Our workforce, which is people between ages 16 to 60, counts for approximately 66.2% of our total population. Since this is also the most financially active group of the country, everything that they earn, spend and save contributes to India’s economic growth, making India one of the world’s fastest-growing economies.
Fast forward to 40 years from now and things will be very different. Roughly 59.5% of our population will be old and the ratio of earners to dependents will be completely different. In 2017, we have an average of 8 dependents (children and old people) per earner but in 2050 it will be more like 21 dependents per earner. Yes, our population will increase in general, but not at a fast enough rate. This means all the people pumping money into the economy at present will stop doing so, what with being too old and unfit. This will change the upward trajectory and increase poverty levels.
To ensure that India’s aging population does not affect its economy, the government needs to not only eradicate poverty now but also in the future.
Here’s what they can do…
Step 1: Increase the retirement age
One possible band-aid for this wound could be to increase the retirement age from 60 to 70. This way, we could harness the productivity of a larger portion of the population and the aged can continue being financially independent. To make sure this isn’t too tiresome; their working hours could be reduced. This change would up tax revenue, increase GDP and consumer spending, all wins for our economy. Added bonus? The government would have more time to pay pensions which would reduce the pressure on the government expense. Many developed nations are considering this change too, for the reason that they want to reduce the burden on social security. Plus by 2050, life expectancy is likely to rise to and no government can afford to provide pensions to individuals for up to 40 years.
Step 2: Encourage more women in the workplace
According to a report by the United Nations Population Fund, between the years 2000 and 2050, the population of 80-plus people would grow by 700% “with a predominance of widowed and highly dependent very old women”. Since we have this information, we should also move our focus to specific groups within our aging population. If a large portion of our future dependents are women, we should put in place policies that would make more women financially independent. Creating better working conditions, providing child care, etc. are all great ways of doing this. The Ministry of Women and Child Development is already administering schemes like the Support to Training and Employment Program for Women (STEP), Working Women Hostels, the Maternity Benefit Act, Indira Gandhi Matritva Sahyog Yojana and the Equal Remuneration Act. Hopefully, this means even if we do have a lot of old windowed women in our country by 2050, at least they won’t be poor, instead contributing as earning members of the society.
Step 3: Partner with private pension providers
Let’s be real, the Government cannot afford to provide pensions for 59.5% of our population post-2050. But, at the same time, the government cannot afford to allow 59.5% of the population to remain old and poor. So, they should try and get some help from the private sector. As the economy consists of people with varied economical capabilities, government pensions would cater to the low-income groups, who are unable to afford private pensions and the government could make it compulsory for companies to provide private pension plans for their employees. While they did try a version of this with their Employee Provident Fund (EPF) and Employee Pension Scheme (EPS) initiatives, by not making their amount inadequate and not ensuring that actually provide these, they’re as good as nonexistent. As a result, the current working population won’t have much of a pension to depend on in their old age and will have to deal with some form of poverty in the future.
We need a more structured and better-implemented partnership between government and private pension plans to make sure the aging population has a safety net once they grow old.
Step 4: Boost immigration
One solution that a lot of developed countries have considered is reducing their earners to dependent ratio is by simply loosening their immigration policy – basically ‘importing a workforce’. Studies show that immigrants are actually the hardest workers and therefore contribute most to the economy. They increase employment rates and tax revenue as well. This means more tax revenue, more money that could be redistributed to the poor through social security. Social security like elder care and pensions. However, most developed countries typically have smaller populations than developing countries. If India decides to open up its economy to immigrants, we must make sure we have the resources to handle it.
Step 5: Promote elder care
One of the reasons the elderly population can be a burden to the economy is because they are often times a burden to the people taking care of them. Considering their physical impairments and health concerns, they actually require more money on a day to day basis than they can contribute to the economy. Employing services like assisted living, adult day care, nursing homes, hospice care, etc. can make sure that the money used on the elderly can be harnessed by a new and growing sector of the healthcare sector. Additionally, ‘outsourcing’ elder care frees up family members to be more productive and earner more to support themselves and their families.