Getting Older, Or Getting Younger?

Warren Sanderson & Sergei Scherbov had a very interesting article in Nature earlier this year (you can find the full article reproduced here on page 5). The article title really tells the story in itself: average remaining lifetimes can increase as human populations age. Put differently, we may be facing the interesting enigma that the longer we live, the longer we have left to live.

But, riddles aside, what Sanderson and Scherbov actually propose is a new metric: the median age of the population standardized for expected remaining years of life. Now why would that be interesting?

Well, as regular readers will already know, I tend to use median age as a rough and ready – rule of thumb type – guide for looking at all kinds of issues, from savings and investment behaviour, to social and political phenomena. Yet I have long been aware that there was something problematic about this way of doing things. Median age is, as Sanderson and Scherbov argue, a moveable feast.

To get an idea of what I am talking about here, let’s take a simple analogy from economics. Economists often think about apples and pears, but sometimes they want to just think about apples, and compare them, from one year to another. Now one comparison we make is in terms of price, how this changes from one year to the next. But often this rather crude way of doing things just isn’t sufficient, since the procedure ignores changes in quality. So to try and get round this economists have invented (well better put Zvi Griliches invented) a thing called hedonics.

Well, in a nutshell, this is what Sanderson and Scherbov are proposing: a hedonics of human age value, using remaining life expectancy as a crude proxy. What do they actually argue?

Population ageing differs from the ageing of an individual. People who survive grow older with each year they live. Populations, on the other hand, can grow younger. Because a wide variety of matters such as the cost of medical care, retirement, bequests, consumption and the accumulation of human and tangible capital depend not only on age but also on time left to live, our understanding of population ageing must also reflect both of these factors. Because conventionally measured old-age dependency ratios (the ratio of the number of people at the retirement age and above divided by the number of people in the working ages) have caused worry about the sustainability of pensions, it is important to recognize that these ratios, rescaled for life expectancy increases, are forecasted to change comparatively little over the century, suggesting caution in our assessment of long-term pension problems.”

Now one idea that Sanderson and Scherbov implicitly advance (although they don’t in my view make this sufficiently explicit) is that this “getting younger” is a re-evaluation of the prime age working life of the human individual. I think this is the point they are making when they say:

Medical care expenditures provide an example where calculating the median remaining life expectancy in a population is useful. Health care costs rise rapidly in the last years of a person’s life. The change in the median remaining life expectancy between years is equal to the change in the median time to the onset of that phase of rapidly rising costs.

That is to say, we shift the more feeble and fragile years up through the age course. They also use the idea of “proportional life cycle rescaling”, which amounts to the same thing.

Proportional life cycle rescaling is a heuristic not a predictive concept. It provides one simple way of thinking about a complex future in which the lengths of life cycle phases will be influenced by social policies and demographic constraints not modelled here. We use proportional life cycle rescaling by adjusting the conventional start of the working age phase (assumed to be age 20 in the year 2000) and the conventional end of that phase (assumed to be age 65 in 2000) proportionally to changes in life expectancy from 2000 onward.”

So the basic idea is that we need a benchmark (say the year 2000) and a moving age index calibrated in terms of the benchmark values. This could give us a measure of how the productive potential of a population was changing through time (and thus some sort of indication of the growth potential of the economy in question).

Two further implications of this approach would be that life rescaling implies a later average start date for work (this is what is implied by moving up the value chain, with more education continuously required) , and of course (as suggested by me in this post) an upwardly flexible retirement age.

13 thoughts on “Getting Older, Or Getting Younger?

  1. “Two further implications of this approach would be that life rescaling implies a later average start date for work (this is what is implied by moving up the value chain, with more education continuously required) , and of course (as suggested by me in this post) an upwardly flexible retirement age.”

    This is interesting stuff. I read an article somewhere which stated that we are likely to see people peak later in their careers, notably we’d see older Nobel prize winners and artists who break through at a later age. One of the reasons is that there is more knowledge to absorb and digest before one can start ‘producing’.

    It should also have an impact on the definition of the word ‘young’.

  2. “One of the reasons is that there is more knowledge to absorb and digest before one can start ‘producing’.”

    Yes! This is the whole point, this is one of the key factors driving the postponment of childbirth, which is what is driving the fertility decline.

    Anthropologists working in the Life History tradition also then link this to increasing life expectancy. This will be the subject of one of my forthcoming posts in this series. Glad you are enjoying.

    “artists who break through at a later age”

    Does this also include ‘wanna-be’ economists? 🙂

  3. “Does this also include ‘wanna-be’ economists? :)”

    Probably, especially in transition periods like these. The good thing about being a wanna-be is that you are allowed (sometimes even forced) to think outside the box/models. Same goes for wanna-be artists.

  4. Because education takes place at the beginnig of life, but retirement at the end, in order for this idea to bear out, that the fraction of life spent in each phase (education, work, retirement) remains roughly constant, even as the length of life extends, each four-year increase in life expectancy can accomodate one year of delayed entry into the workforce, but must be met by three years’ delayed retirement.

  5. Strictly speaking, if it is true that medical costs pile up at the very end, the cost of retirement should not linearly grow with the duration of retirement.

  6. “the cost of retirement should not linearly grow with the duration of retirement.”

    No, that’s right. There’s a fixed part – the pension – which is more or less linear, then there are health and care costs which aren’t. They are heavily accumulated around the last five years. In the US at present this seems to be the big issue, not pensions, but balooning health care.

  7. Medical costs always pile up at the very end but i would argue that this is because of ying and not because of age. Would even be surprised if the last year of a 96 year old is more expensive than the last year of a 76 year old

  8. “Millions now living will never die”

    I think this one is very difficult to address. There are big promises, but the reality is rather more modest. What we can see is some sort of trend line in many countries going back to the mid 19th century, with a relatively constant rate of increase.

    The best bet is that things will continue this way, barring some revolutionary breakthrough. I will post a bit more on this in another moment.

    The thing is that right now we are often more succesful at prolonging life than prolonging quality life, so maybe the big medical and social challenge is to improve the quality of the years past 80. One dimension of this is medical, but the other is, as I say, social. Early retirement may seem like a blessing, but in reality it often isn’t the blessing it seems. I think we *need* to work longer, not just because of the pensions situation.

    Of course if there is a medically driven acceleration in life expectancy we could get to the counter intuitive situation where at the end every year you work you have more working life left till retirement than you had at the begining.

    This raises the whole issue of what kind of relation we have with our work.

    This is another reason why plasticity and flexibility are important. So many years at the same desk, in the same office, seeing the same faces would be more like a nightmare than a boon.

  9. Of course if there is a medically driven acceleration in life expectancy we could get to the counter intuitive situation where at the end every year you work you have more working life left till retirement than you had at the begining.

    At some point, savings will have accumulated. What would prevent people from living on the interest? Are you implying that interest rates have to go way down? If interest rates go to zero with low inflation, why would anybody take any risks in investments?

  10. “Are you implying that interest rates have to go way down?”

    This depends what happens in the third world. We are going to have savings-rich, investment-light economies, and probably relatively low inflation (or even deflation). If the developing countries develop at a rapid enough rate, and want to borrow our savings, then that will push interest rates up. In a sense our future and that of the developing world are completely locked together.

  11. Why would old farts want to invest in scary third world spots?

    Secondly, while we may prolong the working life, we can’t do so for the reproductive life, as biological limits are tighter. What you are saying ultimately makes impossible the reproductive pair rearing and financing children as they are economically unable while fertile. I cannot see our societies shifting this job to grandparents as this implies. It would totally alter the definition of family.
    Isn’t it rather more likely that the clear destinction between education and work will vanish?

  12. “Why would old farts want to invest in scary third world spots?”

    Well in the first place maybe some of them won’t be so scary, look at China now eg.

    Secondly, the old farts don’t do it, the pension funds do. The old farts demand a liveable pension from their funds, and the funds are pushed into looking for higher returns than can be gained in the near zero interest rate environment of the home economy. The central bankers have already been warning that some hedge funds are too keen to do this, and the process is just starting.

    “What you are saying ultimately makes impossible the reproductive pair rearing”

    If you are talking about replacement rate fertility, then of course I agree. There is no floor to fertility at replacement rate. Fertility rates will drop steadily as life expectancy increases. This is my view, and it does imply a whole new way of looking at things.

    The only real fertility issue is that some societies (those with fertility below 1.5) may have allowed their fertility to drop too fast (eg Germany, Japan) and may be caught in some kind of ‘local trap’.

    “It would totally alter the definition of family.”

    This is already happening. Haven’t you noticed? And our idea of work, working life and flexibility is also changeing. The life course theorists talk abou a shift to a whole post-modern value set. The problem isn’t inherent in the set itself, but in the adaptation process.

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