Aging and its Consequences
To understand why population aging strains pension systems and puts their reform on the political agenda, it is paramount to grasp the different dynamics and implications of this process. What is often not fully understood by the layman is that a fall in the population growth rate alone would not pose so much of a problem if the age structure remained the same, i.e. if the relation between young and old would roughly stay constant. In this case, the relative size of the working age population to the non-working population (the retired and children) would not change. This, however, is not what we currently observe in the industrialized nations. Not only does the population growth rate decline there, but the populace also grows older. Hence, the relative number of working age people is steadily declining.
KeywordsReal Interest Rate Pension System Social Security Contribution Pension Reform Current Account Balance
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