Can the Caribbean Avoid an Ageing Population Crisis?

Author(s): Central Bank Of Barbados

The combination of people living longer and a declining birth rate has created an ageing population in many countries across the Caribbean, one that could compromise many of the social safety nets that the region’s citizens currently enjoy.

Indeed, during a recent discussion hosted by the Central Bank of Barbados, Diane Quarless, Director of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) Sub-regional Headquarters for the Caribbean, revealed that by 2050, several countries in the region will see people over 60 accounting for more than a third of the population. In Barbados, that figure is projected to be as high as 50 percent.

Thus Quarless, who was joined by Professor Emeritus Karl Theodore, Senior Consultant Advisor of the Centre for Health Economics at the University of the West Indies, St. Augustine; and Derek Osborne, Partner and Senior Actuary of Lifeworks in the Bahamas as the panellists for the Bank’s July Caribbean Economic Forum, “Solving the Ageing Population Crisis in the Caribbean”, called for regional governments to act swiftly to address the issue.

Professor Theodore concurred with Quarless, expressing frustration at how regional governments have reacted so far. “It is a crisis because of how we are responding…. This is something that we have seen coming for a long time, but we have been very slow at taking the kinds of measures.” He contrasted this to what the Japanese government did after being warned about a similar situation back in the 1950s. He also noted that unlike Japan, the Caribbean has not done sufficient research on its people and culture to find the most appropriate approaches.

In putting forward solutions, Osborne, an actuary by profession, examined the issue from a numbers perspective:

“What we have are promises that are made by governments in these systems to pay pensions when we get old. We therefore have these older people, some of them already in pension, and some of them prior to pension age who are expecting a pension. But in the middle, we have a fund that, if there isn’t some change on the contribution side as well as on the benefits side, will be depleted within 15 to 20 years. Some in even less than 10 years.”

Spelling out what that change could look like, he suggested a combination of current pensioners receiving smaller payments, soon-to-be pensioners being promised less, and workers paying higher contributions to national insurance schemes. It could also mean governments having to top up social security funds, which would inevitably mean higher taxes for citizens.

Then, citing one of his fellow panellists, Osborne offered another suggestion:

“Professor Theodore always says this: ‘not all care comes in the form of cash’. So, we probably have to find a way to provide our seniors with what they need: some in cash, some in healthcare, some in transportation, some in something else. But it need not all be in the form of cash, in the form of pensions.”

Quarless argued that such solutions, particularly anything involving reducing pension benefits was “politically unsafe” and thus a non-starter. Choosing to frame the situation as an “important emerging challenge” rather than a full-blown crisis, she contended that it would be best addressed in conjunction with other such challenges, including youth unemployment, women’s empowerment, and non-communicable diseases (NCDs).

She noted that with youth unemployment at around 40 percent in the region and many women – “there’s at least one country that has two-thirds of the female population” – working in the informal economy, a large section of the labour force is missing from the tax base, and as such governments are missing out on much-needed contributions to their national insurance schemes. This is compounded by the high incidences of NCDs in the region, which both increase governments’ healthcare expenditures and cause people to leave the workforce earlier than they otherwise would.

She also argued that countries’ high indebtedness plus the region’s vulnerability to climatic events and the heavy economic toll that can come with them also pose significant challenges to governments’ ability to provide additional support. In her view, a wholistic approach in which governments address all these issues is therefore needed.

The three panellists each framed the issue from different perspectives and offered different solutions, but they all agree that governments need to move now to address the looming social and economic fallout resulting from the region’s ageing population.