Population aging matters for many reasons, but first and foremost because of the costs of retirement (pensions and health care). In the developed countries, these costs are borne principally by the central government and funded through taxes on the working-age population. The old-age-dependency ratiothat is, the population aged 65 and over divided by the population aged 15 to 64is a key indicator of population aging. Other things being equal, the tax rate for pensions will be proportional to this ratio. In the developed world, this ratio has risen from .12 in 1950 to .21 today, and is projected to increase to .44 by 2050. If, in the developed countries, the elderly in 2050 are to receive the level of benefits given to the current elderly, then the level of payroll taxes needed to fund government pensions will more than double by 2050. Due to higher fertility and immigration, the U.S. population is projected to remain younger than those of other OECD countries, and the pension problem will be less severe. Health costs, however, pose an even more difficult problem because of Medicare, the socialized health-care system for the elderly in the United States. As the population ages and spending per elderly person rises, government spending on health care will likely soar.
Workers paying for the current retirees do so with the understanding that they, in turn, will collect from the next generation of workers. Population aging generates intense political pressure to modify this implicit contract with the government by such devices as delaying the age of retirement or reducing the size of the benefit. The fear of population aging is a strong political force in many developed countries, leading to policies intended to induce people to have larger families. Such policies include banning abortion and contraception (Romania), offering prizes and financial incentives for births (France), and instituting generous paid-leave policies for women who stay home to care for their babies (Sweden). Although the increased costs of the elderly are to some degree offset by declining government and private costs of raising children as the ratio of children to the working-age population declines, population aging increases the total deadweight loss, a loss that always comes about from taxation because most of the child costs are private, while the costs of the elderly are mainly paid by taxpayers.
Sunday, May 11, 2014
Immigration and your future...
If morality, personal liberty, the founding of your nation or any of the other points I touch on and link to here haven't convinced you that allowing citizens of other nations to come en masse to America and stay, work, raise their families and expand our, and their, cultural horizons is in virtually everyone's best interest, perhaps the future of your social retirement benefits and your---and your offspring's---future tax liabilities will. Here's Ronald Demos Lee in his essay titled "Population":