A blog entry by Dr Yanan Zhang and Dr Matt Bennett
Concern has grown regarding the impact of population ageing, which incurs a higher demand for social care and NHS services, lower labour force participation and larger state pensions. However, the way we measure population ageing to account for demographic change and shifts in behaviour in society will have implications for the way policy makers and practitioners plan for our increasingly ageing society. The ONS have recently compared different ‘dependency’ measures that are used to capture population ageing, including the most common ‘Old-Age Dependency Ratio’ (OADR) and the ‘Active Dependency Ratio’ (ADR). The report highlights the need for a measure that accounts for economic activity and international migration when measuring the impact of ageing populations.
Based on the ONS population projections, 1 in 5 people in the UK were aged 65 and over in 2018 and this will increase to 1 in 4 by 2050. The traditional way to measure the impact of ageing populations is the OADR, which is the number of people at state pension age (SPA) and over per 1,000 people aged 16 to SPA. This measurement is used as an indicator of the ratio of non-working and working populations. However, this becomes less practical as people live healthier and longer, and an increasing number at state pension age remain active in the labour market.
The report recommends using the ADR when estimating the effects of an ageing population, measured as the number of people aged 16 years and over who are economically inactive per 1,000 people aged 16 and over who are economically active. If we compare the OADR and ADR, the OADR remains roughly constant between 1992 and 2017 but is projected to increase by 31.34% in 2067. The ADR, however, shows a different picture and actually decreases by 8.6% between 1992 and 2017. By contrast, the ADR is projected to increase by only 12.36% between 2017 and 2067. While both measures show that dependency will increase, the picture is more favourable using the ADR, which could imply a reduced impact of the ageing population.
Migration may also slow down population ageing as more working-aged people will be introduced to the UK and the fertility rate of migrants is higher. The ONS project that the OADR could increase by 25.87%-52.38% by 2067 under different migration scenarios, whereas the ADR is projected to increase between 9.24%-25.65%, further emphasising the need for a measure that captures these demographic changes.
The ONS report helps us to think about how the nature of ageing and social change feeds into population ageing. People are living longer healthier lives and working longer into old age. Along with migration, these demographic changes may offset the impact of population ageing has on services and the economy.