Demographic Change in Scotland

1. INTRODUCTION AND BACKGROUND

1.1 This paper sets out current evidence relating to demography in Scotland, exploring the implications of demographic change and related policy issues, with reference to Scotland's Population Growth Purpose Target, as appropriate. The paper looks at population growth and population ageing in Scotland (ie, the results of demographic change), as well as mortality and life expectancy, fertility and migration (inward and outwards) (ie, the drivers of population change). The paper focuses on evidence related to Scotland but, where relevant, reports on evidence covering the UK and other international jurisdictions.

Background

1.2 Demographic change continues to be a big issue in Scotland, and the UK more generally, with changes in population size and structure both having implications across a range of policy areas. In terms of population size, the Scottish population has grown in recent years, a reversal of the previous long terms trend of population decline which had given rise to concern for policy makers. In terms of population structure, the key issue is the increasing proportion of older people in the population in Scotland (ie, the ageing population).

1.3 While changing population size and structure are the results of demographic change, the drivers of demographic change are mortality and life expectancy, fertility and migration, all with their own implications across a range of policy areas. Thus to understand demographic change, and its impact it is important to also consider the dynamics of the different drivers of change.

Scotland's Population Growth Purpose Target

1.4 Despite the recent upturn in population size, policy makers are still keen to encourage continued population growth. This has been explicitly recognised with the inclusion of the Population Growth Purpose Target within the Scottish Government Economic Strategy:

To match average European [ EU15] population growth over the period from 2007 to 2017, supported by increased healthy life expectancy in Scotland over this period.

1.5 The target recognises the role of population growth (and increased healthy life expectancy) in achieving the overarching Purpose of increasing sustainable growth in Scotland, and has given the issue of demographic change particular focus for the Scottish Government.

1.6 It is important to understand how population growth contributes to economic growth in order to understand why the Scottish Government has adopted this target. Population growth impacts on economic growth performance in a number of ways. Growth in the total population increases the demand for goods and services, which creates business and employment opportunities. In addition, increases in the working age population raise the potential supply of labour in the economy, and should, over time, lead to an increase in the number of people in employment. A larger workforce will be able to produce greater amounts of goods and services, which will result in increased output ( GDP). These effects should also have a positive impact on tax revenues and public spending - particularly in the short to medium term ¹. Population growth (and growth of the working age population in particular) is one of 3 key supply-side drivers of GDP growth, over the medium to long term, along with labour market participation and productivity. Analysis of average annual growth performance against the drivers of GDP growth over the period 1998 to 2008 suggests that nearly half the GDP growth differential between Scotland and the UK as a whole is due to the higher levels of population growth in the UK (see Table 1 below).

Table 1: Factors contributing to economic growth (1998-2008, Scotland and UK)

Source: Scottish Government, ONS
Notes:
(1) Due to lack of seasonally adjusted average hours worked data for Scotland, this variable is estimated as the residual of the other drivers (for both Scotland and the UK).
(2) Individual components and differentials may not sum to totals due to rounding.

1.7 The Scottish Council of Economic Advisers ( CEA) ² has also emphasised the importance of population growth (in-migration and retention in particular) to economic growth, and has also noted the importance of a sound analytical underpinning to any policy work in this area.

1.8 In relation to the population target, the CEA 2009 Annual Report included 2 recommendations. Firstly the CEA recommended that the target be revisited (and the focus of government immigration policy clarified) in the light of changed economic circumstances. Secondly the CEA recommended the commissioning of research to explore factors affecting migration decisions ³.

1.9 The second recommendation explicitly recognises the need to have good evidence to allow the government to monitor and understand progress towards the population target, and consider the policy levers that might be available to help in meeting the target. While the recommendation is made with reference to migration, the principle of ensuring that policy is grounded in good evidence reads across to all areas that contribute to demographic change and progress towards the population target.

Scotland's demography as an issue of ongoing interest

1.10 While the Population Growth Purpose Target may have brought the issue into focus, Scotland's demography has been of interest - for academics and policy makers - for some time. In addition to economic growth, population change impacts on the funding of and demand for public services which are key issues for both national and local government.

1.11 A 2004 ESRC/Scottish Executive seminar brought together academics and policy makers to discuss Scotland's demography and related policy implications, with discussion informed by papers commissioned from key academics working in the area. Figures available at that point showed the key demographic trend for Scotland to be that of a shrinking and ageing population, driven by below replacement fertility rates, balanced in/out migration and increased life expectancy (although not necessarily healthy life expectancy). Projections indicated the continuation of this trend, giving rise to a range of key issues for policy makers. Although most industrialised countries were experiencing population ageing, Scotland was the only EU country at that time where the population was also declining in numbers (1995-2001) ⁴, and responding to the ageing population was seen as a key concern.

1.12 Following the seminar, the ESRC launched the Scottish Demography Research Programme (funded in partnership with the Scottish Executive), resulting in 6 projects looking at aspects of fertility, migration, ageing, and the economic impacts of demographic change:

• Why is fertility in Scotland lower than in England? (Universities of St Andrews/Essex/Stirling)
• Fertility variations in Scotland (Edinburgh/St Andrews)
• Macroeconomic impacts of demographic change in Scotland (Strathclyde/Stirling)
• Scotland's ageing population (Stirling)
• Scottish graduate migration and retention (Edinburgh)
• Scottish migration to, and return from, South East England (Dundee/Edinburgh/Strathclyde)

1.13 The 6 research projects examined aspects of the key issues identified at the time: Scotland's low fertility rate and its drivers; the implications of the ageing population; and the factors influencing migration and retention, with particular reference to England-Scotland migration and student/graduate migration. The main findings of these studies are summarised in Annex 1, and drawn on as relevant in the paper.

1.14 The ESRC has continued to support research in the demography area at a UK level, and funds a number of relevant initiatives within the Social Diversity and Population Dynamics theme. The Research Centre for Population Change, in particular, will provide a key source of evidence in this area over the coming years. This 5-year Centre was established in 2009 and involves Southampton University and a consortium of Scottish universities carrying out work in 4 thematic areas of fertility, life course and family formation, migration, and population modelling (see Annex 2 for further details), and aims to provide policy relevant information in a number of areas of interest to the Scottish Government and other public sector bodies in Scotland.

1.15 Against a background of existing interest and activity relating to demographic change in Scotland, this paper aims to provide an overview of current evidence. In relation to the population target in particular, the CEA report highlighted the need for sound evidence and analysis to ensure that policy decisions in this area were well informed and that the impact of policy initiatives could be properly monitored and evaluated. This paper aims to contribute to the evidence base by collating existing information and providing an overview in relation to key relevant issues. The remainder of this paper looks in more detail at population growth and the ageing population in Scotland (particularly with respect to economic implications), before turning to the 3 themes of mortality and life expectancy, fertility and migration, all of which contribute to demographic change.