European societies are ageing. In 1950, only 12% of the European population was over age 65. Today the share has already doubled, and projections show that in 2050 over 36% of Europe’s population will be 65-plus years old.
The culprits are fertility rates and longevity. In the past, a woman in Europe had on average more than two children. Since 2000, the fertility rate has fallen below that threshold. Europeans are also living longer now: 78 years on average, up from 66 years in the 1950s.
Prolonged human life is a sign of Europe’s prosperity, but combined with the region’s low fertility rate it is also creating an array of social and financial problems for the continent.
Perhaps most critical is the fact that the share of working people who can provide care to the older persons is shrinking, even as the number of people needing care grows.
This imbalance between demand and supply, which leads to shortages in nurses and other professional care providers, is already challenging the fast-ageing countries of Germany, Finland and the United Kingdom.
The increased demand for care will also require significant financial resources. In 2014, OECD countries were spending on average 1.4% of GDP on long-term care, but these costs are projected to rise substantially through, reaching 6,4% by 2060.
Public spending on long-term care is highest in the Netherlands and Scandinavian countries (where it costs 3% to 4% of GDP) and lowest in Central and Eastern Europe. In Poland, Hungary and Estonia, less than 1% of GDP is spent on long-term care.
This difference in expenditures reflects not only the share of the population that’s ageing but also the diversity of long-term care systems in Europe. The Netherlands and Scandinavian countries, for example, have well-developed systems of formal care for older persons, which offer a broad range of government and private-sector services at home or in institutions.
In Central and Eastern European countries, on the other hand, elderly care is largely seen as the responsibility of families. In these countries, as in Mediterranean countries, an elderly person who needs daily care for a lengthy period of time will most likely move in with children or relatives, who provide social support and arrange medical assistance when needed.
This informal care system is facing new challenges in the modern era, too. Women, who around the globe have traditionally played the family caretaker role, are increasingly working outside of the home, further reducing the number of family members available to provide informal care for older persons.
Informal care challenges
Even as they seek to grow their stable of professional long-term care providers, countries are endeavouring to make informal family-based care – which is believed to be more beneficial for older people and exert a lower social cost – more feasible.
In Germany, unpaid caregivers have the option to reduce their working hours with a medium-term paid-leave benefit. In the Czech Republic and Ireland, there are tax exemptions for informal care givers to compensate for their efforts.
This type of support will continue to play an important role in both Western and Eastern European countries. But it also raises questions about quality control. How do countries know that their elderly are being given adequate care? And who monitors their well-being?
Informal caregivers, such as family members and neighbours, generally do not have specialised training, which means that overall they lack skills and knowledge about recognising symptoms and thus, about the type of health-care needed.
As the designated protectors of individual rights and social values, governments still have the obligation to monitor informal care provision and ensure that its elderly citizens are in good hands. Establishing quality-monitoring mechanisms in informal care is itself a formidable challenge.
Today’s seniors are not passive in this process. Widespread digitisation of society and higher tech-savviness has given older people better access to information, which may increase their expectations for the quality and type of care they should receive.
Finding new long-term care systems
Across Europe, from the wealthy west to the developing east, there are always competing demands for public resources. Any money spent on growing long-term elder care systems could also be used to meet other pressing social needs – launching new public-health or environmental programmes, for example.
In Western Europe, where extensive care structures are already in place, their increasingly hefty price tags will make them difficult to sustain in coming years as the population in need continues to balloon.
Eastern European countries face a different policy dilemma: providing care for elderly relatives takes a considerable toll on family members, and public resources for creating nursing homes and elderly houses remain scarce.
At present, as each country begins to ponder a future in which its population is working less but needing more, it is still unclear whether their paths forward will converge. Europe could respond to its divergent but shared problem with a unified response, perhaps via the European Commission, which executes all European Union programming.
To date, the Commission has begun stimulating cross-country collaboration on elderly care with such supranational platforms as the European Innovation Partnership on Active and Healthy Ageing, a portal that helps institutions, professionals and researchers in the healthcare and ageing field to find training resources, best practices, care models and the like.
This is a relatively small step towards grappling with a region-wide social problem. But one immediate hurdle to working together on care for the elderly is the fact that the European Commission has no mandate over healthcare; every EU member state is free to decide how to arrange its own healthcare provision.
In the past, the EU has responded to the need for coordinating similar national issues such as agriculture, for example, by defining subsidies, regulations and investments for EU countries.
A similarly, common European ageing programme based on the commitment and initiative of individual countries could work too, helping each EU member state construct a context-specific care system that benefits both their oldest citizens and society at large.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.