October 31, 2011
The Washington Post seems obsessed with pushing stories that old people will bankrupt the world. It had another front page article today warning that aging populations threaten disaster.
Among the lines in the article we are told that:
“China (1.5) is racing to get rich before it becomes old.” [The “1.5” refers to the birth rate per woman.]
It is difficult to see much of a race. China’s rate of annual productivity growth has been close to 8 percent over the last three decades. This means that output per worker has increased roughly tenfold over this period. If the ratio of workers to retirees falls from 6 to 1 to 2 to 1 over this period (a much larger decline than we will actually see), and retirees consume 75 percent as much as active workers, this rate of productivity growth would be sufficient to allow the income of both workers and retirees to rise more than eightfold.
The other presumed demographic crises have the same nature. Even modest rates of productivity growth can easily offset the impact of aging in raising the ratio of older dependents to workers. With 2 percent annual productivity growth (roughly the rate in the U.S. over the last two decades) output per worker would double over 35 years. If the ratio of workers to retirees fell from 3 to 1 to 2 to 1 over this period, both workers and retirees could enjoy an 80 percent increase in living standards. (This discussion ignores the fact that the ratio of younger dependents [children] to workers has fallen sharply in countries with declining populations. It also ignores ways in which declining population may improve living standards that are not picked up in standard measures of living standards such as less crowded transportation systems and less pollution.)
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