Ageing Populations: Spreading the Costs

Abstract

Over the next 50 years almost all countries of the OECD area will experience a dramatic ageing of their population structures. This process will affect the burden, in terms of taxes or social security contributions, placed on active members of the population. If no changes occur in the (relative) level of benefits, the age of retirement, female participation rates, the level of unemployment, or the level of immigration: then the total burden of support by the active members of the population for the inactive and dependant will rise very considerably. This paper attempts to place broad magnitudes on the amount of the potential increase. The analysis goes on to ask: What if changes should occur in the underlying parameters such as benefit rates, retirement age, female participation, unemployment rates, immigration? The answer appears to be that each of these developments would ease the burden on the active population and would also redistribute it. Some more so than others. If all these things were to happen in combination, it is even possible that the burden of support might be lower in 2040 than it is now. However this paper, which compares potential developments in France, Germany, Japan, the Netherlands, Sweden and the USA, concludes with two, fairly obvious, caveats, first: those countries which are already most generous towards their older generations are also the most vulnerable when it comes to facing the ageing problem; Second: all those developments which might offset the consequences of ageing populations would also be available to improve incomes and welfare even if the ageing problem did not exist. Somewhere along the line, and relative to what might have been, there is a cost to be absorbed.