From down the pyramid looking up - Demographic change from the perspective of the millennial generation

Simon Ullrich, 28 Dec 2010

One group of observers at the World Demographic and Ageing’s Forum ‘Upcoming Demographic Changes in Islamic Countries’ conference were students from the University of St. Gallen. Much attention is currently focused on the higher part of the population pyramid. The students, instead, provided a perspective from lower down the pyramid. Younger generations, in Islamic countries and elsewhere, will be just as impacted by demographic change as older ones. The St. Gallen students reflect here on their experiences of the Forum and their wider perception of demographic change.

In November 2010 the World Demographic and Ageing Forum brought together experts from around the world to the Swiss Re Centre for Global Dialogue to address demographic challenges in the Islamic world. Five key findings from this event help to create a better understanding of demographic changes in various Islamic countries. Building on these insights, we consider demographic shifts from our perspective, the millennial generation – within our framework we try to establish common ground for future ACTION.

During the expert symposium on demographic change in the Islamic world, we experienced a phenomenon young Europeans will have to get used to; we were outnumbered by those of older generations. The focus was on the Islamic world; but the topic of demographic change is of global relevance.

The event gave insights from and perspectives into countries that we rarely encounter in the “western world”. This applies not only to demographic changes but also the level of diversity within Islamic countries. We heard from a number of countries, small and large, rich and poor, educated and non-educated and in different phases of demographic transition. Despite the huge differences, there were some common themes:

1. The role of religion

In the Islamic world religion is a key to change. This was once the case in Europe; but religious authority has gradually diminished. In many states Islamic religion and traditions still guide decisions at both a personal and national level. This can help us to understand some of the developments in this region and reveal possible initiatives and starting points to manage demographic transition as well as its economic and social impacts. It is absolutely necessary to work with and have the support of religious leaders in order to enable or facilitate change.

2. The role of women

The role of women is a crucial factor in the process of managing demographic change. Higher education of women is generally associated with lower fertility as a result of three factors: (i) training in issues such as child health, maternal health, nutrition and access to basic healthcare can reduce child mortality and hence the fertility rate; (ii) female education commonly leads to a higher age at marriage and consequently to a greater input in marriage decisions, which consequently reduces fertility; and (iii) education correlates with higher use of contraceptives and thus again a lower fertility rate. The education of women leads to fewer children both due to changing needs as well as changing preferences. Equally these effects are diminished by gender-stratification. Education is a catalyst for women, changing their social role, autonomy and empowerment.

3. Micro and macro level strategies

To enact these insights strategies are needed at both micro- and macro levels. Female autonomy and advocacy must be accommodated within both. On the personal and communal level ways to increase autonomy of women will lead to higher knowledge and acceptance of contraceptives. Female participation in the labour force could increase if the correct measures are taken. In several Islamic countries there are a large number of women holding university degrees but who are nevertheless unable to work. Work participation can delay age of marriage and further strengthen the role of women. Both directly influence the preferred family size. On the other hand there is a need for overarching state initiatives regarding health, education and family planning.

4. Jobs needed

Some Islamic countries in the Middle East-North Africa (MENA) region will experience a demographic dividend (due to lowering dependency ratio), which could lead to strong economic growth – if the economy manages can absorb and employ the additional workers – or huge unemployment and social instability. The negative impacts of a badly handled youth bulge could threaten to spill over to the whole region. Two issues should be considered together: “How can we create the approximately hundred million jobs needed for the young people joining work force over coming decades in the region?” in order to ensure regional and even global stability.

5. Rapid change is possible

The challenges identified might seem immense but history has shown that rapid change is possible. The decrease in crude birth rates that has been achieved in Iran, for example, shows that this can be a period of transition. The last couple of decades have also shown that new industries can emerge and almost overnight grow to employ a significant part of the population and change the way we structure our lives and environments.

What do we think of the demographic challenges as the young generation?

In Europe the issue of demographic change has various facets. We see some countries experiencing rapid ageing combined with a shrinking workforce and thus an increasing old-age dependency ratio. This severely affects the very foundations of welfare systems as we know them today.

Increased life expectancy and healthy ageing are blessings and indeed opportunities. Handled in a constructive manner this progress could translate into an advantage for individuals, countries and for Europe as a whole.

Healthy ageing has in most cases been translated into more years of retirement. This is now only affordable for a diminishing number. Public pensions will decrease; and at the same time the number of years actively contributing as workers and taxpayers will have to increase. Since we live in knowledge-intensive societies, shortening the time in education does not seem feasible. The central question, therefore, is: “How can labour participation be prolonged in an acceptable and meaningful way?” New ways of balancing work and leisure will have to be found and lifelong learning must become a reality, not only a phrase. Changes will have to be made in the way age is perceived in businesses. Governments need to incentivise both workers and companies to make this happen.

An interesting business approach is, for example, the Consenec Model: Senior managers of the companies ABB, ALSTOM, and Bombardier are obliged to leave their positions at the age of 60 and have to enter the in-house consultancy Consenec as Senior Consultants. They are free to choose their workload (0-100%) and have to acquire their cases by themselves. Their basic remuneration will amount to approximately half of their previous salaries and will rise according to their time-commitment and place of work. The Senior Consultants are required to stay with Consenec until their retirement age, but many choose to work longer (Hörhager, K., 2011, p.157-160). Vast knowledge and experience is used in a meaningful way, while at the same time junior employees are supported in their development. A similar model can be found within the Bosch Group. In Bosch Management Support GmbH already retired senior managers may return to work for specific, mostly short time consultancy projects (Deller et al. 2008, p.128-129.). These are models to voluntarily prolong the labour participation of highly qualified workers. Developing and applying models suited to different situations will be a significant challenge for future human resource management but with a considerable amount of upside potential.

The reliance on public pension schemes is decreasing, as they are already heavily stretched in western countries. Private savings will have to play a more important role for a large part of the population. There is need for education regarding alternatives to public schemes and how to set them up. At the same time suitable and reliable financial products have to be available to create private pension plans. Public -private models can lead the way, particularly in a phase of transition. A current example is plans in which individuals are incentivised to save for their retirement through combined state funding. Since this involves a long investment horizon for many, and the choices made are critical for the future of individuals, it is important that the good choice is the easy one.

The particular products employed in those schemes, therefore, should be trustworthy, easy to understand and monitored closely. When shifting towards less state reliance, welfare aspects must be continued in such a way that there is also coverage for those who for some reason fall short and ensure that also these people have an suitable outcome in their later years.

In addition to the challenges associated to higher life expectancy, Europe faces additional issues. Most of the countries are confronted with very low fertility rates, which are already way below replacement rate and still falling. A central question will be: “How can we make having children an easier choice?” (To which “Smoothing the apparent conflict between work and family life, with the help of micro and macro level strategies.” is only the first text-book answer).

Europe will face growing immigration and needs to implement strategies that allow for successful integration and prosperous and productive exchange and development. Instead of following the current trend to nationalism and protectionism, it will be crucial to strengthen an open society. Key levers might be reducing and preventing parallel societies as well as improving educational opportunities.

The threat of massive unemployment is not unique to the Islamic countries. Europe will face a similar problem (evoked not by a youth bulge but by slowing growth) and will have to answer the question of how to foster innovation in order to guarantee employment and growth.

ACTION - Bridging the gap

To facilitate a shift from description of change to managing the transition, five areas in need of immediate focus were identified. Put together as our ACTION framework, it is general enough to be relevant for both the very diverse Islamic countries and the rest of the world, whether the changes are related to increasing or decreasing populations and on both micro and macro levels.

Awareness - A broad sense of awareness has to be encouraged. The general public must have an understanding of the whats and whys of the situation. With a number of politically difficult decisions to be taken, demographic change has to be actively managed.

Causality - The causality of changes must be explained in order to focus on the most pressing areas. Major demographic changes are already afoot. The time, for example, to discuss minor, stepped adjustments to pension systems in Europe is over, now there is a need for fundamental changes.

Trust - The challenges that our societies face as a result of demographic changes cannot be tackled individually. We live today in a connected, global world. Combined efforts can only be successful if built on trust; trust that governments will work together with their population to bridge this gap with a commitment to finding solutions. Reverting to an authoritarian approach is not a desirable option.

Interaction - In order to put solutions to work and manage these challenges a lot of interaction is required – between governments, agencies, companies and individuals, but also between generations. Large differences in age cohorts in democratic countries can lead to potentially politically powerful groups. An arena for populist policies might be detrimental when it comes to manoeuvring through necessary changes. Interaction builds heavily on awareness, causality and trust.

Organisation - Organisation is necessary to manage the shifts our societies need. Although it may appear an obvious thing to point out, it is crucial that initiatives do not have to fight “the system”. This would undermine the whole process of adapting to new realities. Nearly all branches of the modern welfare state are affected by this transition, so a broad spectrum of initiatives is needed and should be incentivised through facilitation and organisation.

Now - The chance to be proactive has passed. The time to take action is now.

 

References

Deller, J., Kern, S., Hausmann, E., Diederichs, Y. (2008). Personalmanagement im demografischen Wandel. Ein Handbuch für den Veränderungsprozess mit Toolbox Demografiemanagement und Altersstrukturanalyse. Heidelberg: Springer Verlag. Found on 10.12.2010 at http://www.springerlink.de/content/978-3-540-76345-1/#section=151765&page=3&locus=55

Hörhager, K. (2011). Consenec – A well-proven model. In: From Gray to Silver – Managing the Demographic Change Successfully. Hrsg.: M. Boppel, S. Boehm and S. Kunisch, 2011. Heidelberg: Springer Verlag. p.157-160. Found on 10.12.2010 at http://www.springerlink.com/content/978-3-642-15593-2#section=809559&page=4&locus=51

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Author

Simon Ullrich

Student from the University of St. Gallen

Simon Ullrich and his fellow University of St. Gallen students Coskun Bedel, Anna Pirhofer and Odd Sverre Volle are representatives of the millennial generation (also known as the Generation Y (see Wikipedia for definition). They acted as observers at the World Demographic and Ageing’s Forum ‘Upcoming Demographic Changes in Islamic Countries’ conference.

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