Many experts are working to understand the relationship between an aging population and the economy. Some of the more serious effects of baby boomer retirement will include a diminished labor force, and a decrease in the national government's savings rate. To prevent recession in the remainder of the twenty-first century, citizens will be required to save more, and governments will be required to make changes to fiscal policies.
Before 2030, the growth of the labor force will decline sharply. The elderly will make up twenty-one percent of the total population, as opposed to the twelve percent they make up today. Also, working-age adults will make up just fifty-five percent of the population, instead of the sixty percent they make up today.
The economy will suffer the effects of a diminished labor force. The ratio of workers to social security recipients, in 1997, was 3.35; in 2030, the ratio will be 2.03. Workers, as a result, will be forced to retire later than they do today, and the economic growth will slow significantly.
Countries will have to consider relaxing their immigration restrictions. Where the elderly percentage of the citizenry is high, countries will simply not have enough native workers to fill available positions. To sustain the economy, countries will be forced to draw upon outside labor.
The public saving rate will be affected by the changes in demographics. As more people become dependent on public entitlement programs, government debt will rise. While consumption will not fall off, as long as the government continues to make entitlement payouts, the model will not last over the long term. Public pensions will have to sell off assets to pay benefits to baby boomers, causing later retirees to lose their benefits. Households will have to plan on saving everything that they need for retirement, in case entitlement programs no longer exist.
Financial markets will see value changes, as the population ages. Demand for securities has grown, because baby boomers have been buying them, in anticipation of retirement. However, when baby boomers sell those assets to pay their living expenses, market prices will fall, and place the retirement funds needed by future generations in danger.
Countries all over the world, particularly in the Western world, and in China and Japan, are facing the demographic realities of an aging population and the economy. However, not every country around the world will see negative effects. Countries like India, whose birth rates are growing, will attract more capital investment, because their labor force will be consistently replenished.
Before 2030, the growth of the labor force will decline sharply. The elderly will make up twenty-one percent of the total population, as opposed to the twelve percent they make up today. Also, working-age adults will make up just fifty-five percent of the population, instead of the sixty percent they make up today.
The economy will suffer the effects of a diminished labor force. The ratio of workers to social security recipients, in 1997, was 3.35; in 2030, the ratio will be 2.03. Workers, as a result, will be forced to retire later than they do today, and the economic growth will slow significantly.
Countries will have to consider relaxing their immigration restrictions. Where the elderly percentage of the citizenry is high, countries will simply not have enough native workers to fill available positions. To sustain the economy, countries will be forced to draw upon outside labor.
The public saving rate will be affected by the changes in demographics. As more people become dependent on public entitlement programs, government debt will rise. While consumption will not fall off, as long as the government continues to make entitlement payouts, the model will not last over the long term. Public pensions will have to sell off assets to pay benefits to baby boomers, causing later retirees to lose their benefits. Households will have to plan on saving everything that they need for retirement, in case entitlement programs no longer exist.
Financial markets will see value changes, as the population ages. Demand for securities has grown, because baby boomers have been buying them, in anticipation of retirement. However, when baby boomers sell those assets to pay their living expenses, market prices will fall, and place the retirement funds needed by future generations in danger.
Countries all over the world, particularly in the Western world, and in China and Japan, are facing the demographic realities of an aging population and the economy. However, not every country around the world will see negative effects. Countries like India, whose birth rates are growing, will attract more capital investment, because their labor force will be consistently replenished.
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