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Global Demographic Trends and Provisioning for the Future

Listed author(s):
  • L. Randall Wray

The world's population is aging. Virtually no nation is immune to this demographic trend and the challenges it brings for future generations. Relative growth of the elderly population is fueling debate about reform of social security programs in the United States and other developed nations. In the United States, the total discounted shortfall of Social Security revenues has been estimated at about $11 trillion, nearly two-thirds of that comes after 2050. However, this paper argues that those calling for reform have overstated the demographic challenges ahead. Reformers conclude that aging poses such a serious challenge because they focus on financial shortfalls. If we focus on demographics and on the ability to produce real goods and services today and in the future, the likelihood of a real crisis in social security in the United States and developed nations is highly improbable. Demographic changes are too small relative to the growth of output that will be achieved even with low productivity increases. This paper concludes with policy recommendations that will enhance our ability to care for an aging population in a progressive manner that will not put undue burdens on future workers. Policy formation must distinguish between financial provisioning and real provisioning for the future; only the latter can prepare society as a whole for coming challenges. While individuals can, and should, save financial assets for their individual retirements, society cannot prepare for waves of future retirees by accumulating financial trust funds. Rather, society prepares for aging by investing to increase future real productivity.

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File URL: http://www.levyinstitute.org/pubs/wp_468.pdf
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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_468.

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Date of creation: Aug 2006
Handle: RePEc:lev:wrkpap:wp_468
Contact details of provider: Web page: http://www.levyinstitute.org

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  1. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
  2. Dimitri B. Papadimitriou & L. Randall Wray, "undated". "Does Social Security Need Saving? Providing for Retirees throughout the Twenty-first Century," Economics Public Policy Brief Archive ppb_55, Levy Economics Institute.
  3. L. Randall Wray, 2005. "Social Security's 70th Anniversary: Surviving 20 Years of Reform," Economics Policy Note Archive 05-6, Levy Economics Institute.
  4. Tim Callen & Warwick J. McKibbin & Nicoletta Batini, 2006. "The Global Impact of Demographic Change," IMF Working Papers 06/9, International Monetary Fund.
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