Pensions in an Ageing Society: a Symposium

The investigation of the economic impact of population trends cannot but take into account the variety of the local situations, although in the global economy there are formidable interactions among the different regions, due in particular to labour and capital flows and trade. There are various aspects that deserve attention. One is the impact of a shirking native workforce on the labour markets in the developed countries, where the relative decline in the adult population will start to bite in the next decades . Another regards the expected growth in the costs of long-term care and medical assistance for the ageing population. The most hotly debated topic has, however, been pensions. Non-orthodox commentators have always been suspicious of the demographic alarm raised by mainstream scholars and by some international institutions (e.g. World Bank, 1994). This suspicion is warranted since the demographic indicators, such as the ratio of old population to the working-age population, are misleading about the economic sustainability of the inactive population which depends, inter alia, on the share of the adult population that is actually employed and on the community’s choices about the amount of output to be transferred to retirees. The apparently careless use of the demographic indicators clearly reflects a neoclassical outlook in which actual employment, given a competitive labour market, tends to coincide with potential employment, and generous social transfers mechanically displace capital accumulation. The contributions to this Symposium look at the various indicators in innovative ways. With particular reference to Europe, Pierre Concialdi points out that in the next few decades the ageing process will reshuffle the composition of the dependent population rather than dramatically increase its relative weight in the working population. (Similar considerations are put forward by Wray with respect to the US.) In many countries, moreover, the demographic alarm seems premature since they currently suffer from low activity levels and employment rates rather than from labour scarcity. This is still especially true in some European countries in spite of the dramatic demographic changes that are occurring. In these countries a ‘demographic window’ is still open to foster economic growth and raise the employment rate in order to endow those economies with the physical and intangible capital to cope with the prospective ageing of the population. This ‘window’ is about to be lost, not least owing to the deflationary economic policies adopted by the European Monetary Union, as is forcefully noted below by Massimo Pivetti in his contribution. This is the real danger.