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The Challenge of Global Aging how demography will reshape the world of the 21 st century

The Challenge of Global Aging how demography will reshape the world of the 21 st century Richard Jackson CSIS Global Aging Initiative White House Conference on Aging July 20, 2005. The whole world is aging—and today’s developed countries are leading the way. Year 2005.

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The Challenge of Global Aging how demography will reshape the world of the 21 st century

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  1. The Challenge of Global Aging how demography will reshapethe world of the 21st century Richard Jackson CSIS Global Aging Initiative White House Conference on Aging July 20, 2005

  2. The whole world is aging—and today’s developed countries are leading the way. Year 2005

  3. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1950 median age 28.6 THIS IS WHERE WE WERE IN 1950 Men Women Population in Thousands

  4. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1955 median age 29.0 Men Women Population in Thousands

  5. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1960 median age 29.6 Men Women Population in Thousands

  6. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1965 median age 29.8 Men Women Population in Thousands

  7. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1970 median age 30.6 Men Women Population in Thousands

  8. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1975 median age 30.9 Men Women Population in Thousands

  9. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1980 median age 31.9 Men Women Population in Thousands

  10. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1985 median age 33.1 Men Women Population in Thousands

  11. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1990 median age 34.4 Men Women Population in Thousands

  12. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 1995 median age 35.8 Men Women Population in Thousands

  13. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2000 median age 37.3 Men Women Population in Thousands

  14. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2005 median age 38.7 THIS IS WHERE WE ARE TODAY Men Women Population in Thousands

  15. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2010 median age 40.0 Men Women Population in Thousands

  16. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2015 median age 41.2 Men Women Population in Thousands

  17. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2020 median age 42.3 Men Women Population in Thousands

  18. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2025 median age 43.4 Men Women Population in Thousands

  19. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2030 median age 44.5 Men Women Population in Thousands

  20. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2035 median age 45.4 Men Women Population in Thousands

  21. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2040 median age 46.0 Men Women Population in Thousands

  22. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2045 median age 46.3 Men Women Population in Thousands

  23. Pyramid inversion in the developed world—1950 to 2050. • More Developed Regions: UN Constant Fertility Scenario year 2050 median age 46.4 THIS IS WHERE WE WILL BE IN 2050 Men Women Population in Thousands

  24. Five Challenges

  25. The fiscal challenge. • Declining support ratio of workers to retirees • Rising cost of pay-as-you-go retirement benefits • Large tax hikes, large benefit cuts, or exploding public debt • Growing political paralysis over unpopular budget choices

  26. The number of workers available to support each pensioner will decline. two taxpayers for each retiree

  27. Public retirement benefits will consume a much larger share of GDP.

  28. Elders in most countries are highly dependent on government benefits. All3rd HouseholdsQuintile US 35% 54% Canada 42 % 62% Sweden 57% 70% Netherlands 54% 74% UK 50% 75% France 67% 78% Italy 59% 83% Germany 61% 84% Public Benefits as a Percent of After-Tax Elderly Income Source: CSIS (2002)

  29. The labor challenge. • Shrinking workforces and labor shortages • Aging workers and aging union memberships • Pressure to increase immigration—and popular backlash • Growth in cross-border outsourcing

  30. The growth challenge. • Long-term zero or negative GDP growth • Declining rates of savings and investment • Falling demand for infrastructure (highways, housing) and capital goods (offices, mills) • Shrinking consumer markets, overcapacity, and declining profits

  31. The financial challenge. • Danger of “Great Depreciation” in financial markets when Boomers retire • Unsustainable government borrowing to fund pensions • Possible collapse of regional economic entities like the EMU • Capital-flow reversals: Emergence of developed debtors (Japan? Germany?) and developing creditors (China? Mexico?)

  32. The geopolitical challenge. • Will youthful developing societies…► feel demographic pressure to expand?►translate faster economic growth into global leadership? • Will aging developed societies…► find the resources to meet their security commitments? ► be willing to sacrifice for the sake of the future?

  33. If demography is destiny, global leadership may pass to the “Third” world. 1 2 3 4 5 6 7 8 9 10 11 12 12 Largest Countries Ranked by Population 1950 China Soviet Union India United States Japan Indonesia Germany Brazil United Kingdom Italy France Bangladesh 2000 China India United States IndonesiaBrazil Russian Fed.PakistanBangladeshJapanNigeriaMexicoGermany 2050 India China United States PakistanIndonesiaNigeriaBangladeshBrazilCongoEthiopiaMexicoPhilippines Source: UN (2001)

  34. The US Age Wave in Global Perspective

  35. The United States enjoys considerable advantages. • The youngest population in the developed world • The developed world’s deepest capital markets and most flexible labor markets • A relatively inexpensive Social Security system • A well-developed private pension system

  36. America’s age wave is comparatively small.

  37. In many fast-aging countries, the working-age population will shrink dramatically.

  38. Countries with slowly growing workforces may have slowly growing economies.

  39. The United States must also overcome some real obstacles. • The world’s most expensive health-care system • Large gaps in private pension coverage • Unsustainable budget and current account deficits • An entrenched “entitlement ethos,” a powerful senior lobby, and growing political gridlock

  40. Older voters will increasingly dominate the U.S. electorate.

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