The day after the Queen celebrated her 90th birthday, the Obamas came for lunch. Prince Philip, almost five years older than his wife, got behind the wheel of a Range Rover to drive the president and his wife Michelle to the door of Windsor Castle.
What has this got to do with economics? On the face of it, not much. For many, the news coverage to mark the start of Her Majesty’s 10th decade was a blessed relief from rising unemployment and the partial nationalisation of the steel industry. Newspapers pushed the debate about the EU referendum on to inside pages in favour of pictures of the Queen as she is now and how she was way back when.
Yet the Queen exemplifies a trend that will have a profound economic effect in the years to come, namely that we are all living longer. There was shock last week that Victoria Wood and Prince died last week at the age of 62 and 57 respectively, and with good reason. Those who make it to 60 today can expect to live for another 30 years. Wood and Prince have had their lives cut short, but they are the exception to the rule.
By coincidence, the Office for National Statistics published its latest estimates of the “very old” last week. In 2014, the last year for which data is available, there were more than 500,000 people aged 90 and over in the UK. Thirty years ago, 2% of the population was over 90. In 2014 it was 5%. It is the same across the developed world. Longevity is at its most marked in Japan, followed by Italy and France.
The ONS data only captures the half the story. In their forthcoming book, The 100 Year Life, Lynda Gratton and Andrew Scott note that today’s 20-year-olds can expect to live until they are 105. We have got used to the idea that populations are greying, with the balance shifting between those of working age and those who have retired. Longevity, however, requires a fundamental rethink of the way we organise our lives and order our societies.
For a start, it means that people are going to have to work longer – a lot longer, in fact. The government has already raised the state pension age, and employment growth since the global recession of 2008 has been fastest among the over 65s.
If you are one of the twentysomethings who can expect to live until you are 100, at what age can you expect to retire? If you put away 10% of your earnings into a pension and expect to live on 50% of your final salary, the answer is that you will have to work into your early 80s.
This raises all sorts of other issues, not least what sorts of job people are going to be doing in the future. One of the other big driving forces of the modern economy is disruptive technology. Computers are getting smarter year by year, and that threatens to hollow out the labour market. Put simply, robots are going to do more of the routine tasks that have traditionally offered stable full-time employment, and some professional jobs as well.
Economists assume, on the basis of the evidence of the past two centuries, that technological change creates rather destroys jobs. There is deep mistrust of the so-called “lump of labour” fallacy, the idea that there is only so much work to go round.
To take one example, René Böheim of the Johannes Kepler University in Linz has found that delaying retirement does not lead to fewer jobs for young workers. On the contrary, the evidence is that policies which encourage the employment of older workers lead to stronger demand for younger workers as well.
It is possible that the disruption to the labour market that robots and artificial intelligence will causedwarfs anything that has been seen in the past. As machines have taken over from humans in the manufacturing sector there has been rapid employment growth in the service sector to compensate. In future many of these routine white-collar tasks will also be performed by robots.
What seems certain is that the person who gets a job in their early 20s and remains in it for the next five or six decades is going to be a rarity. Until now, lives have been sliced into three distinct segments - education, work and retirement. This model is tidy and convenient for companies, but it is not going to be fit for purpose in a world where more and more people live until they are 100. They are going to start work later, take career breaks and spend time in their 60s and 70s acquiring new skills.
Some of the challenges are obvious. The education system has to focus more on lifelong learning and on teaching people how to learn. The NHS has to live up to its name and become a genuine health service, because there is no real point in people living longer if they are going to be too ill or infirm to enjoy their 80s and 90s. More of what the NHS does will focus on encouraging individuals to take responsibility for their own wellbeing, not just eating healthily and taking more exercise but ensuring that minds are kept active and boredom fended off.
Governments will need to promote policies that encourage workers in what we now considered to be late middle age to find new jobs when their first career comes to an end. The Labour MP Frank Field has proposed a wage top-up for those in their 50s forced into lower-income work, paid for out of national insurance contributions. This is precisely the sort of initiative that will be needed if people are going to continue working into their 70s and 80s.
Last but not least, inequality needs to be tackled. The trend towards living longer is not uniform and the gap in longevity between rich and poor is growing. Among some groups in the US, for example, life expectancy is actually falling. Those who are doing hard, physical work or repetitive tasks are probably looking forward to the day when a robot takes over and they can put their feet up.
It would be a mistake to be daunted. Life expectancy has already doubled in the past 200 years, during which time it has increased by two years each decade. Sure, longevity poses challenges that need to be addressed urgently, and if we fail to prepare properly, living longer could become a curse. As Gratton and Scott say in their book, however, if we get it right longevity will be a great blessing, the chance to live longer and better lives.
The 100 Year Life will be published by Bloomsbury in early June.
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