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Ageing: The role of immigration Samuel Brittan: International Economy: Ageing Symposium Winter 2004 Most of the world's population is ageing. This partly reflects the very welcome increase in life expectation as a result of higher living standards and the progress of medical science. But it also reflects in many countries a fall in the birth rate. In Europe the typical female reproduction rate is 1.5 as against the 2.1 required to maintain the population without immigration. The baby boom has been followed by a baby blip. Not only is the proportion of old people in the population rising; but the proportion of working age adults available to support them is declining. The problem is much less spectacular in the United States where thanks to a higher birth rate and more liberal immigration policy, the total population is expected by the UN to rise from 285m in 2000 to almost 400m by the year 2050. By contrast the population of the European Union is expected to have fallen from 377m to 339m. This population trend could reduce the underlying European growth rate so much that its share of world output will have fallen to ten per cent from 18 per cent. The USA on the other hand is expected to increase its share of global output slightly from the present 23 per cent. The burden of the supporting the older population will however be rising everywhere. According to UN estimates the median age in the European Union's present 15 members will rise from 38 now to 49 by 2050. Even in the US the median age is expected to rise from 35 to 39. The first part of any policy to alleviate the problem must be to index the pension age to life expectation. It is totally absurd that the advance of medical science should go to waste in increasing and often involuntary idleness. It is important to have an automatic indexation formula. A staged rise to another fixed age, say 70, advocated by some European "reformers" does not meet the bill. Nor is doing away with compulsory retirement ages, US style, sufficient. Some notional retirement age has to be written in to the finances of any government social security scheme. And even pension funds and insurance companies make explicit or implicit assumptions on the matter. Obviously higher retirement has to be coupled with changes in work practices to make it easier for older workers to work shorter hours in a less arduous way, perhaps for lower pay. The controversial question is what role immigration can play in improving the denominator of the dependency ratio (that is the ratio of old people to those of working age). Even if immigrants ultimately succumb to the forces making for lower birth rates among the native population this will take many decades and in the meanwhile the working age population is replenished. There is very little case however for so called selective immigration permits for workers deemed in short supply. Labour shortages and surpluses depend overwhelmingly on pay and conditions on offer. Advanced western countries could certainly recruit more native born nurses, IT technicians and kitchen cleaners if they offered better wages and working conditions. Ultimately attitudes to immigration depend on how far present populations value the cultural mix that immigration brings and how far they are prepared to share their opportunities with both refugees and other people seeking a better life. One counter argument could be the pressure on limited land and the resulting congestion and urbanisation. Here however the US and Ireland are much better placed than the rest of western Europe, while Australia is virtually empty. But even the Netherlands,which has one of the highest population densities, manages a quite reasonable quality of life. A final consideration is that immigration controls, like controls on drugs, are an obviously incitement to crime on the part of unscrupulous entrepreneurs prepared to take risks. As one way or another immigrants are going to come then why not enjoy the process and in the meanwhile give ourselves a breathing space in dealing with rising dependency ratios?
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