Ageing in the region is a complicated matter

The Arab world still has one of the lowest ageing rates in the world. However, there is no doubt that the decreasing fertility rates are slowly setting way for an ageing population. The demographic transformation will take different shapes throughout the region.  Governments have a gold opportunity now to shift policies towards an easy transition.

Ageing in absolute numbers

In 2016, around 4.4% of the Arab world was above 65; which was roughly around 16 million individuals. This number is low when compared to that the European Union at 19.5% and North America at 15.3%. But the Arab world, unlike Europe and North America, is going through an age-structural transition which is a  period when the portion of those between 15 to 64 grows faster than the  economically inactive population of children (age 0-14) and older persons (age 65+). Once the region passes through this generational transition, it will have a larger and a faster growing chunk of elderly people in its populations.    To understand what ageing is and entails, we will dissect the phenomena further.

Old Age dependency ratio

Ageing itself cannot be treated in isolation. We have to see other factors that can exacerbate the negative effects of an ageing society or tame it. The first concept to understand is old age dependency ratio. In a nutshell, old age dependency ratio looks at how many citizens above 65 years there are for every 100 citizens who are between 15 to 64. Meaning that it looks at how many economically active people there is compared to senior citizens. The aim of this ratio is to assess the ability of an economy in sustaining the economically inactive seniors. The Arab world’s current dependency ratio is 7% which means there are 7 senior citizens for every 100 individual between 15 to 64. In Europe that rate stands at 30% while it is at 23% in North America. Although these numbers look good at face value, zooming into the different countries in the region shows a different picture.

Different phases of demographic transition

As we explored in the Ageing Trends (link) piece, the Arab world has a diverse set of demographic structures. The remittances piece (link) explored how economic opportunities in the GCC have attracted several migrant workers seeking employment opportunities. Similarly, this trend will affect old age in the Arab world. Countries that “send” working-age workers will see an increase in old-age dependency ratio for two reasons. The obvious one is that they are sending away working age populations but the other lesser known reason is the fact that they are also witnessing ‘return migration’ from workers who go back home after retirement.

With all those indicators in mind, scholars divide the Arab world into three groups:

  1. Fast ageing countries: Algeria, Bahrain, Kuwait, Lebanon, Libya, Morocco, Qatar, Tunisia and the UAE.
  2. Medium ageing countries: Egypt, Jordan, Oman, Saudi Arabia and Syria.
  3. Slow ageing countries: Comoros, Djibouti, Iraq, Mauritania, Palestine, Somalia, Sudan, and Yemen.

Based on those categorizations, Morocco, Tunisia, and Lebanon will have by 2030 the highest percentages of citizens above the age of 65 in the Arab World.

Figure 1 – Which Arab countries will have an aging population by 2030?

So what if we get old?

  • Health expenditures: Health expenditures are a vital challenge for aging populations. For instance, in Europe, the ageing population is projected to increase health care spending by 1- 2% of GDP which is an increase by 25% of current spending levels. This does not account for long-term care that is also needed by aging population. The rapidly increasing ageing population will create similar pressures on already fragile health expenditures in the region.
  • Pensions: Data on pensions in the Arab world is outdated yet the available resources suggest that on average, the mandatory schemes cover 34% of the labor force only. Moreover only 30% of individuals above 65 are covered by an old-age pension scheme in the Arab World. The average rises to 92% in Western European countries.
  • Taxation base: The above two points are interrelated by the inability of the government to face those expenditures without a wide tax base that can feed the cycle. With the fast ageing trends in the region, the base is expected to shrink providing less resources for ageing and current populations.

What can governments do?

Governments in the Arab world need to take serious reforms to cope with the ageing phenomenon of its population. These steps include:

1 – Reform the social security and pension plans: the majority of workers in the region do not have formal safety nets. Studies show that family and religious ties remain one of the biggest informal safety nets at old age. These nets will not be sufficient as economies and intergenerational ties develop and change.

2 – Invest in education and job creation: in order to maintain an active economic population that can sustain the ageing population, governments in the Arab world must not only invest in education to create a skilled workforce but also create economic opportunities for job creation.

3 – Invest in health infrastructures: an ageing population requires a more sophisticated healthcare system that can provide tertiary and preventative health care facilities.


Sources:

Ageing International Journal. 2017. Ageing and Elderly Care in the Arab Region: Policy Challenges and Opportunities
ILO. 2014. Social Protection for Older Persons: key policy trends and statistics.
European Commission. 2010. Projecting Future health care expenditure at European level.
WHO. 2015. Ageing and intergenerational family ties in Arab countries.
World Bank. 2005. Pensions in Middle East and North Africa: Time for Change.
UN-ESCWA, CSA, & UNFPA. 2014. Ageing in the Arab World: Trends, Implications, and Policy Options.
UN-ESCWA. 2013. Development Policy Implications of Age Structural Transitions in the Arab World.
UN-ESCWA. 2013. Demographic Profile of the Arab Countries Analysis of the Ageing Phenomenon