July 31, 2010
The NYT reported on new projections from the Population Reference Bureau showing continuing increases in population in the developing world and slow or negative growth in wealthy countries. Low birth rates in the wealthy countries are projected to lead to a rise in the ratio of retirees to workers. The NYT described this prospect as “sobering.”
There is no obvious reason that people in wealthy countries should be concerned about the prospect of a rising ratio of retirees to workers. This ratio has been increasing for a century. The projected increase in the elderly dependency ratio is largely offset by a decline in the number of dependent children. At the worst, the rise in the dependency ratio will offset some of the gains in wage growth associated with rising productivity, as has been the case in prior decades. So, it is not clear what the NYT wants readers to find “sobering” about this news.
The article also implied that a large jump in the share of GDP going to Social Security and Medicare is due to the aging of the population. Much of the cause of the projected increase in spending on these programs is the projected increase in per person health care costs. If per person health care costs in the United States fell to the levels in Germany or Canada, the share of GDP devoted to these programs in 2050 would be little different from what it is at present.
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