additionally, late-life volunteers have lower rates of deteriorating mental and physical health and delayed mortality. Because of these benefits, national policies should seek to facilitate, reward, and adapt such opportunities for older individuals. And care work undertaken by older people—such as childcare, preparing meals, cleaning, and helping the elderly or disabled—should be recognized for its value and rewarded financially.

Further, providing incentives and encouraging the elderly to engage in creative work related to painting, music, or creative writing can also be beneficial to society and prevent social isolation. Governments can promote such activities by financing arts and crafts courses in social clubs or community centers for older participants.

In Conclusion

Providing opportunities for the elderly to remain in the workforce longer as well as engage in volunteering, care, and artistic activities can provide both social and economic benefits and relieve some of the fiscal pressures related to aging societies. However, work activities for the elderly do not automatically translate into social welfare gains. Policies should be arranged in a way that recognizes the dignity and autonomy of older individuals as opposed to providing them with meaningless or degrading tasks merely to keep them occupied. In addition to furnishing meaningful and rewarding opportunities, activities should be adapted to the physical and mental aptness of older individuals. And while paid and unpaid work activities are beneficial to society and the elderly, allowing for choice and autonomy is key.

It’s also important to recognize that implementing these programs and schemes may have short-term costs. Employers and older workers may face bargaining costs related to negotiating phased-in retirement options. Employers could also incur expenses related to restructuring or adapting tasks, while local governments may need to open community centers to accommodate volunteering and other activities for the elderly. Nonetheless, the long-run welfare benefits to society will likely exceed these short-run costs and improve fiscal and macroeconomic health.  

Get daily updates from Brookings