In 1950 when world population was much younger, with a median age of 23, the global potential support ratio was about 12 people of working age per one person aged 65 years or older. Today, the world PSR has declined to eight and by the year 2050 is projected to decline to four. Although the ratios for individual countries show considerable diversity, the overall trend is both unmistakable and striking: fewer people of working age per elderly person than in the past.What to do? Chamie reviews various policy options, including the one of "replacement migration" that he made famous when he was at the UN. But not every country wants immigrants--thus the concern over the one million Syrian and other Middle Eastern and African refugees and migrants that headed to Europe in 2015. Other policy alternatives include cutting payments to older people, or cutting other budget items, such as defense, in order to maintain payments to the older population. Chamie offers another approach that I have mentioned before (indeed, it is one of my most popular blog posts) and which is the most reasonable approach, in my view. Raise the retirement age.
Raising the statutory retirement age simultaneously increases the working age population and reduces the elderly population. Raising the age threshold for the elderly from 65 to 70 years, for example, increases the global PSR from 8 to 13 people of working age per one elderly person – roughly the 1950 level.
Similarly, to maintain current PSR levels into the future, countries must lift the threshold for the elderly population. To preserve the current global PSR of eight to midcentury, for instance, the threshold age for beginning old age would need to be 73 years. For some countries, however, even higher age thresholds for the elderly would be required to maintain current PSRs through midcentury, such as 80 years for South Korea and 79 for China.The graph below shows the numbers for select countries:
Of course, this is easier to say than do, but we need to get going on it!