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Demographic Development: Reality and Media Distortion

by Gerd Bosbach Wednesday, Oct. 25, 2006 at 1:29 AM
mbatko@lycos.com

Reducing uhemployment and intensive education for children and youth are prerequisites for mastering the future. Instead the economy and politics constantly refer to demography.. Catastrophic reports sell better than the truth.

DEMOGRAPHIC DEVELOPMENT – REALITY AND MEDIA DISTORTION

By Gerd Bosbach

[This article published in: Initial – Berlin Debatte, 8/2/2006 is translated from the German on the World Wide Web, http://www.linksnet.de/artikel.php?id=12520. Gerd Bosbach is a professor in Remagen, Germany.]




Like a barrage, we hear every day that Germany is growing old and shriveling. We have too few children and are becoming much older.

The proposed solutions are allegedly unavoidable and thus outside public debate. Private provisions must bill the gap. Real pensions, pensions minus inflation, will be reduced. Additional social security- and tax contributions will be necessary and people will have to work until 67. In the health area, the pools can no longer be financed at the same levels on account of the old age burden.

Whoever does not see this is dumb or pigheaded or both. Some politicians and academics go even further. Surtax and pension reduction for the childless and an age-limit for medical treatments are their initial demands. The scapegoats are marked out: the childless and the seniors who populate Mallorca at our expense.

Often I am bewildered by this debate. Obvious positive factors are faded out; simple logical connections ignored, future calculations are confused with the coming reality and facts are presented falsely in a misguided way. What matters most is being dramatic. As to solutions, obvious and necessary basic presuppositions are at best mentioned in passing. Here are two examples:

1. Unemployment: The effect of unemployment is much stronger than the demographic development of the last 20 years. A rough calculation reveals the problematic. Today 45 million working persons (persons between 20 and 60) face 20 million seniors (over 60). The supposed demography drama is that this proportion will shift in the future against those able to work. However this is happening today. The reason is unemployment! The official five million unemployed should not be counted in the group of providers but must be added to the needy. Without considering unemployment, the relation would be 2.25 persons able to work to one senior. With inclusion of unemployment, the proportion is 1:1.6. This is a more dramatic shift of the relation than is expected in the next 20 years for the natural population development!

Reducing unemployment would obviously increase the amount of produced goods and services and thus contribute to prosperity. Besides lowering the contributions for unemployment insurance, an additional effect would be lowering the pension contribution since there would be more payees. Whoever regards lowering unemployment as an illusion should not speak of too few providers. Instead of the missing children, the unemployed could contribute to the supply. Thus the demography theme is secondary.

2. The generation that will have to feed the “many seniors” in 2050 is now in school training for this challenge or unfortunately on the street. To feed the “many seniors” later, youth today need an excellent education. Instead there are cancelled school hours, decaying school buildings, overstrained and partly burned-out teachers, shortage in apprenticeships and jobs, dramatically overcrowded universities and a few media-effective drops on the hot stone to cover up the misery in the education realm. (1)

Politicians and entrepreneurs who have a real fear about the demographic development must now slog away and not make a mess in the education sector. Otherwise we will have really huge problems before 2050 because of poorly trained workers! Complaining about future shortage in skilled workers is absolutely insane in view of the massive reduction in apprenticeships…

Reducing unemployment and intensive education for children and youth are elementary prerequisites for mastering the future. Instead the economy and politics constantly refer to demography.

After this somewhat emotional excursion in policy, I’d like to present several important factors that are faded out in the public debate (2), factors that take away much of the drama. Bundled together, they show that the demographic development will not lead to an economic problem. This does not mean the future will be rosy but the reason may not be sought with the “many seniors” and few youths.

The facts cited here are from the German statistical office or the German institute for population research. The future-referring data comes from 2003 population predictions of the German statistical office. Nearly everyone refers to these statistics in public discussion, even most future skeptics.

GLANCE AT THE PAST

The future is described as gloomy because we are becoming ever older and have fewer and fewer children. This is well known to the elders among us and is nothing new. As life expectancy rose in the last century more than 30 years, success in reducing child mortality gives us more than 20 years more life expectancy. For the next 50 years, the experts of the German statistical office assume an aging of six years, that is comparatively little.

What should be said about the second “reason for catastrophe,” the smaller number of children? This trend was much stronger in the last century than is estimated for the future. In numbers, the share of children and youth in the population fell from 1900 to 2000 from 44 percent to 21 percent and will drop to 16 percent in half the time by 2050. The numbers of the needy over 65 speak for themselves: 1900-2000 plus 170%, expert expectation for the next 50 years, plus 77%, is proportionately less than in the last century! The conclusion of these facts is: We have handled this much better in the last century than is expected for the future – with a massively greater prosperity for everyone and a development of the social systems. Thus seniors and fewer children by no means force a dismantling of social benefits.

Before I discuss the reasons in the next section, I remind you that frequent attempts were made at blaming demographic development.

“Welfare State in a Cul-De-Sac. Who Pays Tomorrow’s Pensions?” This was the headline of a large Austrian newspaper in 1959. In the 1967 family report of the German government at the time of the first great coalition, we read: “The share of children has constantly decreased; the share of older persons has constantly grown… In 1871, 5 percent of the population was over 65. In 1967, the share of seniors had more than doubled to over 12 percent. In 1980, Helmut Schmidt sought to explain negative developments with demography but fortunately was stopped by his advisors. Today the theme is rediscovered and spread by the media in well-planned campaigns.

“FORGOTTEN” FACTORS IN FUTURE PREDICTIONS

Now let us turn to the population forecast of the German statistical office for 2050. Nearly all “dramatists” draw their anxious view of the future from this forecast. The German government appeals to these numbers for “rebuilding” the social systems. Let us assume the predictions are right. Then today’s population of 82 million residents will fall to 75 million in 2050. The share of children and youth would fall from 21 to 16 percent. That does not sound so dramatic. But with a very restricted perspective, one can still discover the dilemma, many seniors and an excessive provision burden.

Today 44 persons over 60 face 100 persons able to work and in 2050 it will be 78 persons. That is a growth rate of 77 percent. Intolerable!

Future pessimists who still use facts justify their fear one way or another. If that sounds terrible, look once at the statistics! That a society changes in 44 years and is described by more than one component must be faded out by means of scare mongering.

What is ignored with this way of looking at things?

· Not only the provision of seniors by persons able to work should be considered. Children and youth also must be fed, need kindergartens, schools and universities with trained personnel and many other things. Therefore the total quotient mirrors the relation of the young and seniors to persons able to work and correctly reflects the financial burden. While the proportion of seniors to persons able to work will increase dramatically 77 percent by 2050, the more realistic total quotient only climbs 37 percent. The inclusion of this simple statistical truth alone cuts in half the allegedly dramatic numerical relation.

· The next trick is even more surprising. In their calculations, the dramatizers always assume that the pension age in 2050 will be the same as today. For their horror numbers, they assume people will live six years longer in 2050 corresponding to the predictions of the German statistical office, that persons able to work will be overstrained and that there will be a shortage of workers who need not work a day longer! The premature retirement that is often forced today remains stable in its numbers. This is obviously a ridiculous calculation that completely contradicts the discussion about pensions at 67. Isn’t everything done for the sake of effects? If one takes into account an adjustment of the actual pension age today (around 60) to the legal (65) in the year 2050, the demographic development completely loses its dramatic nature. Then the total quotient only rises four percent! In 49 years (3) only four percent more output per person able to work will be necessary. This equals an annual growth increase of 0.08 percent. If one calculates with a pension age of 63 for 2050, every person able to work will have to master an additional 0.29 percent provision burden per year. Whatever goes beyond this would benefit him or his employer.

· If it were true that the “few” young persons would be overstrained with the provision in 2050, the unemployed would fall enormously. The dramatists also do not calculate this. Unemployment makes the present relation of provider to the needy miserable. Thus the development to 2050 will be essentially un-dramatic.

· The increased productivity of working persons is also completely ignored in the discussion. This fact responsible for the success of the past should not play any role in the future! A slight increase of 1.25 percent per year (forecast of the Herzog commission) in 50 years will raise the output of every working person 86 percent. The young and seniors could profit equally from this; no one must be restricted.

· Whoever believes there will be no progress in the future ignores the trends known to many today and actually excludes himself from the future. An economic system based on competition inevitably develops new things. In other words, the productivity of individuals increases. (4)

In the concrete calculation, the two first-named factors alone – inclusion of youth and changes of the pension age – would eliminate the dramatic numbers. Even the consideration of a low increased productivity refutes future pessimism. In addition, the reduction of unemployment and a higher women’s share in paid work that is low in Germany would have positive effects.

All these powerful influencing factors are completely faded out in the mainstream public discussion. A simple aggregate economic reflection shows that these factors operate nevertheless. Since the population will fall in the next decades, everyone – whether young or old – could receive more in an economy that is no longer growing (“zero-growth” of the gross domestic product). This simple division calculation – same cake divided by fewer people – is still true even if a solid portion is assigned to employers and not to the population, for instance around 30 percent as today. The remaining 70 percent could be distributed to fewer people in the future with more for each person. The statistics could actually be even better since a permanent “zero growth” is very unlikely in a competitive economy.

On the subject of population numbers, we are not a land that is dying out. In its main variant, the German statistical office starts from a decline from 82 to 75 million people in Germany. This is less than a ten percent decline in 50 years in one of Europe’s most populous countries measured in absolute population figures and in relation to surface area. The expected number of 12,100.000 children and youth in no way promise a land without children’s smiles. Perhaps a little more room for positive developments will be created. Work could become more effective at least in the hopelessly overcrowded universities today. Consciously or unconsciously another fact of the German statistical office does not enter the public discussions. The appreciable rise of the pension numbers will occur at the earliest in 2025 when the powerful age g4roups from the beginnings of the 1960s retire. Is this un-dramatic development of the next two decades the reason everybody only looks to the year 2050 and is hardly interested in the years in between?

ON THE CERTAINTY OF LONG TERM FORECASTS

In the whole demography discussion, the development up to 2050 seems firmly pre-programmed without any more possibilities for movement. A comparison of past predictions with the actual development and very simple reflection show that this is hardly true.

· Predictions of population development are nothing but model calculations projecting well-known trends. They cannot forecast structural breaches. A 50-year prognosis from 1950 would not have taken into account the pill or the baby boom, the influx of foreign workers and eastern European settlers or the trend to small families and simple life. A calculation from 1900 to 1950 would have even overlooked two world wars. Only today do we hear the arrogant claim of being able to foresee the future despite our fast-paced age. Here is a dumb question: Would you trust a prediction of Konrad Adenauer from 1951 (!!!) for today? If so, you should read what I am writing. If not, why do you believe in forecasting power today?

· Two of the most important screws of the calculating model of statisticians – the number of children per woman and the immigration of foreigners – are at least partly influenced by policy, for instance by child-friendly measures or active immigration policy to lower the need for workers. The experts of the German statistical office also know that population forecasts are uncertain. Therefore they used nine different variants in the4ir calculations in 2003. The span of the results for 2050 extends from 67 to 81 million people. The difference amounts to 14 million persons. There is no trace of certainty! This uncertainty was also manifest in serious revisions in the past. For example, in its 7th forecast, the office calculated a population of 69.9 million for the year 2030. Only two years later, the number in the 8th forecast was 3.8 to 11.2 million higher!

Thus future development is not strictly determined, as the pundits of the population catastrophe would constantly persuade us.

WINNERS OF THE DEMOGRAPHY DISCUSSION

If one quietly considers the arguments, one can only be astonished at the public discussion. Next to a graph on the development of life expectancy in the last century (plus 30 years), there is the complaint in an article that the society that is now six years older cannot be financed any more. On its front page, “Die Welt” writes: “If the birthrate in Germany continues at the present low level, the population will shrivel at least a third in the next three decades.” With the same assumptions, the German statistical office starts from less than minus ten percent in 49 years. Schirrmacher speaks about the “hosts of 110-year old women.” Muntefering knows every second girl born today will be 100 years old. The new mortality table of the German statistical office says only 1.3 percent of people will reach the hundredth year. We have allegedly the lowest birthrate worldwide. In the European Union of 25, Germany is in 14th place according to the statistical office of the European community. Every week there are plenty of shocking statements contradicting the facts. Even prestigious institutes, academics and serious newspapers join in spreading obviously false news that cannot withstand any examination. A competition for the most dramatic news seems presently underway. Truth is a minor consideration.

There are at least two reasons why mistakes remain largely unnoticed:

1. Everybody sees that we are older and the number of children falls. In 2003, people were ready to accept negative news. Accustomed to negative news – the positive was nearly always suppressed -, the pinch of panic could be slowly increased. Like habituation to horror films, people with time are ready to devour more and more. I cannot otherwise explain that such abstruse news is simply believed by almost everyone although the contradictory facts are known. People know that Spain and Italy have lower birthrates than Germany but intuitively accept that Germany is in last place worldwide.

2. There are many influential winners of the demography debate, first of all the private pension insurers. Who can blame them for wanting the largest possible piece from the huge cake of the legal pension insurance, approximately 240 billion euros in 2004? To that end, it is necessary to anchor in all minds that the legal pension insurance cannot solve the problem of demography. The alliance celebrated its success in the middle of March. “The growing demand for private old-age pensions helped the alliance to enormous growth in 2005.”

The other finance service providers have great interest in money influx from outside. Stock markets remain a zero-sum game without fresh money as for example through private old-age pensions. Others lose what one earns.

The advantage of employers who bid farewell to equal financed pensions through private provisions is manifest and is not concealed in the public discussion. The small and large enterprises of the media branch are counted in the employers. Some cooperate directly with the insurance industry. To expect neutral information from them means hoping they will oppose their own financial interests. Catastrophe reports sell better than harmless news as a large publishing house told me.

That politicians exploit the development does not surprise experts of the scene. Thus in 2003 Ms. Schmidt described the cuts in health care as preparation for the demographic development of the 21st century although it was really a reaction to empty treasuries. When Gerhard Schroeder proudly announced that he wanted to make Germany “solvent for the future,” he did not know how to tackle the problems of the next months with state revenues, unemployment and shortages in apprenticeships. Diverted from the real present problems and not knowing how to think ahead, what could be more assuring?

The list of beneficiaries could be continued. What are central here are advantages, money and influence, not truth, presenting their own interests as a wise reaction to the “objective necessities.” The latest example is the information from the “Berlin Institute for Population and Development” from March 2006. With its book “The Demographic State of the Nation,” the institute gave the press a series of horror news. For example on the birthrate, “Germany for over 30 years has been in last place worldwide.” A glance at the statistical yearbook would be enough to expose this as false news. The headline “After the Person Comes the Wolf” also awakens little trust. This is more an appeal to primal human fears than an academic contribution to population. The press echo was enormous, in headlines at the beginning of news broadcasts and talk shows with the director of the Berlin Institute. How did this come about? On its website, we read: “The Berlin Institute for Population and Development” seeks to improve public perception of worldwide demographic changes.” Thus a private opinion-forming institute represents itself in public as a neutral, scholarly think tank. Those hidden behind the foundations and contemporary sponsors are unclear. But they have enough money and influence to present the easily demonstrable lies of a private think tank over nearly all media as scholarly analysis!

WHAT CAN WE DO AS A SOCIETY?

The dramatization campaign must be unmasked. Castigating pensioners and the childless as scapegoats is tasteless and dangerous if one does not want a war of the generations. At least in the West, w3e have too many children seeking a day care place, pupils needing care, students in lectures and examinations, persons seeking apprenticeships, persons seeking jobs and pensioners. Why is one of the weak groups singled out and castigated?

Optimally promoting today’s children should be demanded from politics – with places in kindergartens, trained teachers in modern schools, enough apprenticeships and universities where the teaching staff has time for conversations with students. That would make youth “solvent for the future” for their later provision tasks. In this way, an optimistic generation could arise that thinks differently about being a child and having children.

The argument of many students is worth considering: “Children are wonderful when I have a partner and at least one of us has a secure job.” Isn’t the extension of the trial-period to two years or the required nation-wide mobility of the unemployed harmful?

Obviously no social solution is possible if mass unemployment continues. THE PRESCRIPTIONS OF THE LAST 15 YEARS HAVE FAILED. INCREASING THE DOSE WILL NOT IMPROVE THINGS. NEW SOLUTIONS MUST BE SOUGHT! This is certainly a difficult task. Without its partial solution, more children will only increase the number of unemployed in the long-term.

Pensions at 67 are certainly not a convincing contribution. For example, academics are in the labor market three years earlier in NRW (North Rhine Westphalia) through earlier enrollment, reduction of the years of study and shorter bachelor curriculums. Where should all the jobs originate if they work two years longer?

Most importantly, w3e must keep clear heads, not fall into a panic, analyze strengths and weaknesses and draw conclusions. We are a land with good skilled workers, engineers and researchers, a land with a basically good infrastructure, high work discipline and worldwide economic success. We can build on this.

Notes

1 Wem ein sachlich nüchterner Stil mit mehr statistischen Fakten besser liegt, den verweise ich auf meinen Aufsatz mit Klaus Bingler in (1) oder die kürzere Version (2).

2 In diesem Aufsatz wird nicht zwischen Ost- und Westdeutschland differenziert. Die vorhandenen Unterschiede sind Folge des wirtschaftlichen Geschehens und haben nichts mit der allgemeinen demographischen Entwicklung zu tun.

3 Die irritierend wirkenden Abstände zu 2050 erklären sich leicht: Die Rechnungen des Statistischen Bundesamtes basieren auf der Bevölkerung des Jahres 2001, die Veröffentlichung erfolgte zwei Jahre später, und jetzt haben wir bereits das Jahr 2006.

4 Konkrete Berechnungen dazu sind in (1) und (2) enthalten.

Literatur

(1) Klaus Bingler, Gerd Bosbach: Kein Anlaß zu Furcht und Panik – Fakten und Mythen zur „demographischen Katastrophe“, in: Deutsche Rentenversicherung (Hg.: Verband Deutscher Renten-versicherungsträger) 11-12/2004, S. 725-749

(2) Gerd Bosbach: Demographische Entwicklung – nicht dramatisieren!, in: Gewerkschaftliche Monatshefte 2/2004, S. 96-103; unter: www.nachdenkseiten.de/cms/upload/pdf/gbosbach_demogr.pdf

(3) Statistisches Bundesamt: Bevölkerung Deutschlands bis 2050, 10. koordinierte Bevölkerungsvorausberechnung, Presseexemplar, 2003; unter: www.destatis.de/presse/deutsch/pk/2003/Bevoelkerung_2050.pdf

Prof. Dr. Gerd Bosbach, Fachhochschule Remagen

aus: Berliner Debatte INITIAL 17 (2006) 3, S. 59-66

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