Is Latin America Ready for its Aging Revolution?

By Daniel Cotlear and Phillip Hay

Population aging is a global issue that affects virtually every country around the world, especially at a time when family support and other traditional safety nets have become far less certain in the aftermath of the global economic crisis. In Latin America, for example, life expectancy has jumped by 22 years over the last 50 years and its population is now dominated by working-age adults with significantly fewer children and now faces the prospect of rapid aging .

A new report from the World Bank’s Human Development Network warns that governments and communities in the region cannot afford to be complacent about its ‘greying revolution,’ given that the next 50 years will be very different from its past half century. According to Population Aging: Is Latin America Ready?, countries with large numbers of elderly people will find it more challenging to achieve economic growth and to meet the healthcare, pension, and other needs of their elder population will be especially difficult for low- and middle-income countries to afford. Early planning for the region’s powerful demographic shifts with the right policies and institutions will be vital to safeguard Latin America’s social and economic future.

OECD countries have been getting used to the idea of rapid aging over previous decades as a result of smaller family sizes, better health, more money, and longer lives, all of which has been a huge social plus. But we should all be worried that rapid aging is no longer a rich country phenomenon and that many poorer countries are now catching up, but largely without the money and advanced planning to cope with the social and economic challenges of this profound social change.
 
The demographic makeup of Latin America and the Caribbean (LAC) has changed dramatically since the 1950s. At that time, the region had a small population of about 160 million people, less than today’s population of Brazil. Two-thirds of Latin Americans lived in the countryside. Families were large and women had one of the highest fertility rates in the world, low levels of education, and few opportunities for work outside the household. Investments in health and education reached only a small fraction of the children, many of whom died before reaching their fifth birthday.
 
But fast forward and the region’s LAC population has now tripled and mostly lives in cities. Far fewer children die from the illnesses of previous decades thanks to health and education advances; and 50 percent fewer babies are born as a result of women taking advantage of education and significantly more opportunities to work outside their homes.

As a result, demographic change in LAC during the 21st century will be dominated by rapid population aging. Aging is being felt initially in the countries of high European immigration, which were the first to initiate the demographic transition during the early 20th century and which also have the most extended social security systems. The rest of LAC will continue to benefit from a falling dependency ratio for a few more years, but will then also face rapid aging. And this process will not take a century as it did in Europe; these changes in LAC will take place over two or three decades. Globally, a fourth of the countries that are aging most rapidly are in the region.

In a note to the authors of the new Bank study, Alejandro Toledo, the former President of Peru, says “this book describes the issues that compel us to craft a new social agenda for Latin America which now needs to incorporate the challenges of the growing aging population…Governments and the private sector must learn to balance the needs the demands posed by a rapidly growing population of seniors while continuing to invest in the education of our youth and the needs of the poor.”

So how can governments manage the inevitable aging of their smaller populations? It’s important to note that it is not a case of either pensions or poverty being the only options. We need to understand the economic life cycle, elderly work and incomes, family support, gender and also the cost of health care in old age. In the long run, pension coverage needs to cover more people, especially those who work off the radar in the informal jobs market where government regulations and protections just don’t apply.  

The new report advises countries and communities to develop a number of policies that support long productive lives for their workers and keep the elderly healthy and mobile for as long as possible.
 
For example, health care systems that can provide the elderly with healthy living and geriatric health services will be essential. This is especially important since diabetes, obesity, heart disease and other non-communicable diseases predominantly strike people in middle age and beyond and can be a source of financial hardship and worse still, sudden poverty, as people are forced to pay for their own treatment.

Promoting healthy aging is without doubt one of the best strategies to keep older people healthy and active, and involves the adoption of preventive medical and social approaches to forestall the need of elderly for clinical or long-term care services.  Standard measures relate to lifestyle changes, including diet, weight and exercise.  Increasing efforts to confront growing rates of obesity – both reducing the weight of obese elderly and in preventing additional elderly from becoming obese – is of particular importance.
 
Many dependent people and their families turn to the health sector, in particular hospitals, when they really need effective social care. Long-term care provided by the health system might not be sufficient. For example, as many as 12 million Americans are expected to need long term care by the year 2020, and the need in the developing world will rise by as much as 400 percent in the coming decades. In Brazil, five times as many people are projected to need care by non-family members in 2040 compared to today. 
 
In most countries, there is a lack of community-based care such as daycare, assisted living and home-based care. Patients overwhelmingly prefer to be taken care of at homes; in many cases it is also the more effective and affordable solution. Examples of such designs are the neighborhood and community-based arrangements termed “care-friendly districts” in the Netherlands and “Open Care Centers” in Greece.  These arrangements introduce a category of care that is part medical and part social, located between home care and primary care. With caring for the elderly likely to take up more and more national economic activity over the coming years, the report says that the public sector cannot be expected to care of this responsibility on its own. The public sector needs to prioritize its core services and buy long-term care services from the private sector, including NGOs and community groups. 

Instead of retiring in their early 60s, workers could wait until much later to leave the workforce as they now do in Singapore and some European Union countries; governments can provide life-long learning programs for people in their 50s and 60s, expanding them from their current audience of adults mostly in their 30s. Enacting laws against age discrimination should be explored because of indications in some Latin American countries that older workers already face real discrimination in the workplace.

Attracting more women into the jobs market is another policy option since the numbers of women in the region’s workforce vary widely. Countries with fewer women employed outside their homes may want to think about this as an opportunity to expand their workforce in the context of population aging.

LAC countries will also want to continue reforming their pension systems, seeking to achieve greater coverage of the population and to increase life savings. Many countries in the region have championed reforms that have been largely successful at reducing costs, but have failed to expand sufficient coverage for older people.  For example, LAC countries projected increase in pension spending of about 2.4 percent – similar to most countries in the European Union – but cover only 40 percent of the elderly.  On the other hand, where coverage is high – as in Brazil, Costa Rica and Cuba – population aging alone over the next 40 years is set to add between 10 and 18 percent of GDP to public obligations.  The World Bank is working with countries to tackle these problems with lending and innovative policies.

So, just as OECD countries have shown over recent decades, early planning for the region’s profound demographic shifts with the right policies and institutions will be vital to safeguard Latin America’s social and economic future.

Daniel Cotlear is a World Bank lead health economist and co-author of the new book Population Aging: Is Latin America Ready?. Phillip Hay is a communications adviser with the World Bank’s Human Development Network.