Why Nations Can Afford Population Ageing
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Author(s)
Guest, Ross
Griffith University Author(s)
Year published
2005
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This paper presents a range of evidence supporting a sanguine view of the impact of
population ageing on a nation’s average living standards, with particular reference to
Australia. The evidence points to a small decrease in the growth of living standards
over the next few decades, and no decline in the average level of living standards.
There are essentially two reasons for this benign view, which is at odds with the dire
consequences of ageing predicted by media commentators and politicians. The first is
simply the power of compound growth in technical progress that is expected to be
more or less unaffected by ...
View more >This paper presents a range of evidence supporting a sanguine view of the impact of population ageing on a nation’s average living standards, with particular reference to Australia. The evidence points to a small decrease in the growth of living standards over the next few decades, and no decline in the average level of living standards. There are essentially two reasons for this benign view, which is at odds with the dire consequences of ageing predicted by media commentators and politicians. The first is simply the power of compound growth in technical progress that is expected to be more or less unaffected by population ageing. The second is the adjustments that will occur in the behaviour of consumers, workers and firms, and in government policies, that will ameliorate the impact of ageing on living standards. Several policy implications flow from the assessment presented here. Pro-fertility policies, such as the baby bonus in Australia, cannot be justified on the basis of the need to protect living standards in the future, nor on the grounds of intergenerational equity. Similarly, the case for boosting national saving through increased compulsory superannuation, for example, is weak on the grounds of a response to population ageing. There may be good reasons to boost fertility and national saving, but population ageing is not one of them.
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View more >This paper presents a range of evidence supporting a sanguine view of the impact of population ageing on a nation’s average living standards, with particular reference to Australia. The evidence points to a small decrease in the growth of living standards over the next few decades, and no decline in the average level of living standards. There are essentially two reasons for this benign view, which is at odds with the dire consequences of ageing predicted by media commentators and politicians. The first is simply the power of compound growth in technical progress that is expected to be more or less unaffected by population ageing. The second is the adjustments that will occur in the behaviour of consumers, workers and firms, and in government policies, that will ameliorate the impact of ageing on living standards. Several policy implications flow from the assessment presented here. Pro-fertility policies, such as the baby bonus in Australia, cannot be justified on the basis of the need to protect living standards in the future, nor on the grounds of intergenerational equity. Similarly, the case for boosting national saving through increased compulsory superannuation, for example, is weak on the grounds of a response to population ageing. There may be good reasons to boost fertility and national saving, but population ageing is not one of them.
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School
Graduate School of Management
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© 2005 Griffith University