Is Spain prepared for the demographic transition and the challenges of aging?

In 2018, for the first time in history, the population over 64 surpassed the population under five. This demographic transition towards a more elderly society raises fundamental questions that go beyond the simple increase in life expectancy. Are we ready for an increasingly aging population? How should our economies and policies adapt to confront the demographic challenge and leverage the opportunities of this structural change?

A change in the economic and social paradigm

Demographic transition is a reality that affects all aspects of social and economic life. A longer life expectancy is undoubtedly an achievement for humanity, but it also requires a profound adaptation of economic and social structures.

With fewer people of working age and more retired individuals, economies face significant pressures on public spending, especially on pensions and healthcare. Additionally, aging poses challenges related to social inclusion, ageism, and intergenerational equity, as younger generations could bear a greater financial burden if appropriate changes are not implemented.

Although these issues are crucial, there is a lack of data and measurement tools to help understand how countries are addressing this challenge. So far, most analyses of aging have focused on isolated indicators, such as the proportion of older people or dependency rates, without providing a comprehensive and multidimensional view of countries' readiness to face this transition.

Capturing the complexity of longevity

This is where the Senior Economy Tracker (SET) comes into play, a new index that allows for assessing how countries are adapting to the demographic challenge, providing measures that enable the analysis of temporal evolution and comparisons between countries.

Existing measures often fall short when it comes to capturing the complexity of longevity. Most available indices (e.g. The Active Aging Index by the World Health Organization) offer a limited perspective by focusing on a single aspect, such as health or employment, which hinders an integrated understanding of the challenges and opportunities posed by population aging.

The SET, on the other hand, covers four key dimensions – demographic, institutional, macroeconomic, and individual – to provide a more comprehensive and holistic view of how countries are managing the challenge of longevity. This new index, developed by researchers at the Pontifical University of Comillas in collaboration with Ageingnomics (Mapfre Foundation), considers the proportion of older people in society, the capacity of institutions to support healthy aging, the economic inclusion of older people in the labor market, and the overall quality of life of this population.

Which countries are leading the demographic challenge?

When applying the SET to 27 European countries during the period 2010-2021, we have found significant differences in strategies and levels of readiness to address the socio-economic effects of the demographic challenge. Thus, Nordic countries, such as Denmark and Sweden, are at the forefront of adapting to the demographic transition.

These countries have adopted an integrated approach, combining effective active aging policies with robust welfare systems that support both older populations and younger generations. This advanced readiness is reflected in high scores across all dimensions evaluated by the SET.

On the contrary, many Eastern European countries, such as Romania and Bulgaria, lag behind, facing significant challenges in terms of institutional infrastructure, economic participation of older people, and quality of life. These countries show an urgent need for political and economic reforms to address deficiencies in their support systems and promote a more active and healthy aging.

The longevity dividend

One of the main conclusions of the SET is that longevity does not have to be a burden, but rather an opportunity. The concept of longevity dividend refers to the economic and social benefits that can be obtained if societies manage to maximize the contributions of older people, not only as consumers but also as workers, mentors, and volunteers.

According to researcher Andrew Scott, promoting active and healthy aging could transform what we currently see as a cost into a source of economic growth and social well-being.

However, for this dividend to be possible, a coordinated effort between governments, businesses, and individuals is required. The countries leading in the SET have shown that it is essential to promote continuous training, adapt workplaces to include older workers, and encourage healthy habits from an early age.

In this sense, by providing a comprehensive and easily interpretable framework, the SET facilitates the development of more effective political interventions, promotes informed decision-making, and raises public awareness of the importance of adapting to demographic changes.

David Roch Dupré is a professor in the Department of Quantitative Methods at the Faculty of Economics and Business Studies (ICADE), and a Researcher at the Institute of Technological Research (IIT) of the Higher Technical School of Engineering (ICAI), Comillas Pontifical University. Elisa Aracil is a professor in the Department of Economics and a Researcher at the same institution. Pablo Calvo is an assistant collaborating professor in the Department of Quantitative Methods at the same university. This article was originally published in The Conversation.