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So, isn't it possible that the "pensions crisis" is simply a transitory phenomenon due to the baby boomers and that given the size of a "sustainable" population the "right" thing to do would be to let the population shrink after the baby boomers are gone?

In the meantime, the "pensions crisis" might be a political problem, not really an economic impossibility to provide a dignified standard of living for everyone. All economics is political economy.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Thu May 8th, 2008 at 02:38:35 PM EST
[ Parent ]
It depends on what you mean with transitional. Life expectancy may increase for a long time.
Lower birth rates will increase the the old-age dependency ratio asymptotically to a certain value, if not accompanied with an increase in life expectancy.

More concrete I have from destatis the picture below. It shows in blue the number of people older than 65 years per 100 people between 20 and 65. In green the number of people below 20, as the sum of these people is expected to be those who can't earn their own income. For the modelling it is assumed, that net immigration will be around the value of the last ten years (so slightly higher than currently), constant fertility and some reasonable assumption about life expectancy.

What makes economic stress is not the absolut level, but the change, if one assumes productivity gains. So from the mid 20s to the mid 30s Germany will suffer, but untill about 2020, there it will be less painfull than the last 15 years. (In Germany the baby boomers started later than in the US, only around the mid 50s, so they start to ordinary retire around 2020)

by Martin (weiser.mensch(at)googlemail.com) on Thu May 8th, 2008 at 09:48:17 PM EST
[ Parent ]
If the life expectancy keeps increasing eventually retirement age would have to be delayed to 75 or something. But then you'd have a problem of unemployment in the under-35 age range. The elephant in the living room is the fact of overproductivity which Metatone keeps hammering on.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Fri May 9th, 2008 at 03:13:45 AM EST
[ Parent ]

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