Economics in Global Scenarios. Macroeconomic Effects on the Ageing Population in Germany

Table of contents

1. Introduction

2. Ageing population in Germany
2.1 Fertility rate
2.2 Increase in life expectancy

3. Macroeconomic effects of ageing population
3.1. Labour market
3.2. Social security systems
3.3. Innovative capacity

4. Opportunities for action
4.1. Births
4.2. Immigration

5. Conclusion

References

Table of figures

Figure 1: Average Age of the population in Germany (Statista 2020)

Figure 2: Fertility rate in Germany (Macrotrends 2020)

Figure 3: Life expectancy in Germany (Macrotrends 2020)

Figure 4: Population forecast for Germany by age group (Statista 2020)

Figure 5: Expenditure of the pension insurance in Germany (Trade magazine 2017)

Figure 6: Childlessness rate of women aged 45 to 49 in 2018 in Germany (Destatis 2020)

1. Introduction

"Demography is the study of how and why populations change" (Landry 1987). Adolphe Laundry, a French demographer, already addressed this question at the beginning of the 20th century. This quotation illustrates that the term "demographic change" initially refers only to changes in the age structure of a society, although it is completely open whether these changes have positive or negative consequences.

Demographic change generally affects a wide range of issues. For example, population growth, an ageing population, unequal distribution of wealth, and a growing gap between rich and poor. These challenges depend very much on individual countries (Bloom 2020).

For Germany as a developed and industrialized country, one of the most important and at the same time most worrying issues of demographic change is the current trend towards an ageing population.

The effects of this development are complex and cannot simply be read off the balance of births and deaths. Especially the combination of increased life expectancy and declining birth rates affects many different political, social, and economic fields.

This paper focuses on the macroeconomic implications of ageing populations and the challenges they pose, using Germany as an example.

In order to arrive at qualitative results and proposals, the paper starts with a brief analysis of the German population structure with a basic understanding of the reasons and background. The third chapter deals with the effects of the ageing population on the labour market, the social security system, and the innovative capacity of the German economy.

It then looks at birth and migration, two ways of softening and slowing down the consequences.

The paper ends with a final conclusion.

2. Ageing population in Germany

As an introduction to the second chapter, figure one shows the development of the average age in Germany from 1950 to the year 2050 and very quickly brings the urgency and importance of this topic visually to the point.

Germany: Average age of the population from 1950 to 2050* (median age in years)

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Average Age of the population in Germany (Statista 2020)

In the graph, it can be seen, that the average age has increased by more than 10 years in less than 50 years since the low point of 34 years in 1970. And the trend is still towards a rising average age for the future, at least the speed of ageing is decreasing at a lower level than in the past.

Looking at these figures more specifically for each age group, less than fourteen percent of the total population in Germany in 2019 was younger than 15 years, while at the same time more than 21 percent were 65 years and older. Almost 65 percent are between these age groups (Statista 2020).

As briefly mentioned in the introduction, it is important to recognise that an ageing population is characterised on the one hand by increasing life expectancy and a decrease in mortality at an older age, and on the other hand by its lower fertility rate (WHO 2020). These two indicators are examined below on population developments in Germany.

2.1 Fertility rate

The most important indicator of birth is the fertility rate. It calculates the average number of children born to women during their reproductive years (Britannica 2020). Looking at the second figure, this birth rate in Germany has remained at a consistently low level of around 1.4 births since the 1980s. In recent years, however, it has risen again slightly and currently stands at 1.6 children per woman in Germany.

Nevertheless, a birth rate of just under 2.1 is necessary to ensure the long-term reproduction of the population in Germany without any consideration of immigration (DW 2020).

Editor's note: This image was removed due to copyright reasons

Figure 2: Fertility rate in Germany (Macrotrends 2020)

The birth rate is one of the main problems given the ageing population structure, especially in developed countries. The following is a brief description of the reasons for this rapid change in a relatively short period of time.

The first point is improved access to education for women. As a result of these improved educational opportunities, there are more women today who are focusing on their professional careers. Besides, advanced education is also accompanied by several other points, such as greater use of contraception.

Secondly, it is very important to bear in mind that infant mortality rates have fallen dramatically in recent decades, so fertility rates are generally lower.

A major reason for the decline in fertility rates is the introduction of safe and reliable access to contraception. Especially in advanced countries, experts are certain that this is one of the strongest reasons.

The last point states that generally increasing wealth results in a smaller number of children. According to experts, people in many wealthier regions marry later in life, make a career and decide to have children later or not to have children at all (Empowered Women's Health 2020).

2.2 Increase in life expectancy

The second key aspect of the ageing population is the increased life expectancy, which is due on the one hand to a decrease in infant mortality and on the other hand to a decrease in the mortality rate at a higher age (Statista 2020).

At the beginning of the 20th century, this was mainly due to the first one. In the recent past, however, the probability of dying at an advanced age has decreased, which has increased life expectancy overall. Therefore, this paper mainly discusses the reduced level of morbidity in older age.

In 2019, the global life expectancy reaches a new peak at 72.6 years (Our World in Data 2020).

Editor's note: This image was removed due to copyright reasons

Figure 3: Life expectancy in Germany (Macrotrends 2020)

This graph clearly shows that life expectancy has increased enormously in recent decades. Last year the average life expectancy was more than 81 years. This is an increase of more than 12 years compared to 1960. A comparison with global life expectancy also shows that Germany is significantly above average.

The reasons for this increase are relatively clear.

The main factor that keeps people living into old age is better medical care. This is mainly applicable to developed countries. However, average life expectancy is rising sharply worldwide because infant mortality has fallen worldwide and, above all, finally in the developing countries.

Moreover, fewer people have to do hard physical labour to earn money. This has a positive effect on physical fitness in old age.

A WHO study has officially confirmed that there is a significant correlation between life expectancy and educational level and income.

In China, men aged 55 with a university or college degree were compared with men with a lower level of education. The result was that the well-educated group lived more than 20 percent longer than the others. And people with higher incomes live on average 37 percent longer than those who earn less (Alumni Portal Germany 2020).

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