Basically many governments of developed economies have begun responding to changing demographics in one key area; namely in the area of growing life expectancy and longetivity. In essence many developed economies are becoming aware (they are beginning to feel it as well) that the dependancy ratio is rising and as such pensions schemes, health care schemes and in fact general welfare schemes are being modified accordingly. The general consensus seems to be something like; we need to work longer as function of rising longetivity and go quicker through the education system (specifically coined in a Danish context) in order to ameliorate the dependancy ratio. As always there is of course an article to go along; this time from The Guardian about the pressures on UK's pension system.
'Britain's pensions deficit could be larger than official figures suggest because workers are living longer than predicted, the regulator said yesterday.
Employers, already under pressure to plug deficits in their final-salary schemes, could be forced to inject further finance into their retirement funds to honour obligations to staff, said David Norgrove, who chairs the pensions regulator board.
A recent report by the Institute of Economic Affairs, a rightwing thinktank, argued that the increasing life expectancy, coupled with falling investment returns and low interest rates, had increased the public-sector pension deficit by a quarter to more than £1 trillion. The deficit in the private sector is estimated to be about £100bn on liabilities of £900bn.'
The obvious question which must come on the back of my post is whether it is enough? Is it enough to tweak existing structural mechanisms to better fit the compositional effect of an ageing population? Well at the offset it makes perfectly good sense; we are living longer and therfore we also need to push retirement age accordingly; this is logical. But at the end of the day it is probably not enough (fertility is low and falling as well) and certainly this is not a viable solution for a countries like Japan and Italy, or Germany for that matter. Here at DM (this includes our commentators as well!) we are still trying to get to grips with explaining what is actually going on as we move forward. However, we are getting there and it seems clear that the current political response to changing demographics is inadequate in many countries. So what should they do?