Population Age Structure And Fiscal Challenges

All other things being equal (which they seldom are), the fiscal challenges for the state to provide income and/or and medical care for the aged is an increasing problem in many parts of the world.

There needs to be more people in the younger working age group than in the older non-working age group for the math to work out.  Changing population age distributions are making the math harder to work.

These four sets of population pyramids (vertical scale for 5-year age bands, with blue for men and red for women) give insight into the changing past (1992), present (2012) and future (2022) fiscal picture with respect to state provided care for the aged.

You can see how the older ages become a larger share of the total population as we move from a period 20 years ago, to today, to a period 10 years in the future.  A higher proportion of older people indicates a higher demand for social welfare expenditures at whatever level of support or safety net each country may provide.

The black horizontal line across all three periods separate the over and under age 65 population, which we use as an arbitrary line of demarcation.

The United States actually shows the least future stress in terms of population age structure.  There are other issues, of course, but the expected age distribution is more favorable than for Italy and Japan.  China looks to have a big problem brewing too, although they do not currently have support programs anywhere near as comprehensive and liberal as the developed economies.

The China problem arises from the “one child” policy.  The Italy and Japan problem arises from voluntary reductions in family size as countries become more affluent.  The “better” US situation may be partly due to immigration into the younger age groups.

However, in spite of the possibly better working age population supporting the old age group in the US, the United States is on the cusp of a huge increase in retirement age population, which will require big increases in Social Security budgets and Medicare budgets.  Not only will the portion of the population in Medicare expand dramatically, but utilization rates multiply as people age.

United States (1992 –> 2012 –> 2022)

Italy (1992 –> 2012 –> 2022)

Japan (1992 –> 2012 –> 2022)

China (1992 –> 2012 –> 2022)

 

population data source:  US Census Bureau

 

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