The numbers do not lie and they reflect a vexing and numbing reality: Bermuda’s populace is getting older — a fact that will have significant implications for the future economic health of the island.
The Anchor Investment Management economic update lays out the facts. They phrased the aging population as an impending “grey tsunami” which evokes a financial apocalypse with a lot of angry bluehairs.
The proportion of Bermuda residents aged 65 years or older will climb from 14 percent in 2010 to 20 percent by 2020. During that time frame, the median age on the island will rise from 41 to 46, meaning that half of the population will be older than that latter number by 2020.
What does this mean?
Well, a bunch of things, according to the Anchor report. Most importantly, such a shift could weaken economic growth and place pressure on entitlement programs.
“This crushing demographic shift is placing an enormous burden on Bermuda’s future youth and work force,” reads the report. “The healthy working population is being asked to shoulder an ever increasing level of the costs associated with the island’s health care.”
Health care isn’t getting any cheaper. Last year each household spent an average of about $10,300 on health care, which represented a 47 percent increase from 2004, according to the report.
The numbers are similar for seniors: In 2013, households headed by seniors spent $10,919 per year on health care, up from $6,000 in 2004.
Meanwhile, the island’s population is declining and a dipping birth rate means that will likely continue. Population growth, or lack thereof, is one of the underlying factors as to why the country’s estimated potential gross domestic product growth remains essentially zero.
Additionally, the declining population has placed entitlements, such as pensions, at risk.
The report does not pull any punches in its assessment of the situation.
“At this stage, only net immigration can solve this dilemma,” it reads.
In 2020 there will be 30 seniors for every 100 people who are of working age. By comparison, in 2010, there were 19 seniors for every 100 people of working age.
The decline in the number of births and workers has far-reaching consequences for pay-as-you-go type pensions such as the Bermuda government’s contributory pension fund, according to the report.
This is because the contributions that are paid into the fund in a given year by workers are generally paid out as benefits in the same year.
This is not new news. The SAGE (Spending and Government Efficiency) report highlighted that conundrum when it was released last autumn. That problem is not going anywhere.
In fact, the Anchor report quotes the SAGE findings, saying “left in its current structure, workers would have to pay ever increasing amounts in contributions for people who are retired. This is an untenable option.”