Global Aging
The global population is living longer and having fewer kids. Thanks to the baby boomers, we've enjoyed unprecedented economic growth, personal wealth and health. Unlike their parents however, when the boomers became parents, they produced less children -- freeing much of their wealth to be spent on themselves -- further fueling the economic growth. But what happens when they reach retirement age?
The pessimist school of thought will have you believe that since there will be a smaller labour force to the retired population, we're heading for a world economic disaster. Less wealth created by the smaller labour force in the future, spread across an aging population that is expensive to maintain is not a good equation. Nations will fall. The industrialized nations won't be the only ones impacted -- the emerging economies are also heading rapidly into the same crisis. It's a compelling argument.
The optimists however, have a different view. They're placing their bets on the continuing rise in productivity. The belief is that as the labour pool shrinks and the aging population increases, the burden on our children will not rise because they will be far more productive than we were. They will therefore create more wealth than we ever had, and will therefore be able to fund our stay in convalescence homes
What future you expect of course, depends on your outlook. There's evidence to support both the optimists and the pessimists -- and since we've never experienced anything like this in the past, we have no reliable models to depend on. If you want to bet on the safe side however -- and there is a safe side -- I'd place myself in the pessimist camp -- prepare for a frugal future and save some money. And if you're wrong -- well, that's good news too.
Check out the BusinessWeek cover article, and see the links below for more on this topic.
McKinsey Global Institute -- The Coming Demographic Deficit: How Aging Populations Will Reduce Global Savings
Knowledge@Wharton -- Older Workers: Untapped Assets for Creating Value
World Economic Forum -- International Pension Readiness Report Finds Most Major Industrial Countries Unprepared for Coming Crisis and Pension Readiness Report by Country
The Macroeconomic Implications of Aging in a Global Context [PDF] -- this is a PDF document, even if the extension is wrong.
Federal Reserve Bank -- Live Long and Prosper: Challenges Ahead for an Aging Population [PDF]
Report to World Leaders: Findings and Recommendations of the Commission on Global Aging [PDF]
Population Change and Economic Growth: The Long-Term Outlook [PDF]
The pessimist school of thought will have you believe that since there will be a smaller labour force to the retired population, we're heading for a world economic disaster. Less wealth created by the smaller labour force in the future, spread across an aging population that is expensive to maintain is not a good equation. Nations will fall. The industrialized nations won't be the only ones impacted -- the emerging economies are also heading rapidly into the same crisis. It's a compelling argument.
The optimists however, have a different view. They're placing their bets on the continuing rise in productivity. The belief is that as the labour pool shrinks and the aging population increases, the burden on our children will not rise because they will be far more productive than we were. They will therefore create more wealth than we ever had, and will therefore be able to fund our stay in convalescence homes
What future you expect of course, depends on your outlook. There's evidence to support both the optimists and the pessimists -- and since we've never experienced anything like this in the past, we have no reliable models to depend on. If you want to bet on the safe side however -- and there is a safe side -- I'd place myself in the pessimist camp -- prepare for a frugal future and save some money. And if you're wrong -- well, that's good news too.
Check out the BusinessWeek cover article, and see the links below for more on this topic.
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