PARIS – Inequality among older people will continue to build up in the future, with an increased risk of falling under the poverty line at an advanced age, due to an aging world population and other factors such as irregular career trajectories among younger generations, according to a report published on Wednesday by the Organization for Economic Cooperation and Development.
The OECD report titled “Preventing Ageing Unequally” concludes that those born during the 1960s will not experience higher than average real incomes compared to the previous generation born a decade earlier.
“They are expected to live longer, but have been experiencing more unstable labor market conditions and widening inequalities in the distribution of earning and household income,” the OECD report said.
This will contribute to widening the inequality gap in old age, while socioeconomic disparities in health status will remain large, and therefore translate in a negative evolution of retirement pensions, in particular among the less educated population, the report added.
In addition, the pensions system is going to be subject to increased pressure as people live longer, according to the OECD, phenomena that can be described by the so-called dependency ratio, which looks at the work-force population compared to the population of people not working.
In 1980, the OECD noted that there was an average of 20.5 persons older than 65 years for every 100 people in their prime working age (20-64 years of age group), a percentage that increased to 28 in 2015 and is forecast to rise to 53.2 by 2050.
Japan is currently the country with the highest dependency rate with 47 percent, followed by Italy (37.9 percent), Greece (36.1 percent) and Finland (36.1 percent).
By 2050, Japan will continue in the lead with a staggering 77.4 percent, followed by Spain with 75.5 percent, Italy (73.9 percent), Portugal (72 percent), South Korea (71.8 percent) and Greece (71.6 percent).
This scenario is compounded by a dropping fertility rate, and increased life expectancy which is not equal to all the population as from an early stage disadvantages in education, health employment and wages take their toll, the OECD said.
Furthermore, aging is not a uniform process – a 25-year-old university-educated man can expect to live 7.5 years longer than his lower-educated peers; and in the case of women, the difference is much lower at 4.6 years.
This educational divide is reflected in the career-life, of those asked, 30 percent of males aged 50-64 with low education declare they have work limitations due to health problems, compared to only 10 percent of those with a higher education.
The OECD underscores that income inequality is rising among the latest generations which, until now, had enjoyed an overall improvement in their income compared to the preceding generation.
Since the mid-1980s, the 60-64 age group incomes had risen 13 percent more than for the 30-34 years age group and this tendency has been particularly acute in the case of Italy, Spain, France and Denmark.
But an increasingly worrying forecast suggests a worsening situation as regards to the circumstances in which retirement takes place.
As a matter of fact, only 44 percent of the 55-64 age group with lower education are employed while the percentage among those with a higher education is of 70 percent, the report said.
The OECD points out that generations born during the 1960s, now in their 50s, can no longer expect to earn a higher wage than the previous 50s decade generation when they reached the same age. The same happens to those born in the 70s if compared to the previous decade.
The question now is to discern whether this is a shock-wave from the global recession that struck a decade ago or if it confirms a major sea-change.