The impact of demographic changes is recognized as one of the most important challenges that social security institutions will face in the future.
Generations. Photo: Andrea Costa.
For industrialized countries, rising costs in the pension and the health areas represent an important threat to both the economy and public budgets. In the near future, many developing countries will be faced with a significant increase in their elderly population, but their old-age pension systems often remain poorly adapted to the coming social needs of their societies.
The changing balance of age groups
For social security, population ageing is at the heart of the challenge brought by demographic changes. It needs to be emphasized that “ageing” relates not only to an increasing proportion of the elderly (or retired) population, but overall to a change in the balance of all age groups – a diminishing younger population due to a declining fertility rate, an increasing working population that will eventually diminish in a rather near or distant future depending on the country, and of course an increasing number of older and very old persons – who may require support depending on their state of health. What is more, in some developing countries, the impact of HIV/AIDS is an important feature of the demographic structure of the population, in view of the high prevalence among the 20-49 age group and the negative impact it may have on social security contributions.
The impact of ageing
The impact of an ageing population on social security is manifold. It increases the dependency ratio between the non-working and the working population, as well as possibly even the dependency ratio between the non-healthy and the healthy. It has different impacts on the specific social security branches: for instance, threatening the sustainability of old-age insurance schemes, demanding innovative employment policies in view of the ageing of the working population, increasing needs for long-term care programmes etc. On a societal level, ageing will contribute to radically changing all aspects of life, contributing to the emergence of a long-life society – a society in which a new generational contract will have to be agreed.
All countries and all social security branches are challenged by demographic changes and ageing. How can social security adapt to face the ageing challenge and protect people in an adequate and sustainable way? Evidence shows that many social security institutions have taken measures to address these challenges, and this should provide inspiration to others.