Ageing Population: A slow-burning fuse!

The  twentieth century has seen a large rise in life expectancy across the globe, with higher living standards for most caused by improvements in health care and the availability food. However, increased life expectancy combined with declining birth rates have caused many to worry about the cost of an ageing population. There are fears that future generations will struggle to meet the increasing needs of the elderly.
      In the UK, the dependency ratio is expected to to fall from 3.7 to 1 in 2000 to 2.1 to 1 in 2040. This highlights  a cause for concern because  it will place a higher burden on a shrinking working population.However, it is argued a rising life expectancy at the same time would also lead to policies inovoling  some increase in the retirement age. The UK governement have already revealed plans in the 2013 autumn statement to raise the pension age. The date when the state pension age rises to 68 will be brought forward to the mid-2030s  and the age could rise to 69 by the late 2040s; in an attempt to make the ageing population more manageable. 
          So why is there such concern about an ageing population? There are many problems associated with an ageing population. Firstly, an older population tends to lead to increased government spending on helath and social security sectors. This is while the government make less revenue from the loss in income tax from pensioners. The combination of higher spending  and lower tax revenue is a source of concern especially when governments already have large amounts of debt after the 2008 financial crisis .In addition, the current working force may be forced to pay higher taxes to increase government revenues.This could create disincentives to work and disincentives for firms to invest, therefore growth could decline in the long run. So all signs look like we will be bearing and increased burden for the elderly by the time we begin earning. 


Dependency ratios in different countries