Population aging, pensions and social protection: A macroeconomic examination of challenges

Population growth and an increasingly youthful age structure have characterized the largest part of history; whereas the deceleration of population growth and an aging population are relatively recent phenomena. Experiences how countries are able to cope with, and address an aging population are relatively limited, and fear of an aging population and associated economic and social consequences are perhaps understandingly widespread. The fears of an aging population are by and large related to economic challenges. Will population aging negatively affect economic output and lead to deflation? Can they pay adequate pensions? Can they cope with rising health care expenditures? Will policy responses inevitably place a burden on the elderly or the younger generations? This paper argues that the fear of population aging is often based on a partial economic analysis, which focuses on the level of households, and that the challenges are considerably less daunting if viewed from a macroeconomic perspective. In most countries it the establishment of functioning pension systems and the provision of social protection is a question of political consensus rather than economic capacity. However, some countries, especially the world's least developed, confront t challenges.