The German Federal Statistical Office in November last year reminded us once again of the the dreadful state of German (and Western Europe’s) demographics in its report “Every seventh person will be 80 or more years old in 2060”.
Demographics is is one of the few variable that can be used with 100% certainty when making projections. Sadly, even that has not motivated politicians to tackle its serious implications for Western Europe’s state welfare system, apart from minor tinkering around the edges.
Germany’s population will fall 20%
At present Germany has a population of 82 million which will, in the worse case scenario, decline by just over 20% to 65 million over the next 50 years. The annual excess of deaths over births, will more than triple by 2060 (2008: 162,000, 2060: 527,000).
This may not sound like a lot but but 17 million people is more than the total population of the Netherlands and slightly less than that of Chile. (Source Wikipedia) And that in a country that produces just over 6% of world nominal GDP in 2008. (The USA produced 23.7%) (Source: Wikipedia)
This is not the worse
This however is not the worse of it. With the welfare system already straining to meet its obligations the age dependency rate is nearly going to double by 2060, with the number of people aged 65 and over increase substantially after 2020.
The age dependency rate is calculated as follows: (No of people 65 years and over) / (100 people of working age) Today in Germany 34 people aged 65 and over are supported by 100 people working (aged between 20 and 65 years). In 2030, this number will increase to 53 and in 2060 to 67.
That means in 2060 the welfare of 67 people will have to be supported by 100 working people with the system currently straining with just 34.
I will not be there
Thank goodness I will be long buried in 2060 and will not then be looking at any state benefits! Graphically it looks like this: People aged 65 and older for every 100 people working
The numbers will look slightly better if one assumes a retirement age of 67 with the a ratio of 43 in 2030 and 56 in 2060, from 29 today.
But its all looks quite grim. It will be interesting to see how the debate in Germany develops as it is basically the interests of generations against each other. The only problem being that the retired is a powerful voting block, directly effected and is good at organisation whereas for the young the problem lies in the distant future and they are not as well organised.
The only problem is changes need to be made now before the train hits the wall. Take a look at this fascinating interactive graphic showing the ageing of the German population in slow motion. Interactive German Demographics 2009 to 2060
Have you signed up for my free weekly newsletter “Investing that makes sense” yet?
Sign up now and receive articles like this in your inbox weekly.
And if you sign up now you will also receive a 10 page free bonus report – Enhanced Checklist for Value Investors – with over 30 proven checklist items to improve your investment returns.