Although Mexico has enjoyed a relatively youthful population in recent years, demographics are not static, and the country is subject to forces that will inevitably reshape its economic and social landscape soon. Among these changes, the age structure will be a key factor that will define Mexico in 2050, a time in which elders will have a higher representation in Mexico’s demographics.
In 2015, Mexico's median age was 27.9 years, a demographic dividend that often translates into a strong labour pool with the potential to drive economic growth. By 2050, this will no longer be the case. Mexico is projected to reach a median age of 42. At the same time, the proportion of older people (aged 65 and over) is expected to triple to 20.2%. An ageing society will pose challenges not only for the care economy but also for the future of the country as the mass retirement of the population becomes a reality in 2050.
Urgent action needs to be taken for that future. Mexico currently faces the challenge of poor health and social security coverage. A system that is not prepared to deal with the large number of retirees that will be coming over the next years. Although the current Mexican government has made pensions for the elderly one of its priorities, at a time when experts have warned of the unsustainability of this system, this is only a small part of a wider future-looking reform that must ensure sustainable revenue transfers to national pension systems, develop a strong long-term health and care service, create the conditions for a savings culture and promote financial inclusion in the private sector for the elderly-people.
Alternative scenarios: exploring the future of elders and pensions in Mexico.
According to the futurist Jim Dator, when humans think about the future, their visions often enter one of the following archetypes: growth, collapse, limit & discipline, and transformation. Through the eyes of the current trends and uncertainties, it is possible to anticipate alternative scenarios about how the future may unfold. These scenarios are not intended to predict the future but only offer provocative narratives of what could happen based on the evidence of the present. Part of the narrative behind these scenarios derives from the results of a foresight course project in which students were required to identify key trends, signals of change and wild cards related to the future of pensions for elders in Mexico. Scenarios have been written for this article using Jim Dator’s archetypes. Neither of these scenarios is “good” or “bad” in nature, all of them imply risks and opportunities.
1) Growth scenario
In this scenario, Mexico will experience its most significant population peak by 2050, with a robust economy sustained by continuous foreign investment. The re-localization of supply chains within Mexican territory contributes to economic strength. However, the rising elderly population presents challenges for the federal government, as uncontrolled urbanization negatively impacts basic public services for elder care. Critical concerns are raised about the pension system's sustainability due to historically limited progressive tax reforms that are unable to secure the long-term viability of the system. Only the wealthiest population can afford private retirement funds, which contributes to an increasing sense of inequality and polarization in society.
Figure 1. Growth scenario
Source: Image generated by Dall-E
2) Collapse scenario:
Stemming from years of mismanagement and short-term regulatory frameworks, social security institutions in healthcare and retirement have collapsed in Mexico. Various parts of the country are experiencing a severe humanitarian crisis that draws international attention. The crisis is more critical for vulnerable elders who depended for years on government transfers. A vast majority of elders face deprivation of income revenue and nulled public health attention. Also, climate change induces a high inflation period on food products due to the damage of croplands and agrifood systems. Sofia an elder woman who lives in the suburbs of Mexico City and suffers from starvation, becomes the symbol of the tragedy when she is found deceased in her home a month later, unnoticed. In the wake of the government’s failure to provide solutions, civil society and grassroots movements have taken the lead in implementing a local solution approach while pooling international resources to provide community-based interventions.
Figure 2. Collapse scenario
Source: Image generated by Dall-E
3) Limits & discipline scenario:
In this scenario, elders wield power in Mexico, establishing a gerontocracy with autocratic practices. While this regime provides affirmative actions through public policies that favour a significant portion of the elderly population, conservative measures by the government regarding youth employment and technology adoption hamper Mexico’s competitiveness and provoke a drain of skilled professionals. Although a minor sector of young professionals expresses their view on the conservative government citing limited professional growth, most of the younger populations opt for an historic exodus that sparks national debates about the importance of considering long-term policies that balance the impact of multiple generations.
Figure 3: Limits & Constrains scenario
Source: Image generated by Dall-E
4) Transformation scenario
This is a world in which the government has implemented extensive economic and social reforms to establish a universal social security system that includes all generations. However, these reforms are met with high resistance from multiple entrenched stakeholders who have benefited from the status quo. The previous challenge is partially sorted out through a strong grassroots movement supported by international investors who have advocated for understanding ageing as an opportunity and new motor for the Mexican economy. As a result, a comprehensive care economy ecosystem emerges, allowing migrants and youth to contribute to the economy through high taxes in exchange for robust health and social security benefits. The private sector also plays a crucial role in enhancing financial inclusion by implementing fintech solutions for elders that offer products and services that provide to their needs. Financial education is now an elementary course in public education which incepts the skills of saving and planning from an early age.
Figure 4: Transformation scenario
Source: Image generated by Dall-E
Final remarks
Scenarios describe plausible futures that could happen in the light of present and past trends. To reach the best possible scenario, proactive measures, such as comprehensive social and economic reforms are needed to turn the current challenges into opportunities. These structural changes may consider the following:
Firstly, with the right conditions in place, a "silver economy" has the potential to flourish in Mexico. By providing products and services that meet the specific needs of elders, they can become a new motor for the Mexican economy.
Migration is a wild card, but it could have a major positive impact on some of the problems of having a reduced workforce. A migration reform aimed at integrating skilled migrants into the Mexican economy would fill the labour gap and provide sustainable revenues for public finances while bringing valuable expertise to create complex industries.
Financial education should be considered as a core subject in Mexican curricula. By doing so children are taught from an early age to have a savings culture and a more promising future.
Mexico's demographic dividend is declining as the country transitions into an ageing society by 2050. The actions that are taken today, will define the Mexico of the future.
References:
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