How Longer Lifespans Are Changing Everything All Around The World

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With rapidly developing economies, improving incomes and quality of life, life expectancy is improving around the world. The speed and degree of these changes, however, are markedly different.In a new report, Credit Suisse looks at how higher life expectancy has changed economic activities for both men and women, and affected how they spend and save. It has also increased the burden on the government

At 80.9 years, G4 countries (Germany, Japan, UK and U.S.) have the highest life expectancies in the world

Global life expectancy has increased from 47.7 years (1950 - 1955) to 69.3 years (2010 - 2015). At 57 years, Africa is the only continent with a life expectancy lower that the world average of 69 years.

Russia and South Africa are the only countries where life expectancy has stagnated or declined. The decline in South Africa first began in the mid-1990s, only stabilised very recently, and has been attributed to the rise in the number of HIV-related deaths. Life expectancy increases at birth have been the highest in Asian countries.

Source: Credit Suisse

This raises huge questions for ageing countries like Japan

Conditional life expectancy, namely how much longer a person has to live at a particular age, is highest in Japan. At 65, Japan has the highest conditional life expectancy of 21.7 years, and at age 80, it has 10.6 years.

South Africa in comparison has conditional life expectancy of 13.7 years at age 65, and 6.7 years at age 80.

Source: Credit Suisse

This means people are entering the labour market later, having children later...

In 1975, an average Japanese woman joined the labour market at the age of 18.2, spent 12.2 years studying, married at 24.7 years. She would spend 15.8 years in retirement.

In 2009, an average Japanese woman started working at 21, spent 15 years studying, got married at 28.6 years, and lived 21.7 years in retirement.

Source: Credit Suisse

Kids now spend more time in school...

Children are more socialized and have greater exposure to television and digital experiences and spend more time in education. Between the ages of 25 - 65 years they are likely to delay marriage and parenthood, change jobs frequently, work long-distance and remotely.

At 65 - 80 years they are expected to experience an increase in wealth, travel and luxury but are also likely to have longer and more uncertain post-retirement periods.

Source: Credit Suisse

It has changed the cost of raising children, and distribution of households by size

The distribution of U.S. households by size has changed significantly as life expectancy has changed. In 1965, 15% of U.S. homes were 1-person homes, 16% were 4-person, compared to 27% and 14% respectively in 2010.

Cost of raising children increased as well. A family that earned over $64,000 a year would spend $241,770 to raise a child to the age of 17 in 2000. In 2010 however, a family that had an annual pre-tax income of over $77,500 would spend $377,040 to raise a child to the age of 17.

Source: Credit Suisse

Post-retirement lifestyle changes have increased activity rates in emerging markets

The need to finance longer post-retirement life affects the choices of middle-aged and old workers. The activity rate for 55-64 year olds is the highest in Indonesia and the lowest in South Africa.

In most developed countries, the participation rates for men in the 50-64 age groups has fallen significantly since 1970 but has increased for women.

Source: Credit Suisse

But female participation in the economy needs to rise...

Countries need to focus on boosting female economic rates and prevent male economic activity rates from falling further than they have to maintain the living standards for the elderly.

Germany has seen the largest increase in female economic activity rates between 1980 and 2010, while Japan's has been flat. Meanwhile, the U.S. has seen the largest drop in male economic activity rates from 1980, compared with 2010.

Source: Credit Suisse

The elderly are more likely to spend on health and leisure

Compared to the young, in the U.S. the old spend a higher proportion of their income on health. In the UK, the old spend more on food, beverages and leisure, recreation and hotels.

In Germany those in the 60+ age group spend more on housing, leisure, recreation and hotels than those between 20-29 years, while in Japan, they spend more on food and beverages.

Source: Credit Suisse

It has also affected how they save

In Japan, income has fallen for all age groups between 2004 and 2009, which would affect how they save and how much and where they invest. In 2009, those under 30 invested 49% of their savings in demand deposits; and investment in securities like stocks, bonds, etc., increased from the younger age group to the older age group.

Source: Credit Suisse

Pensions are increasingly financed by employees rather than employers

There has been a rapid growth of Defined Contributions (DC) pensions where plan participants bear the risks of their pensions, while in Defined Benefit (DB) plans employers bear the pensions risk.

In the U.S., DC pensions jumped to 57% of the population in 2010 compared with 44% in 1999. The largest jump however has been in the UK, which has seen its DC pensions rise from 5% in 1999, to 40% in 2010. Australia however has a massive 81% DC pensions.

Source: Credit Suisse

The burden on governments has increased, especially in developed countries

Old age-dependency ratio has been rising around the world. The ratio is much higher in developed countries, and amongst G4 countries, Japan has the highest at 35.5. In Asia and Latin America the ratio is low overall.

Healthy life expectancy is crucial for countries like Germany, which spends nearly 8.6% of its GDP on public health expenditure. The country has a healthy life expectancy for women of only 60.9 years, compared with life expectancy of 82.7 years.

Source: Credit Suisse

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