John Rapley is a political economist at the University of Cambridge and managing director of Seaford Macro.
As we age, we slow down. If you doubt that, try what I once did and do a little boxing with your 16-year-old. You may not repeat the experience.
The same is apparently true of society. Yes, with age comes wisdom, and to some degree our economies presume that. Reflecting the importance we attach to accumulated knowledge, we usually reward people for their seniority by raising their pay as they age, and we typically reserve leadership positions for older workers. But that’s kind of ironic, because when it comes to the energy that sustains an economy, to the schlepping and lifting and building and nursing, nothing beats the vigour of youth.
After getting our education, we go to work for the next 30 or 40 years, then after we retire we live off the output of younger workers who are still employed. It’s the modern cycle of life, and it’s all built upon a steady supply of young people. And with family sizes now falling but lifespans growing across Western countries, median ages have been rising, raising the dependency ratio (the number of non-working people each worker needs to support). With more output allocated to support the inactive population, the economy’s growth rate slows, something we’ve been seeing for years now.
There may be more to this than just labour power. It’s possible that aging slows our collective brainpower, too. A recent paper by Boston University’s Aakash Kalyani found that as the population’s average age rose, the number of new creative patents declined. Younger inventors filed more creative patents but then, over time, tended to file more derivative patents – those which built upon creative patents and so had less of an impact on productivity.
This won’t surprise anyone familiar with the sociology of scholarship. Knowledge is like wealth: When you’re young and haven’t yet accumulated much of it, you’re willing to experiment with different possibilities, chase new opportunities or take risks, all of which is essential to the process of discovery. But when you subsequently accumulate a nest egg, you want to protect it. That’s why academics tend to develop research streams that don’t veer too far from their doctoral dissertations. Moreover, if a young Turk later comes along to challenge their work, the temptation to slow them down with peer-review processes or promotion panels – which are usually weighted toward older researchers – can prove irresistible. The Nobel-winning German physicist Max Planck expressed this phenomenon of obstinate old scholars in his adage that science progressed one funeral at a time.
If a country is into its sunset years and needs an injection of youth, one obvious solution is to increase immigration. Openness to foreigners not only enables a country to obtain new workers, but fresh thinking, too. Just think of the iconic businesses launched in Silicon Valley by immigrants who came to do their university studies and then stuck around to apply what they’d learned, or the well-known Canadian brands created by refugees or immigrants. In a world that is approaching its demographic peak, countries that roll out the welcome mat to foreigners will continue to enjoy an edge over those that want at all costs to preserve their traditions.
It’s thus no accident that some of the world’s worst-performing economies at the moment are in Europe, because they also tend to be among the countries most resistant to immigrants. Yet perhaps more significant is that China, despite its aging population, equally resists the idea of mass immigration. Recently overtaken by India as the world’s most populous country, one can’t help but wonder what the long-term implications will be in its competition with its southern neighbour to be Asia’s superpower, let alone its conflict with the United States. Many are the economists warning that China will grow old before it grows rich. If the country appears to be getting more belligerent, it may be because it realizes that its fighting days are numbered.
Yet as Canada’s ever-slowing growth rate reveals, although immigration can prevent a country from sliding into outright decline, it can’t actually reverse the slide. So it’s possible that, like the aging fighter, Western countries need to consider if they can still do what they once did. As a society, we formed our expectations of the future in the roaring economy of the past. We may have mistakenly assumed we’d be able to endlessly lengthen lives, raise incomes, make retirements more generous and improve services.
Amid a slowing economy, we may now need to revisit those expectations. Because if we keep passing the rising bill for the promises we made ourselves onto our young people, we may find they check out of an economy that no longer serves them. It’s not that we need to give up our cake. But we may want to look at how we’re slicing it.