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Will population ageing spell the end of the welfare state? A review of evidence and policy options

The Economics of Healthy and Active Ageing

Authors: Jonathan Cylus, Charles Normand and Josep Figueras

Population ageing presents both challenges and opportunities for societies around the world. As the share of the population at older age increases, there are concerns over how to cope with expectations of greater health and long-term care needs, as well as the potential economic implications of having a comparatively smaller share of younger people at traditional working age. There is consensus among many that these demographic changes will have inevitable consequences for households, public finances and economic growth. Faced with the task of addressing these and other supposed ageing-related issues head-on, policy-makers may choose to declare the welfare state itself unsustainable and take remedial actions to dismantle it.

Yet a closer inspection of the available evidence suggests that an increasingly older population is not necessarily so costly to care for, and that older people often provide significant economic and societal benefits – particularly if they are healthy and active. Furthermore, appropriate policy actions can help to enhance the benefits and reduce the costs associated with population ageing. This is the broad perspective of the European Observatory on Health System and Policies’ Economics of Healthy and Active Ageing programme of work: to inspire a ‘re-think’ of the costs and benefits attributable to population ageing and to identify appropriate policy interventions.

In this overview brief we examine the available research on the health and long-term care costs of older people, on their economic and societal contributions via paid and unpaid work, and on the acceptability, equity and effectiveness of financing care and consumption of older people. Throughout, we identify evidence gaps and methodological challenges. We conclude by identifying key areas for policy intervention. Some of the issues explored in this brief will be analysed in more depth in further briefs in the Economics of Healthy and Active Ageing series.