Arnold Kling

Demographic Realities

Arnold Kling, Great Questions of Economics
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This Goldman Sachs report on Global Aging provides important insight into the future. (Thanks to More than Zero for the pointer.) Author Maureen M. Culhane writes

The world's population is aging. Over the next 50 years...each worker will have to support twice as many elderly people as he or she does today...

She presents a table showing that in the U.S. the ratio of workers to elderly dependents (people aged 65 or over) will fall from 4.0 today to 2.3 in 2050. In Japan and Europe, the ratio starts lower and falls even further, to between 0.9 (Spain and Italy) and 1.7 (United Kingdom).

What this suggests to me is that public pension systems will collapse unless either:

  • the retirement age is raised (the most effective way to privatize the pension system); or
  • productivity growth from innovation is high, and it proves economically and politically feasible to distribute most of this gain in productivity to the elderly, with the working population bearing the tax burden

Discussion Question. What factors could lead the elderly population to be even larger than is now projected?

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