Committee for a Responsible Federal Budget

AARP Event Discusses Population Aging Across the Globe

Jul 24, 2012 | Social Security

The American Association of Retired Persons (AARP) hosted an event entitled "Work, Retirement Age, and Fiscal Sustainability in an Aging World." Two professionals in the field of pension public policy and fiscal sustainability led the discussion, providing an international perspective on the difficulty that population aging is posing for budgets across the world.

Christian Toft, a professor at the University of Kassel in Germany and a Cambridge PhD recipient, initiated the discussion by sharing his research on the relationship between pension reform, retirement ages, and labor supply in the United States and the European Union. His discussion spanned a historical retrospective on pension reform policy from 1950 onwards and also provided critical insight on the growth of the elderly workforce through 2060.

Toft noted that while continental European nations are more receptive to quick and responsive changes in entitlement policy, the last major pension reform implemented in the United States came under Ronald Reagan's presidency in 1983. Additionally, he argued that the dramatic reduction in elderly labor force participation since 1950 in the United States is directly related to early retirement age policy. Toft concluded that as a result of retirement age reform in Europe, the European Union could expect to have higher labor participation rates than the United States by 2060, bucking the trend of the past half-century.

The second speaker, Richard Jackson, a senior fellow at the Center for Strategic and International Studies (CSIS), took the discussion in a different direction. He talked about the Global Aging Preparedness (GAP) index, which provides a "comprehensive quantitative assessment of the progress that countries worldwide are making in preparing for global aging." Jackson noted that although the United States scored fairly high amongst the developed nations in the category of income adequacy, the country failed to pass the litmus test for the fiscal sustainability category in the index.

What both Toft and Jackson echoed is the need to address the fiscal sustainability of entitlement funding programs for the aging populations both domestically and internationally. As we previously discussed, aging plays a big role alongside health care costs in the projected future growth of entitlement spending. As a result, federal policymakers should keep an eye on policies that can mitigate the effects of population aging on the federal budget.