Reports 2016/20

Demand for labour and residental care in the long term care sector towards 2060

This publication is in Norwegian only.

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This report projects three variables related to the total demand for Long Term Care (LTC) in Norway towards 2060: users, sheltered housing and man years. Such projections are relevant when deciding the capacity of the future supply of LTC services, including both investments in nursing homes and relevant education. Moreover, updated projections of employment in the health sector are relevant in assessments of the fiscal sustainability of the Norwegian welfare state in the future decades.

Section 2 explains our methodology, which emphasises the strong age dependency of individual demand for health services. Thus, the key elements of our study are projections of the total population and its age composition, as well as gender specific age profiles of the present user ratios (population shares of LTC users), LTC service standards (man years per user), as well as the number of sheltered houses per user of home based LTC. Section 3 defines concepts and describes data sources used in the projections. Section 4 presents and discusses the age profiles of user ratios and service standards that can be estimated from the relevant micro data.

Sections 5 and 6 presents our base line projection, as well as sensitivity analyses of the importance of the various key assumptions. The base line relies on the most realistic demographic projections carried out by Statistics Norway in 2014. Furthermore, it maintains the 2014 age profiles of service standards, productivity and informal care supplied by family members, whereas the health condition of individuals aged 55 or more is assumed to improve as the expected life time increases. In this scenario the number of users of formal home based LTC increases from 192 000 in 2014 to 330 000 in 2060, which equals 72 percent. In addition comes 90 000 man years supplied by family members in all years. The relative increase in institutionalized LTC over the same period is equally strong, but is much smaller in absolute values: from 43 000 to 74 000. The increase is mainly due to a 149 percent growth over the period in individuals which are elder than 70 years. The demand for day-and-night services (places in institutions and sheltered housing) grows from 65 000 in 2014 to 114 000 in 2060. The demand for formal LTC man years rises from 133 000 in 20104 to 220 000 in 2060.

The annual growth over the period as long as 2014-2060 becomes relatively small if one replaces the base line assumptions by the low alternative for life expectancy growth, 0,5 percent annual labour saving productivity growth, or the 2014 ratio between man years in formal and informal LTC. On the other hand, raising service standards by 1 percent in all years – rather than no growth – raises labour demand to as much as 400 000 man years in 2060. Replacing the assumption of gradual health improvements by maintaining the gender- and age-specific user ratios of 2014 till 2060, will have the same effect. Reinforcing the increase in life expectancy by moving from the medium to the high alternative in the population projections implies that labour demand increases to 332 000 in 2060, 200 000 more than the formal LTC employment in 2014.

Nor will the demand for day and night supply of LTC increase significantly towards 2060 if the base line assumptions of health improvements, prolongation of the 2014 levels of service standards, productivity and informal care are combined with the low alternative of life expectancy growth. However, replacing the assumption of health improvements by prolongation of the 2014 user ratios implies a large increase in this kind of demand. The same is true if life expectancy grows according to the high rather than the medium alternative. A simultaneous change in the two last mentioned assumptions raises the demand for day and night supply of LTC by more than 190 000 places.

Thus, cross combinations of plausible assumptions span a large range of results regarding the number of LTC users and man years, as well sheltered houses towards 2060. We do not try to evaluate the probabilities of the various outcomes. However, our conjecture is that the base line scenario underestimates the growth in labour demand. The basic reason is that we find it rather unlikely that the service standard will not improve over the next decades, and standard improvements have a strong effect on labour demand in LTC. However, evaluations of the realism of various LTC scenarios should distinguish demand from supply. The scenarios of LTC demand presented in this report show the implications of several assumptions, each of which seems plausible when considered separately. But realization of the demand projections also depends on supply side conditions not considered in this study. Among such conditions, two stand out as particularly crucial. Firstly, the labour force must be able to and willing to take the rapidly increasing number of jobs in the LTC sector. Secondly, several analyses show that making the Norwegian welfare state even more generous requires political accept of a substantial increase in tax rates after 2025. We have not considered how such real and financial constraints will affect the future prioritizing of LTC.

Most of the projections in this report depend relatively strongly on assumptions related to informal care and likely future improvements in gender and age specific health. Here, our choice of assumptions can hardly be better motivated than several alternatives. We do hope that a critical discussion of these and other assumptions will generate estimates and insights which allow more realistic quantification of these effects in next projections of LTC demand.

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