As we move through December, it is a time when everyone starts anticipating the new year and what it might bring. There will be many 2018 outlooks and forecasts but before we get there I want to step back and look a bit further. This is especially in the context of our recently proposed Vision 2030 plan.
At the end of this year, we would be closer to the year 2035 than 2000. Time flies doesn’t it?
The world is changing rapidly but the question for us in T&T is whether our rate of development is keeping pace with the rest of the world.
The clear reality is that if we are developing at a slower pace than the rest of the world—and we are not yet at developed country status—then we will never get to the stage of being considered developed.
So, more than the quality of our plans and initiatives, it is the speed with which we execute those plans and initiatives that, ultimately, makes the difference of where we end up. Being a developed nation is a relative, as opposed to absolute, construct.
A key issue in economic development is our demographic profile.
Arthur Kemp is credited with coining the phrase, “Demographics is destiny”. If that statement is true then it is quite likely that on our current path T&T is has more challenges than we currently realise.
Upon the release of the last national census, we were told that “a population in which the ratio of people aged 65 and over relative to the population aged 15 and younger (ageing index) is 30 or above may be described as old.”
The ageing index of T&T is 43.5 which means we are a very “old” population. Three years on from this statement we are probably an even “older” population.
What are the implications and what are we doing about it?
Is the public aware, do we even care?
Something may be dawning on us as the discussion about increasing the retirement age takes hold. The labour leaders in T&T are expressing their members’ concern about increasing the retirement age. I would expect that those same labour leaders would have questioned their members about how they plan to fund their retirement and whether they can survive on their retirement benefits in an era when government subsidies will likely be no more.
Something has to give and one would expect nothing less than reasoned and intelligent conversations as opposed to spurious arguments and bluster.
Our ageing demographic is a reality that is the result of our collective lifestyle choices. Now we have no choice but to find solutions or risk serious social challenges.
Many times over this column has raised the issue of our poor demographics in the context of planning for retirement and our inability to develop our capital markets so as to allow for wealth creation where people can manage their own affairs into retirement and beyond instead of depending on the State for an increased grant or allowance. Instead of wealth creation our politics is more about wealth transfer.
Demographic issues have far reaching consequences, will affect the lives of every citizen and will determine the future prosperity of this country in a post oil and gas era. Despite this, it is yet to form part of the mainstream national debate and gets little more than lip service from those in authority.
Is it that we do not understand what is at stake?
Main driver
It is my strongly held view that demographics—more than any other driver—determines the movement of financial markets and impacts changes to culture and social “norms”. All this ultimately combines to determine the prosperity of a nation.
The number of children born to a woman living in the United States averaged eight in 1800 and declined steadily to two by 1930. At the end of that period came what is today called The Great Depression.
Following the end of World War II that number spiked to four children in 1960 heralding what was known as the “Baby Boom Generation”. As that generation came into the workforce it heralded the wealthiest generation in the history of man.
By 2010, the Baby Boomers began to retire en mass and 1.93 children per woman was the new average in the US. With that change in demographic came The Great Recession. Is this just a coincidence?
Factor in Japan which is currently in the midst of a multi decade economic malaise marked by chronic deflation. In 1989, 11 per cent of the Japanese population was over 65. In 2006, that number moved to 20 percent and it is expected to reach 38 per cent by 2055.
Japan has a life expectancy of 84.2 years, the highest in the world. Overall welfare costs have risen from five per cent of national income in 1970 to 31 per cent in 2012.
Will Japan ever get out of their economic malaise given their already high debt burden and poor demographic? I doubt it and the experience of the US and Japan are just two examples of the role that demographics play in an economy.
Demography impacts the structure of the capital markets as well. A society saving for retirement will invest and in the process the demand for longer-term securities like stocks increases.
A society that is aged will switch to longer term fixed income investments that tends to keep interest rates low, thus impacting savers in other age groups.
Demographic malaise
In 1973, the median age in China was 19, today it is 35.
China, with a one child per couple policy, has the same median age as T&T.
An aged index of 43.5, a median age of 34.5 and a negative population growth rate of -0.11 per cent speaks to T&T’s challenges. Our negative legal population growth rate is because 6.42 individuals leave per 1000 of population. After migration then add murders, even people killed in car accidents all have a cost to the society.
If you accept the role that demographics played in some of the countries citied above it should be clear our future is going to be challenged. T&T’s two largest age brackets at the time of the census was 20-34 and 45-55 years.
The 20-34 age group in theory leads to the greatest increase in output and GDP but how many of ours are in make-work and state sponsored programmes?
What plans are there to cater to the burgeoning over 40 demographic that now comprises 40 per cent of the population?
Where are our improvements to healthcare services, how are their retirements going to be funded?
Ian Narine can be contacted at ian.narine@gmail.com