Aging Populations (Finally) Drive Reforms
By MICHAEL HODIN,
Posted: June 24, 2011
AARP’s realistic (some would say heroic) position on America’s Social Security reform interestingly connects to a recent announcement in France that was tucked away in an issue of The Economist: “Recipients [of welfare] should contribute at least five hours of community service a week … adding a workfare requirement to unemployment benefits.” Simple and straightforward – though politically tortuous – the pronouncement represents a growing recognition of 21st-century demographic realities. Tens of millions of people are living far beyond the traditional notion of retirement, and the trend is exacerbated by the general fall in fertility and a decrease in the numbers of traditional citizens of working age that seems inevitable in any modern, developed economy. Clearly the social welfare system of earlier times is unsustainable today.
Not unconnected to this is the fact that a year into the Greek debt crisis, European and global financial leaders are struggling for a solution. While the Greek financial collapse might have coincided with the global financial crisis, the 2008-2009 financial meltdown brought to a boiling point would what have come to pass by roughly 2020, as last October’s S&P Global Aging Report made clear. We were warned there of the profound incompatibility between mid 20th-century social programs – Social Security, Medicare, NHS and their counterparts across the OECD countries – and our 21st-century aging populations.
So we shouldn’t be surprised that in the same news cycle we have the tectonic shift in America’s “senior lobby,” the persistent Greek debt crisis, and the contemplation by the French of the unthinkable. A European commissioner, Laurent Wauquiez, even commented that welfare dependency is a “cancer in French society.”
In the midst of the political turmoil set up by the mismatch of aging populations and public institutional arrangements, this week in Paris at OECD headquarters is a conference on the very topic of aging populations. It’s at least reassuring to know that the speakers are addressing the topic. As AARP as well as voices within the Sarkozy government get pounded by their so-called friends on the left for telling the truth, they might find some comfort in the messages coming from the intellectual and policy leadership at the OECD. Answers to our current social welfare and fiscal mess will emerge if we can shift the approach from one of “dependency and disability” to one much more closely aligned with economic activity that drives growth and wealth creation.
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