Ageing population

Introduction

This paper sets out relevant data and outlines key issues in respect of Jersey’s ageing population. The intention is to facilitate an informed discussion about the consequences of an ageing population and trade-offs between various policy responses.

Summary

• In the ten years to 2021 the proportion of the Jersey population aged 65 and over increased from 14.8% to 18.1% and the dependency ratio increased from 46% to 52%.
• There is a sharp reduction in labour force participation after the age of 64; 64% of the 60 - 64 age group are economically active compared with 13% of the 65 and over age group. Labour force participation by the Jersey-born population is over ten percentage points lower than that of people born in Portugal and Poland.
• The dependency ratio is forecast to increase to around 65% by 2035 with net immigration of 1,000 a year and to 73% with net nil migration.
• Other things being equal an ageing population means a reduction in living standards.
• A report by PwC suggested a number of policy directions including –

o Increasing labour force participation, particularly of older workers, is crucial to maintain a workforce that meets the needs of the economy and to reduce reliance on migrant labour. Policy areas to achieve this cover retirement and pensions, employment support, skills and lifelong learning and healthy ageing.

o An ageing population will impact some sectors’ workforces more than others.

o The type of employment activity created in Jersey will play a part in determining the Island's capacity to retain and retrain older workers. As a knowledge-based service economy, Jersey is arguably better positioned to retain an older workforce compared to economies concentrated on manual labour.

o Technological progress can be the vehicle to mitigate the adverse effects of ageing.

o On the fiscal side, a potential drop in the tax base combined with increasing government expenditure can put pressure on fiscal sustainability.

Historic data

Table 1 shows the breakdown of the Jersey population by broad age group from the censuses between 1951 and 2021.

Table 1 Age breakdown of the population, 1951-2021

It will be seen that there was a sharp increase of 3.3 percentage points in the 65 and over group between 2011 and 2021.

The ageing population is a key determinant of the dependency ratio, defined as the proportion of those outside working age (16-64; until 2011 it was 16-59 for women) to those of working age. The following table shows trends in the ratio since 1931. It will be seen that there was an increase of six percentage points between 2011 and 2022.

Dependency ratio 1931-2021

1931 55%

1951 55%

1961 57%

1971 60%

1981 53%

1991 47%

2001 53%

2011 55%     46%

2021             52%   

Source: the figures in the first column are taken from the 2011 Census; the figures of 46% for 2011 and 52% for 2021 are taken from the 2021 Census . The 55% figure in 2011 is with women from 16-59 and is compatible with the earlier figures. The 46% figure is with women 16-64 and is compatible with the 2021 figure.

Data from the 2021 Census

The following table, from the 2021 census report, shows the number of people economically active as a proportion of the population by age –

Economically active population by age, 2021

50-54 89%

55-59 85%

60-64 64%

65 & over 13%

All 68%

It will be seen that participation in the labour force falls significantly between the ages of 59 and 64 and then massively from the age of 65.

The following table, from the 2021 census report, shows those economically active as proportion of the population of working age by place of birth –

Economically active population by place of birth, 2021

Jersey 79%

Other British Isles 84%

Ireland 88%

Poland 93%

Portugal/Madeira 92%

Other European 90%

Other 88%

It will be seen that participation in the labour force is lower among the Jersey-born than among those born elsewhere in the British Isles and much lower than those born elsewhere in Europe. Put another way, if the Jersey-born proportion was the same as the Portuguese/Madeiran born population there would be additional 3,600 economically active people in the Island.

Future trends in the population and the dependency ratio

On 9 December 2023 Statistics Jersey published Population Projections 2023-2080. The report analyses the future size and structure of Jersey’s resident population under different scenarios of births, deaths and migration pattern. All of the date in this section are taken from that report.

Table 2 shows population size under different migration assumptions.

Table 2 Jersey population size under different migration assumptions

It will be seen that with the net nil migration assumption the population would fall from 103,200 in 2022 to 99,900 in 2040 and 87,400 in 2080.

Net migration of 325 a year would result in figures of 106,500 in 2040 and 113,000 in 2080, and with net migration of 700 a year the figures would be 114,100 in 2040 and 142,500 in 2080.

The ageing population means that with any of the assumptions the proportion of the population over 64 will increase. So with net nil migration, between 2022 and 2050 the number of people over 64 will increase from 19,600 (19% of the population) to 26,410 (27% of the population). By contrast the proportion of the population under 16 will fall by 2040 under any of the assumptions. Under the net nil migration assumption between 2022 and 2050 the number of people under 16 will fall from 16,000 (16% of the population) to 13,200 (14% of the population).

Table 3 shows trends in the dependency ratio for the various net migration assumptions.

Table 3 Jersey dependency ratio under different migration assumptions

The table shows that with net nil migration the dependency ratio would increase from 52.6% in 2022 to 64.0% in 2040. Net migration of 1,000 a year would result in a virtually unchanged dependency ratio.

Jersey’s comparative position

The 2021 Census Report stated that “Jersey’s dependency ratio (52%) was lower than that of England & Wales (56%) and Guernsey (57%)”.

Guernsey no longer does traditional ten-yearly censuses but rather publishes an annual electronic census report. The most recent Guernsey Annual Electronic Census Report was published on 31 January 2023. The report shows that in the ten years from 2012 Q1 to 2022 Q1 the population increased by just 1%, from 63,085 to 63,711. This compares with an increase in Jersey over a similar period of 4.7% Over the same period the dependency ratio increased from 50% to 57%.

Guernsey also publishes an Annual Guernsey Population Projection Bulletin, although the most recent one is dated December 2021. The central projection is based on net migration of 100 a year. This would result in a population of 63,220 in 2040, 57,535 in 2060 and 52,716 in 2080. The dependency ratio is projected to increase to 76% in 2042. On a comparable basis Jersey’s figure would be between 60% and 61%. The difference is partly explained by the starting point, which reflects Guernsey’s low rate of population growth in the last ten years.

Implications of an ageing population

The implications of an ageing population can perhaps best be illustrated by taking a theoretical community of 100 people which for many years was stable with 15 under working age, 20 over working age and 65 working. Thus 65 people provided the output on which 100 people lived. Now assume that over a period of years the number of people over working age increases to 25 and correspondingly the number working falls to 60. Now, five fewer people are providing the output on which 100 people depend. In technical terms the dependency ratio has increased 54% to 67%. Multiply those figures by 1,000 and, broadly speaking, this is what is happening in Jersey.

There is an additional factor with an ageing population. The elderly require more healthcare than younger people and therefore the higher the proportion of elderly people in the community the higher the proportion of the wealth of that community that goes in healthcare costs.

In short, the inevitable consequences of an ageing population are –

• A lower level of goods and services that the community as a whole is able to enjoy.
• Higher taxes pensions and subsidy arrangements for the elderly.
• Increased healthcare costs, again generally requiring higher taxes.
• A change in the nature of society.

In 2021 the Government commissioned a report from PwC Impacts of an ageing population on Jersey’s economy.  The report noted that “Although policy recommendations are beyond the scope of this study, broad policy directions are offered”. Key findings included –

• The ageing of Jersey’s society is expected to accelerate in the future.
• As a result of this demographic change, Jersey faces an increasing old-age dependency challenge.
• Jersey’s population ageing tends to reduce the size of its labour force.
• Population projections indicate that positive inward migration will be needed to grow Jersey’s workforce and to slow the increase in the old-age dependency ratio.
• Increasing labour force participation, particularly of older workers, is crucial to maintain a workforce that meets the needs of the economy and to reduce reliance on migrant labour.
• An ageing population will impact some sectors’ workforces more than others. Currently, both financial services and hospitality have a relatively young workforce while transport, storage and communications sector have a relatively old workforce. The demographic imbalances between sector workforces are likely to cause severe labour shortages as some grapple with issues of employee succession planning, while others with employee retention.
• The type of employment activity created in Jersey will play a part in determining the Island's capacity to retain and retrain older workers. As a knowledge-based service economy, Jersey is arguably better positioned to retain an older workforce compared to economies concentrated on manual labour.
• Technological progress can be the vehicle to mitigate the adverse effects of ageing. Capital-intensive industries can offset a shortage of labour by investing in automating technologies. Labour shortages are likely to be accentuated in sectors that are more labour-intensive and less susceptible to automation, for example healthcare and education.
• Jersey’s sectoral economic activity will be driven by how older people consume and spend.
• Changing aggregate expenditure across sectors can slow economic growth. Though older consumers will be more numerous and thus take a larger share of aggregate expenditure, the lower per-capita spending of those aged 65+, compounded by a concentration of spending in lower productivity sectors (e.g. health care), means that an ageing population can slow overall productivity in Jersey’s economy. Furthermore, these trends can exacerbate existing skills shortages in those sectors.
• On the fiscal side, a potential drop in the tax base combined with increasing government expenditure can put pressure on fiscal sustainability.
• Policies are needed to facilitate more participation of society in the workforce. The report identifies four policy areas to achieve this: (i) retirement and pension policy; (ii) employment support policy; (iii) skills and lifelong learning policy; (iv) healthy ageing policy.