:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/YI2VGCVUD5BFFKBALU4QJWTKEY.jpg "A senior citizen walks in Plaza de Bolívar in Bogotá, Colombia, on March 22, 2023.")
Bogotá — Projections foresee Colombia having 10 million senior citizens by 2031, which would mean an increase of 41% compared to 2021 figures, and which in turn will generate challenges for the country in terms of public health and pensions expenditure, according to government estimates.
“The fall in the birth rate is the latest sign of a trend that has been consolidating for a long time, which is clear and inescapable, and which is the aging of the population,” Daniel Wills, vice president of the Colombian Association of Pension and Severance Funds Administrators (Asofondos), told Bloomberg Línea.
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“Little by little we are transforming from being a population with many young people and few older people, to a population that will be mostly adults and eventually older adults,” he added.
Last year, a total of 569,311 births were reported in Colombia, which meant a 7.7% decrease compared to 2021, when 616,914 births were registered.
“This decrease is historic, considering that in the last decade the year-on-year reductions reported range from -2.1% to -1.0%,” according to the country’s statistics agency DANE.
In Wills’ opinion, as the population of senior citizens grows, those who come after them have to reach retirement age “with their pension under their arm”.
“We have to save, because the systems that are based on young people contributing to pay the pensions for the elderly are no longer sustainable,” Wills said.
According to a report by the central bank, these demographic changes will generate changes to the rate of dependency, which is the ratio between the working-age population and those of retirement age.
By 2060 it is expected that for almost every two working-age people there will be one in retirement.
“These forecasts show a big structural change, as in the 1980s the rate of dependence was above eight, and in the 1950s, nine,” the central bank report states.
The increase in the average age in Colombia presents a scenario that will put pressure on the labor market, and which should be a reason to increase contributions to the pension system by encouraging the formalization of the labor market, which is key to taking the pressure off future subsidy needs. This, together with the health reform, which should guarantee care and welfare for a longer-living population. All this in a demographic environment that does not seem to be an ideal scenario in this aspect.
José Andrés Rueda Montaño, Colombian academic
Regarding this debate, Juan Pablo Espinosa, vice president of risk at pension fund Protección, considers that “the demographic transition that is becoming evident at a global level is a key factor to consider, since the low birth rate and at the same time the increase in life expectancy strongly impacts a pay-as-you-go system, and requires strengthening individual savings”.
“Young workers in Colombia must take ownership of their future by saving and understanding that in their old age there will most likely not be a young mass of contributors capable of financing their pensions. Therefore, it is everyone’s duty and responsibility to think of a long-term sustainable mechanism that can guarantee future pensions, a mechanism that is none other than savings”, he told Bloomberg Línea.
Why is the birth rate falling, and what does it tell us?
:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/YHF3UBTIBFA2DAKVY7G7YKJJ5A.jpg "A pregnant Venezuelan woman at the Erasmo Meoz hospital in Cúcuta, Colombia, on March 26, 2023.")
Researcher and professor at Universidad Externado, Diva Marcela García, told Bloomberg Línea that this is a trend that has been happening not only in Colombia but worldwide for several decades, and that this is due to multiple factors.
“This can basically be explained by changes in the forms of production. Before, having many children was a strategic tool for survival in rural life and today, with the change in production methods, it no longer necessarily represents those advantages,” he said.
She also referred to the expansion of contraceptive methods and above all the transformations in gender roles, mainly due to the incorporation of women into the labor market and other different scenarios of life related to reproduction and care, which makes it more difficult to have so many children.
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Analysts consulted by Bloomberg Línea confirm that Colombia is changing demographically, as in 2000, 32.6% of the population was 15 years old or younger versus 21.1% in 2023.
And on the other side of the spectrum, in that same period the population over 60 years of age increased from 6.8% to 14.2%.
Likewise, the total population increased from 39 million in 2000 to 52 million in 2023, according to figures shared by José Andrés Rueda Montaño, a professor at the Faculty of Economics and Administrative Sciences at the Universidad de América.
In 2022, explains the professor of the Universidad Externado, the impact of the pandemic was also reflected in the birth rate.
“What it did was to restrict much more the decision to have children. We know that in the context of certain unfavorable economic situations, the decision to have children is based on much more thought. So what we are having is a major social change that is making families smaller today, added to a conjunctural element that accelerated this trend of fertility reduction”, she added.
Why is Colombia’s aging population a cause for concern?
Rueda Montaño says that “the increase in the average age in Colombia means that more and more people are entering the labor market, a situation that calls for a reform that generates the new jobs that the country requires, that contribute to labor formalization, and that increase total contributions to the health and pension systems, thus reducing the pressure on the national budget to grant subsidies in the future.”
“The fact that Colombians live longer will have a price,” which is evidenced by the fact that health spending went from 4.31% of GDP in 2000 to 7.07% in the middle of the pandemic, while in 2019 it was 6.28%”, he added.
He made specific reference to the pension reform proposed by the government of President Gustavo Petro, which proposes a model based on pillars (solidarity, semi-contributory, contributory and voluntary savings).
According to Montaño, “the proposed pillar system requires a growing population, in which the young base supports those who are pensioned”.
However, “the fertility rate in 2022 is 1.85 per woman, which means that we will not be able to replace the people who die with new births. This trend takes us away from population growth”.
Given this scenario, “young Colombians will have an important burden to help pensioners, but unless the demographic trend is reversed, they will have serious problems to finance their pension capital”.
Despite the reduction in fertility, Diva Marcela García points out that the country still has a large part of the population of a young age, Colombians who were born in those generations in which there were still many children, known as the demographic bonus.
This is “the stage in which a country has a larger population of working age people, of adult age. It has a surplus in that population group, and will have less burden of care. We are right at that moment. In many regions of the country there is talk that we are already at the end of this demographic bonus”, she said.
She added that the country is not yet in a process of “imminent aging”, but eventually it will happen because those generations that are in the demographic bonus (at working age) will reach old age together and will have a greater longevity.
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