Youth Perspectives

Unhealthy ageing cripples countries' economies

An elderly fisherman mends his nets in the early morning hours on a beach in a Luanda bay April 28.

Ageing populations can effect economics, health and growth. Image: Reuters

Carlos Riumallo
Herl, Erasmus University Rotterdam
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Population ageing is often associated with health-related challenges. But its effects also reach other spheres of life. In particular, an ageing population has a big impact on countries’ economies. Research shows how it can influence a country’s economic growth. And a similar effect can be found at the household level.

This is of greater relevance given there is a greater share of the population reaching older age across the world. This had made it even more important to understand how ageing influences household well-being, what challenges exist, and – more crucially – how policies can be designed to improve general welfare.

Our research in South Africa seeks to understand how different social policies can influence health and income at older ages. The idea is to contribute to the development of evidence based policy making. We believe that our findings are relevant to other developing countries too.

Image: NBER

Our research has been conducted under the umbrella of the Health and Aging in Africa: A Longitudinal Study of a community in South Africa. It’s been conducted in 31 villages in rural northeast South Africa, close to the border with Mozambique since 2013. The study, which is ongoing, has involved collecting income and health information on older people approximately every two years.

This is the first study of its kind in Africa but joins a large family of studies that follow the same methodology to explore the links between ageing, income, and health across many countries.

Ageing, jobs and health

Ageing can influence a households’ economic well-being because it has a bearing on employment. In our study we have seen employment rates drop off even before people reach retirement age. In South Africa there is no legal retirement age, but men and women qualify for an old age grant at 60.

This means that a large share of older people who are still in active age do not participate in the labour force.

There are two potential explanations for this. One is the very high levels of unemployment in South Africa. This is affecting older people too. Being out of the labour force is strongly associated with lower incomes and thus a lower capacity to consume.

Health is the other factor affecting the economic well-being of households. This can happen in two ways. First, unhealthy ageing is strongly associated with greater need for health services. This, in turn, is often coupled expenditure that reduces the amount of income available for other needs like food. This can even lead to medical impoverishment – when a household’s income falls below the poverty line due to the fact that money has been spent on health services.

In our research we found that most of the people living in the study communities are already living below the South African poverty line.

Unhealthy ageing can also impact economic well-being by forcing other household members out of work to provide care for the elderly – compounding the burden on the household.

It’s also important to remember that economic well-being itself can have an impact on health. It’s evident from our research that while health influences economic well-being, the inverse is also true - economic well-being influences health.

Results from the baseline wave of the our study show that individuals in the highest wealth quintiles – defined either by wealth or consumption – are more likely to be in better health. For example, an individual in the highest wealth quintile is approximately two times less likely to be in the bottom quintile of disability.

And there’s evidence that individuals in the lower wealth quintile are less likely to access health care or follow the correct guidelines for disease prevention. This can be either due to knowledge or financial capacity reasons.

This implies that already impoverished households can be made worse due to the health consequences of their economic position.

Breaking the cycle

The relationship between income and health underlines the need for strong government policies to break the cycle.

A myriad of policies could be considered. In South Africa the focus has been on establishing an extensive social grant net. The country’s old age pension system is one of the largest and more generous – in proportion to local income – in the developing world.

South Africa has three social grants to protect households from the financial consequences of ageing:

Old age state grant provided to all individuals over the age of 60,

disability grant to those that have a disability that prevents them from working and,

carer grant which is provided to individuals that need to care for disabled adults.

These grants have become strong pillars in the South African welfare system and most importantly a valuable tool for tackling poverty among older people. Over 17 million grants are paid out every month.

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But there are still important challenges. The main one is that administration isn’t perfect – some people who are eligible aren’t getting them. For example, around 10% of those eligible for the old age grant aren’t receiving it. This number increases to over 85% for both the disability and carer grant according to our estimates in the town of Agincourt, Mpumalanga province. The reasons for this sub-optimal uptake are either lack of knowledge, stigma, or lack of the required documentation such as a national identity card.

What’s clear is that there’s a need to improve access.

What’s needed

As the population ages in developing countries like South Africa it is vital to remember the dual relationship between health and income. This can prove helpful in the development of strong social policies that contribute to healthy ageing as well as protect and improve the economic well-being of households. This is important given that that poverty rates and bad health are often greater for older people.

Evidence gathered in South Africa suggests where policy interventions can have a larger impact. And it can be a source of knowledge for other developing countries.

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