Population aging shapes the demographic profile of an increasing number of countries. Thanks to dramatic improvements in nutrition, sanitation, health, education, and—more generally—economic well-being, longevity has increased everywhere in the world at the same time as fertility has decreased in most countries, especially in Asia. As a result, population aging, which had previously seemed to be a phenomenon confined to Organisation for Economic Co-operation and Development (OECD) and Eastern European countries, is now defining societies in East Asia and Latin America (box 1.1). Even in regions where aging is a more distant concern overall (such as South Asia, Africa, and the Middle East), a few countries increasingly face aging-related challenges, and more countries are forecast to enter the aging phase of the demographic transition in the coming decades. The pace at which this phenomenon is unfolding in the developing world is striking.
The World Bank is anticipating an increase in demand for support from countries that are facing challenges related to population aging. Although there is no explicit aging strategy, several corporate documents refer to the urgency of addressing demographic issues related to aging. The Global Monitoring Report 2015/2016 (GMR) discusses population aging as part of a broad, comprehensive framework that describes the impacts of demographic changes on development (World Bank and IMF 2016). The report argues that, for the world to stand a better chance of ending extreme poverty and improving the well-being of the bottom 40 percent, countries need to adapt their policies and institutions to a different demographic profile. This report—complemented by regional aging reports—represents the World Bank’s reference framework to think about the aging challenges of its client countries and how policies can help turn those challenges into opportunities.
Population aging has critical implications for economic growth, inter- and intragenerational equity, and the inclusiveness of the development process. A large and increasing body of evidence has shown that population aging can slow down growth if it is not accompanied by an increase in labor force participation and productivity (appendix B). There is also clear evidence that different groups of the population are differently affected by population aging. Social norms regarding care, changes in family structures, and negative attitudes toward aging and older people (ageism), also have an impact on how countries may be affected by population aging. Policies that promote healthy and productive lives and positive perceptions about aging are therefore essential to improve the quality of life of the population, increase the productivity of a shrinking labor force, and reduce the future burden of long-term care needs.
Box 1.1. When Is a Country “Aging”?
A country is usually defined as aging when the share of people ages 65 and older is above 7 percent, aged when the share is 14 percent or more, and superaged when it exceeds 20 percent.a Other definitions are used, such as the median age or the old-age dependency ratio, which is the ratio of older dependents (people older than 64) to the working-age population (people ages 15–64). Cut-offs are arbitrary, however, because they do not consider how healthy and functional the so-defined older people are. The prospective old-age dependency ratio measures population aging based on remaining life expectancy instead of the number of years lived (Sanderson and Scherbov 2005, 2007, 2010). This measure reflects improvements in life expectancy over time, instead of anchoring old age to a fixed threshold, and suggests a slower increase in dependency than the traditional old-age dependency ratio.
The Global Monitoring Report 2015/2016 proposes a definition that combines trends in fertility and in the size of the working-age population. Based on these trends, countries are classified into four stages of “demographic transition”: predividend countries (where fertility is greater than 4 births per woman); early-dividend countries (where fertility is lower than 4 births per woman but the working-age population is still increasing); late-dividend countries (with a shrinking working-age population but where fertility fell only recently); and postdividend countries (with a shrinking working-age population and where fertility fell below replacement level, or 2.1 births per woman, three decades earlier). The last two stages characterize aging countries. This evaluation adopts the Global Monitoring Report definition to select aging countries, although it may refer to other definitions when appropriate.
Source: Independent Evaluation Group; World Bank and IMF 2016.
Note: a. The cut-off of age 65 is generally used because this is normally when people can claim social security.
The purpose of this evaluation is to assess how the World Bank has been able to support clients to confront the challenges deriving from population aging. This evaluation is the first report from the Independent Evaluation Group (IEG) to focus on how the World Bank has been helping countries adjust to and prepare for population aging and create the conditions for inclusive growth and prosperity during advanced stages of demographic change. The evaluation aims to inform the World Bank Group’s Board of Executive Directors and management on the relevance, coherence, and operationalization of World Bank support to aging countries and contribute to the future refinement of this line of work. Providing adequate responses to aging countries will become more of a priority as the phenomenon accelerates.
The evaluation’s overarching question is: How well is the World Bank supporting client countries in addressing and anticipating their aging challenges? This overarching question embeds two main subquestions:
- How well does the World Bank diagnose aging-related challenges in client countries?
- How comprehensive, timely, and coherent is the World Bank’s operationalizing of its support to aging countries?
The first subquestion assesses the alignment of diagnostic work with the country’s aging context and priorities and with the current evidence on the challenges and opportunities of aging countries. It also assesses how diagnostic work has informed the World Bank’s strategy and policy dialogue with the country. The second subquestion assesses the comprehensiveness and timeliness of World Bank support to countries and its internal (in relation to instruments and Global Practices) and external (in relation to other partners’ agendas) coherence. (See appendix A for a more detailed description of the evaluation questions and methodology.)
Conceptual Framework and World Bank Work on Aging
IEG derived a conceptual framework to guide the evaluation, based on three literature reviews covering the pensions and labor market, health and long-term care, and accessibility and friendly cities. This framework is used: (i) at the analytical level, to describe the channels (informed by the literature reviews) through which population aging can affect a country’s development outcomes; define the sectors potentially involved; identify the World Bank’s entry points; and guide the interpretation of the evaluation’s findings; and (ii) at the methodological level, to delimit the topics and potential interventions that can be mapped to aging to identify the relevant World Bank portfolios of activities (figure 1.1).
The framework summarizes the drivers of population aging and their immediate and medium- and long-term impacts on the economy, and highlights how country conditions, behaviors, and policies influence those impacts (see appendix B for a more extensive discussion). Population aging can put downward pressure on long-term economic growth when it means a reduction in employment and labor productivity, higher dependency, and lower savings and investments. However, these negative impacts do not materialize if longevity is achieved by adding healthy years, which allows individuals to stay productive and independent for longer, and if the economy uses opportunities to produce higher savings and investments during the first demographic dividend.
The impacts of population aging vary across countries and within countries. Evidence shows that the gap between life expectancy and healthy life expectancy is large among different socioeconomic groups and that there are important differences between developed and developing countries (Lancet 2017). There may also be differences between generations. Although older people are not necessarily poorer than younger ones, there is high variability across countries (Evans and Palacios 2015). In some cases, aging may be associated with illness, disability, social isolation, inability to be employed, and uncertainty about income or care-support sources. Vulnerabilities depend on the coverage of pension and health systems; the availability of care; the pervasiveness of informality; the magnitude of rural-urban migration; and preferences and attitudes toward coresidence, intergenerational support, and gender and social norms about care and female labor force participation.
The effect of population aging on growth and inequalities will ultimately depend on the type and timing of policy responses. Countries may need to adapt their health care systems to focus on preventing and managing noncommunicable diseases (NCDs); ensure access to long-term care services; adopt labor market policies that support employment (female employment in particular) and productivity; consider proimmigration policies to counteract the decrease in the working population; and counter fertility reduction with family-friendly policies. Policies can also provide incentives to change behaviors, for example for individuals to adopt healthy behaviors, for workers to delay retirement, and for workers and employers to invest in skills. Fiscal reforms and adjustments in social protection and pension systems may be needed to relax fiscal constraints and avoid increased labor costs and disincentives to competitiveness and job creation.
It is also important to recognize that economic development is not only determined by but also a determinant of aging. Economic development allows for technological advances and improvements in health systems, working conditions, and quality of life, and these impacts can counteract some of the negative impact of aging running in the opposite direction.
Policies may need to address inequalities related to population aging. The impact of aging on intergenerational inequalities will depend on how support for older people is provided for in a given society, including the extent of social programs, the prevalent familial systems and patterns of coresidence, and the allocation of savings and consumption across the life cycle (see Lee 2016; Lee and Mason 2011). Measures to cover the large informal sector characterizing most World Bank client countries may need to be considered. Gender inequalities may not be exacerbated if public policies are in place to provide long-term care and, at the same time, support female paid employment (OECD 2017). Countries may also need to consider how to improve “accessibility” (a broad category including access to information, accessible buildings, urban planning, affordable housing and services, and public transport) and ensure social inclusion of older people.
Figure 1.1. Conceptual Aging Framework
The conceptual framework identifies the main instruments for World Bank support and the channels through which it can influence client countries’ policies in a broad variety of sectors. The World Bank’s work on aging—even when not labeled as such—spans several decades. This work has been delivered in the form of diagnostics, operational support (both lending and technical assistance), and policy dialogue and advice (figure 1.1 [bottom left box] and table 1.1).
Table 1.1. Main Entry Points for World Bank’s Work on Aging
Advisory services and analytics
Global, regional, and country diagnostics and analytical work produced for ad hoc reports or poverty assessments, public expenditure reviews, jobs diagnostics, and so on; diagnostics work in SCDs, originally produced for the SCD or harvested from existing knowledge products
Financial support and technical assistance
Lending and nonlending support to country policies and capacity strengthening to tackle aging challenges (as per analytical framework)
Inclusion of priorities related to aging in CPFs
Knowledge brokering and data generation, access, and sharing
Global, regional and country workshops; North-South and South-South learning activities; data collection; data identification; data use
Partnerships at the global, regional, or country level for direct financial support to countries or the production of analytical work or data work
Source: Independent Evaluation Group.
Note: CPF = Country Partnership Framework; SCD = Systematic Country Diagnostic.
IEG used the GMR categorization of aging countries as the basis for this evaluation. Aging countries are, for the purposes of this evaluation, the late- and postdividend countries where the World Bank has a portfolio of activities. IEG also selected 12 early-dividend countries that are fast approaching the late-dividend stage to assess how the World Bank helps these countries prepare for aging. See appendix C for the full list of countries and more details on their selection and analysis.
The evaluation used a multilevel design, whereby analysis was conducted for (i) the whole reference population (47 post- and late-dividend countries plus 12 early-dividend countries) and (ii) selected countries (6 countries visited by IEG, plus 9 countries selected for desk review). For the whole reference population, the evaluation reviewed 157 reports representing the main diagnostic work on aging, a portfolio of aging-relevant operations, the universe of existing Systematic Country Diagnostics (SCDs), and the most recent Country Partnership Framework (CPF). For selected countries, the evaluation conducted a more detailed portfolio review of operations and advisory services and analytics (ASA; including reimbursable advisory services [RAS]) and conducted country visits. The evaluation used semistructured interviews with key informants at both levels to support portfolio reviews and analysis and to complement findings from other sources.
Analysis of the World Bank’s diagnostic work is a key element of this evaluation. This is because one of the evaluation goals is to assess how well the World Bank has used knowledge of specific demographic challenges to tailor its support to clients. In addition, the World Bank’s production of diagnostic work is a key part of its engagement with upper-middle-income and high-income client countries—the ones for which aging is a critical challenge.
The combination of methods and the multilevel design facilitated the derivation of robust lessons, although managing the scope of the evaluation was an important challenge. The main challenge that the evaluation encountered was in identifying aging-relevant work at the conceptual and operational levels. The evaluation distinguished among different types of relevant activities in addressing this challenge at the conceptual level (box 1.2). At the operational level, the evaluation (i) recognized the limitations of a sector-driven selection of activities and searched for aging-relevant work in all sectors; (ii) used a keyword search to identify the potentially relevant lending and ASA portfolio and complemented this by manual scanning of Project Appraisal Documents (lending) and reports (ASA) to discard false positives and (for selected sectors) false negatives; and (iii) used interviews and a survey addressed to the country director in all Country Management Units (CMUs) of the reference population of aging countries to validate the selection of aging-relevant operations and diagnostic work.
Box 1.2. How to Identify Aging-Relevant Activities
Based on the literature and preliminary portfolio reviews conducted for this evaluation, aging-relevant activities may be
- Providing support targeted TO older people: pensions, long-term care, accessibility, social inclusion, social services;
- Related to sectors or areas that disproportionately AFFECT older people, de facto or by design, even when older people are not directly targeted: urban design, transport, health services, financial capability;
- Directed to the DRIVERS of population aging: migration, fertility, premature working-age mortality; or
- Addressing issues arising BECAUSE OF population aging: labor productivity, lifelong learning and skills development, fiscal burden constraint or deficit.
Source: Independent Evaluation Group.
The evaluation does not assess the work of the International Finance Corporation. The evaluation acknowledges that the private sector may be providing services to the older population and that age discrimination in the workplace is addressed in International Finance Corporation Performance Standards. However, the evaluation’s focus is limited to the work of the World Bank to keep the scope manageable.
Using the country as the unit of analysis entails some limitations. Case studies allow for a deeper analysis of World Bank support, but they may not provide the full picture of World Bank work in this area. Case selection relies on external data, which may not cover the full range of countries, and on World Bank documentation, which is not always available or consistent.
The evaluation does not provide an in-depth assessment of World Bank sectoral work. For example, a proper analysis of the World Bank work on pensions, probably the most prolific and established line of work in the area of aging, would have required an extensive, ad hoc investigation (IEG conducted an in-depth evaluation of the World Bank work on pension systems and pension reforms in 2006 [World Bank 2006]).
The evaluation includes an extensive discussion on the vulnerabilities of aging countries that have been affected by the coronavirus (COVID-19) pandemic. Because the pandemic began as the evaluation was concluding, IEG did not collect primary data in this area but commissioned a separate study, based on the emerging scientific and policy literature, which is reported in appendix G. Some lessons emerging from the pandemic that resonate with the evaluation findings have been woven into the main text of the report.
The report is organized as follows: Chapter 2 analyzes the evolution of the World Bank’s perspective on population aging over the past 20 years. It shows that the volume of analytical work on aging has increased and has grown to cover more diverse sectors. Several reports on aging have used a comprehensive framework to demonstrate that population aging has wide-ranging socioeconomic consequences. Chapter 3 discusses how the World Bank engages with client countries on population aging using the country engagement model. Although this is not the only modality of engagement, it is the most regular and systematic. Moreover, as population aging can negatively affect growth and well-being if not addressed, the SCD-CPF model is the appropriate channel to analyze the issue and identify possible policy responses. The chapter also reviews some factors that may constrain systematic engagement with clients. Chapter 4 analyzes the type and characteristics of activities that can provide a timely, comprehensive, and coherent response to population aging. Activities are classified based on two elements: their contribution to countries’ preparedness for population aging (support in anticipating aging challenges) and their ability to reflect a cross-sectoral perspective. The major constraints to developing these types of activities are reviewed in the final part of the chapter. Chapter 5 concludes by providing some insights into how the World Bank can improve its support to client countries that are increasingly facing the challenges of population aging.
- According to the projections of the United Nations Population Division, significant gains in life expectancy have been achieved in recent years in all regions of the world (United Nations 2017). Globally, life expectancy at birth rose by 3.6 years between 2000–05 and 2010–15, from 67.2 to 70.8 years. The greatest gains were in Africa, where life expectancy rose by 6.6 years between these two periods after rising by less than 2 years over the previous decade.
- Notable is the case of the Republic of Korea, where—according to the 2017 census—the working-age population ages 15–64 dropped for the first time, and the proportion of the population ages 65 or older increased to 14.2 percent. This transition from an aging to an aged society happened in just 17 years—the fastest ever recorded so far. Indeed, it was only in 2000 when the percentage of citizens ages 65 and over surpassed 7 percent (Statistics Korea 2017).
- The implementation update of the World Bank Group’s Forward Look document refers explicitly to the challenges of aging societies and the need to meet increased demand for new types of products and services, such as pensions and insurance products, as populations in emerging markets become, on average, older and more affluent (World Bank 2018b). It also refers to middle-income countries’ “unresolved development challenges” and signals that “many [middle-income countries] have lost their demographic dividend or will soon, and their pension and social protection systems are a rapidly rising financial burden” (World Bank 2018b, 4). The Bank Group Capital Package highlights ensuring health care for an aging population and preventing noncommunicable diseases as a prominent part of the Improving Human Endowment pillar of the World Bank Group Gender Strategy (World Bank 2018d). Indeed, this strategy identifies aging-related challenges in health, education, and social protection as part of emerging (second-generation) issues to be addressed under the first pillar (World Bank 2015m).
- The Independent Evaluation Group conducted an evaluation on demographic issues in 2009, which focused mostly on issues of high fertility (World Bank 2009a).
- An earlier version of this framework was presented in the evaluation Approach Paper and validated during the evaluation process by an extensive review of the literature and through interviews with key stakeholders within and outside the Bank Group.