More migrants needed to pay for elderly, says report

Thursday 09 December 2021

More people of working age will have to move to Jersey to pay for its ever-growing older population, a new Government-commissioned report has concluded.

However, Jersey can mitigate against this by more older people working for longer, greater use of technology, a healthier life in our senior years, and more employment support.

Although the challenges of an ageing population, falling fertility rate and a diminishing proportion of tax-generating workers have long been raised, this is one of the first pieces of evidence which lays out the issues in black and white.

Written by PwC, it is likely to be a key reference point as the States prepares to debate one of the most keenly discussed topics in Jersey: population.

Firstly, it describes how Jersey’s demographic has changed: in 1891, just 8% of the island’s population was aged 65 or over. In 2021, it is 17%.

More broadly, all age groups over 40 have seen double digit growth over the past three decades, while the number of people aged 20-29 has fallen by over a fifth.

People aged 50-59 now represent the largest age group, whereas it was those aged 20-29 in 1991.

The ageing of Jersey’s society is expected to accelerate in the future. In order for each generation to replace itself, each woman should give birth to, on average, 2.1 children. 

CLICK TO ENLARGE: Population projections by age under different migration scenarios, 2050

However, Jersey’s fertility rate has moved below that while life expectancy has increased. The fertility rate is a fifth lower in Jersey than in the UK, having trended downward for the past three decades from 12.5 children per 1,000 population in 1993 to 8.8 in 2018.

As a result of this demographic change, Jersey faces an increasing old-age dependency challenge, be it to a slightly lesser extent than the UK. 

Between 2010 and 2019, Jersey’s old-age dependency ratio increased from 21% to almost 26%. This means that for every four people of working age, there is one person over 65. 

The old-age dependency ratio is expected to reach over 40% by 2050, meaning fewer workers supporting more retirees.

Pictured: The Government need to introduce policies to allow and encourage more older people to work.

The report states: “Population projections indicate that positive inward migration will be needed to grow Jersey’s workforce and to slow the increase in the old-age dependency ratio. 

“Population growth is now largely driven by net-migration, accounting for approximately 80% of population growth between 2001 and 2019. 

“If Jersey adopted a policy of net-nil migration, the workforce would shrink by a fifth and the dependency ratio would increase to 57% by 2070. 

“Alternatively, with +325 migration a year, the workforce would largely be the same size in 2070 as in 2021, but the old-age dependency ratio would still grow from 26% to 51%. 

“With higher net-migration of 1500+ per-year, the workforce would steadily grow and the dependency ratio would reach 38% by 2070.

However, PwC conclude that other options are available: “Increasing labour force participation, particularly of older workers, is crucial to maintain a workforce that meets the needs of the economy and to reduce reliance on migrant labour. 

“The scale of inward migration needed to maintain the workforce size will partly depend on changes to the labour force participation rate. 

“Under a net-migration scenario of 700+ per-year, the difference between high and low participation rate scenarios could equate to over 12,500 workers by 2050. 

“In Gross Value Added terms, the projected difference by 2050 between low and high participation rates could be worth more than £1 billion per year.”

The report points out that an ageing population affects some sectors more than others: finance and hospitality have a relatively young workforce while in transport, storage and communications, more than a quarter of workers are over 55.

“The demographic imbalances between sector' workforces are likely to cause severe labour shortages as some grapple with issues of employee succession planning, while others with employee retention,” the report concludes.

However, it adds: “As a knowledge-based service economy, Jersey is arguably better positioned to retain an older workforce compared to economies concentrated on manual labour.”

Pictured: Technology could counter some of the impact of ageing population, says the report.

Technology could also mitigate the negatives of an ageing population, although labour-intensive sectors, such as education and healthcare, are likely to suffer.

PwC also looks at what an ever-growing ageing population will spend its money on. With half of all spending projected to be carried by those aged 55 and above by 2050, hospitality, health care, and retail and wholesale, are set to benefit.

However, older people tend to spend less per capita than younger people, meaning that productivity and economic growth could slow.

On the fiscal side, the report notes that a potential drop in the tax base combined with increasing government expenditure could put pressure on fiscal sustainability. 

It says: “The current health care expenditure, for instance, is likely unsustainable in the future.

“Under the net 700+ migration scenario, the number of people aged over 65 is expected to increase by 14,193 by 2050. 

“Assuming a constant per capita health spend over the next 30 years, a further £60.4m in spending will be needed to cover the healthcare needs for those aged 65 and above, creating pressure to increase tax rates to keep the budget balance in order.”

The PwC report calls for policies to be introduced to encourage more islanders to work.

Recognising that Jersey’s pension regime already allows older people to work, it also calls for new polices around employment support, skills and lifelong learning, and healthy ageing. 

“[These] three areas are interrelated and they can jointly promote employability and skills of older workers and help achieve better labour market inclusion, not only of older workers but more generally of women, youth and migrants,” it says.

Population as long been a significant concern of islanders, according to opinions’ surveys. Some argue that migration has always been a feature of life in Jersey and is necessary in small island communities.

Others, however, argue that the population is too high and describe bringing in more people to pay for the elderly as a ‘Ponzi Scheme’, in that these people too will get old.

A population policy was due to be debated by 31 December this year, but the politician put in charge of it - Assistant Minister Deputy Rowland Huelin - decided to push back lodging it until January due to a busy States Assembly schedule this term.

When it does come to fruition, he warned that islanders should not expect the policy to be a "silver bullet" for all of Jersey's problems.

He is due to provide an update on the policy tomorrow.

Click HERE to read PwC's report in full.