World Bank Support to Aging Countries
Population aging—resulting from falling fertility rates, declining mortality, and increased longevity—shapes the profile and the needs of an increasing number of countries. How effective has the World Bank been in tailoring its support to provide an adequate response to this evolving challenge? This evaluation is the first report from the Independent Evaluation Group to assess the World Bank’s contribution to diagnosing client countries’ demographic issues related to population aging; understanding the variance in policy needs and context specificities; and providing vision, tools, and resources to respond to challenges in countries at different stages of aging.
This evaluation aims to inform the World Bank Group’s Board of Executive Directors, management, and staff about the relevance, coherence, and operationalization of World Bank support to aging countries. The World Bank is increasingly called on to offer support to respond to the deep socioeconomic challenges its clients are facing because of population aging. Providing adequate responses to aging countries will become more of a priority as the phenomenon accelerates and becomes more prominent in World Bank client countries.
The analysis was conducted at two levels. First, for a group of 59 countries, the evaluation analyzed the main diagnostic work on aging (157 reports), a portfolio of age-sensitive operations, and Systematic Country Diagnostics (SCDs) and Country Partnership Frameworks (CPFs). The 59 countries were selected to include 47 post- and late-dividend countries, plus 12 early-dividend countries. The evaluation refers to this broad group of countries as the reference population. Second, a more in-depth review was undertaken for a subset of 15 countries, including 6 countries that were visited by the Independent Evaluation Group. The evaluation used semistructured key informant interviews at both levels to support portfolio reviews and analysis.
The evaluation found that the World Bank has made progress toward building a comprehensive approach to guide its support to aging countries. The World Bank’s analytical work more regularly explores the interconnections among different sectors of the economy and calls for coordinated policy responses. This growing body of analytical work, however, is only partially reflected in the SCDs and CPFs of countries that are aging. As a result, the country engagement model is not used to its potential to diagnose the challenges related to population aging and the consequences that these can have for economic growth and well-being. At the sectoral or operational level, progress has been slower than at the analytical level, and the World Bank has not been proactive, timely, or innovative in identifying solutions to help countries plan ahead to support a healthier and more productive population. The evaluation found that for the World Bank to better help its clients address their aging challenges, it needs to focus more on preparedness and improve its cross-sectoral thinking.
The World Bank does not have an explicit aging strategy, but many corporate documents refer to the urgency of addressing demographic issues related to aging. The Global Monitoring Report 2015/2016: Development Goals in an Era of Demographic Change by the World Bank and the International Monetary Fund and several regional aging reports have built a reference framework for thinking about the challenges of aging in the World Bank’s client countries and how policies can help turn those challenges into opportunities.
The World Bank Perspective on Population Aging
The World Bank’s understanding of aging has gone through several phases, from a narrow focus on the sustainability of pension systems to a broader perspective encompassing the whole economy.
The number of reports on population aging has increased over time, and the range of topics has become more diverse. These reports show that population aging is a complex phenomenon that touches on virtually all sectors of the economy and can affect growth and inequality. Pensions no longer represent the lion’s share of the World Bank’s work on aging. The adoption of new methodologies—for example, National Transfer Accounts—has allowed for the exploration of future scenarios based on different projections of population aging, labor force participation, education, and so on, to derive alternative impacts of aging on economic activity, productivity, and gross domestic product growth, and to define alternative policy options.
The evaluation found that this work has two main limitations: (i) it does not closely correspond to country needs, and (ii) it does not systematically analyze the impacts of population aging on different population groups. The evaluation found a disconnect between the country “needs”—measured by the demographic challenges faced by the country according to statistical data—and the issues examined in the World Bank’s analytical work. This means, for example, that countries that acutely face specific challenges related to population aging (for example, strong outmigration or extremely low female labor force participation) are not more likely than others to receive good World Bank diagnostics on those issues (in some cases, they are actually less likely). This may be driven by data availability, but it also appears that work is decided somewhat opportunistically.
Population aging can produce profound distributional issues (gender gaps; intergenerational disparities; and spatial, rural versus urban, and socioeconomic inequalities), but these are seldom explored in analytical work. There are multiple sources of gender inequality in relation to aging, as a result of gender differences in life expectancy; employment patterns; accumulation of pension entitlements; care responsibilities (including toward older people); and other vulnerabilities related to old age. The relatively little attention paid to these issues is therefore puzzling, especially since gender and aging is included as an area of focus of the World Bank Group Gender Strategy. In general, access to the right type of data can explain some of these patterns. The World Bank tends to use macro statistics and cross-sectional data, like those provided by the Living Standards Measurement Study, and occasionally Demographic and Health Survey data. It less frequently uses longitudinal data and specialized surveys. The partnership that has invested in the China Health and Retirement Longitudinal Study, which studies the multiple dimensions of aging in China, is a welcome exception.
Engaging Countries on Population Aging
The country engagement model, which is the key channel for analyzing the main constraints and opportunities for growth, prosperity, and poverty reduction at the country level, is not regularly and systematically used to assess the drivers and consequences of population aging, even if population aging can have substantial impacts on growth and prosperity.
SCDs and CPFs do not regularly discuss population aging, even in countries where aging is a relevant issue. The SCDs in aging countries seldom analyze the implications of population aging and do not make systematic use of existing analytical work in relation to aging. When they do, they do it very selectively. For example, they are much more likely to use existing fiscal sustainability analysis of pensions and health systems than to use existing poverty and migration analysis in relation to aging. Labor market issues in relation to aging are also more frequently analyzed than other topics.
CPFs in aging countries also seldom discuss the challenges of population aging and its consequences, even in cases where the SCD had a good focus on aging. CPFs that stand out are those that use demographic analysis to identify the challenges of population aging and propose policies for medium- and long-term solutions, for example those aimed at strengthening the human capital of the population.
The evaluation found good examples of the analytical work providing a solid and substantial empirical base and directly influencing the policy discussion. Country aging reports have been in some cases instrumental in stimulating the need to act to address the many challenges of population aging and have generated concrete responses by governments (Uruguay). In other cases, high-quality diagnostic work has helped countries to develop approaches to tackle specific issues, such as long-term care (China). At the same time, the SCD-CPF model has the advantage of adopting a cross-sectoral approach, bringing together diverse teams from various Global Practices and focusing on the challenges to growth, poverty, and shared prosperity. It therefore represents the natural vehicle to discuss the implications of population aging in a systematic way and to use an aging lens when prioritizing support in aging countries.
Several factors inhibit the ability of the World Bank to engage more regularly and systematically with client countries on aging. These factors include the lack of a natural counterpart in governments for a such a cross-sectoral topic, the absence of population aging from some of the World Bank agendas that could house it (the Human Capital Project, future of work agenda, inclusion agenda, and gender strategy), and the insufficient use of partnerships to help advance the topic with the client.
Addressing Population Aging
Addressing and anticipating the consequences of population aging calls for creating the conditions for a healthier and more productive society. To support client countries in achieving that goal, the World Bank needs to focus on preparedness and think cross-sectorally.
Focusing on preparedness implies aiming at systemic solutions, for example promoting healthier behaviors for a healthy longevity, supporting productivity throughout the working life, and introducing incentives to save for retirement. The evaluation found that the World Bank has not been systematic and deliberate in helping countries prepare for population aging. Except for its work on reducing tobacco consumption, the World Bank has not extensively invested in programs to incentivize healthy behaviors. The World Bank is currently working toward building a lifelong learning framework but has not yet integrated it into the aging work. Another promising area is accessibility (smart cities, friendly environment), but this work is still tentative. The World Bank is also not active on changing negative attitudes toward older people.
The most innovative work that the World Bank has done over the past 10 years is supporting countries in piloting new approaches to long-term care. In 2011, the World Bank supported the Chinese government in its effort to build a comprehensive policy and institutional framework for long-term care and prepared its first two projects entirely focused on long-term care. Since then, the World Bank has provided technical assistance in this area, using different approaches to long-term care provision. The World Bank’s expertise and reputation in this area is increasing.
Thinking cross-sectorally means recognizing the links across issues and that sectoral interventions can have broader impacts, some of them unintended. This is always the case for complex and systemic issues such as population aging. Thinking cross-sectorally, therefore, helps to avoid the risk that sectoral interventions will create negative consequences in other sectors, undermine other interventions, or miss the opportunity to use existing synergies. The evaluation found that the World Bank suffers from a certain degree of fragmentation, partly due to lack of coordination and collaboration across Global Practices, so that issues and risks are often considered in isolation. The evaluation presents several examples.
The internal constraints that hinder working on preparedness and thinking cross-sectorally are, in addition to poor internal coordination, limited resources (especially in internal expertise) and difficulty in accessing knowledge, especially knowledge accumulated through reimbursable advisory services.
The Way Forward
In keeping with its formative intent, this evaluation does not offer recommendations but has two suggestions for helping the World Bank make progress.
Suggestion 1: Better formulate the World Bank’s position with respect to population aging. This should facilitate dialogue with clients and potential partners and improve the World Bank’s capacity to provide support on this issue. Concrete steps that the World Bank can consider to achieve this goal are the following:
- Identify a champion who can coordinate the efforts related to this agenda to facilitate cooperation across teams and promote the inclusion of aging in relevant institutional agendas: the Human Capital Project, future of work agenda, gender strategy, and inclusion agenda.
- Produce a high-level report or position paper on population aging, outlining the World Bank’s framework and priorities for engagement. A World Development Report on population aging, for instance, could provide a framework for the World Bank.
Suggestion 2: Improve the systematic production and use of diagnostic work to provide more regular analysis of the drivers and consequences of population aging to inform engagement with aging countries. Concrete steps that the World Bank can consider to achieve this goal are the following:
- Make the existing wealth of analytical work more easily accessible (especially analysis developed for reimbursable advisory services).
- Invest in identifying and addressing key data gaps to better inform diagnostics, planning, and policy discussions.