The combined impact of these changes is to shift the demographic pattern of rich developed countries from pyramids to columns, and in some cases to columns tapering at the bottom ( figure 1). The change has two elements: a steady rise in life expectancy and a one-off fall in fertility. All too often, the debate is dominated by a belief that developed rich societies face severe problems, some would say potential crises, as a result of demographic change. The current UK CRR of 2.48 is higher than needed for pension reasons, and it is suggested that it exceeds the welfare maximizing level.Īgeing populations present opportunities as well as challenges. A CRR above 2 implies continued population growth.
A combined replacement ratio (CRR) is suggested for developed countries combining the impact of the fertility rate and immigration rate. It needs to be replaced by a welfare optimizing model, which takes into account the increasing years of healthy life, a slow rise in the pensionable age, capital inheritance and wider welfare considerations of population density that are not reflected in GDP measures. A mechanistic approach assuming a fixed retirement age and a need to raise fertility or increase immigration in order to maintain pensions at a fixed proportion of the gross domestic product (GDP) is overstated and wrong. The UK experience in accommodating to a changing dependency ratio provides some generalizable insights. Approximately half the world's population now has replacement-level fertility or below.