Chapter 11: An Aging Population and the Economic Vitality of Pennsylvania’s Cities and Towns
Peter Karl Kresl The population of all industrialized economies is aging, frighteningly so in some countries. In a study of the impacts of aging populations the OECD argued that it will be difficult to maintain anticipated increases in living standards, taxes to support age-related programs will reduce productive investment and work effort, and that there will actually be a negative impact on living standards. The report argued that these impacts were not absolutely unavoidable. The solution, it was argued, is focused on older workers, specifically increased efforts at lifelong learning, so as to maintain the skills of older workers, an end to subsidized early retirement, and increasing the labor participation rate of older women (OECD, 2005). In the European Union, by 2050 the population will be smaller and older, with the working age cohort declining by 48 million, or 16 per cent, and the 65+ cohort increasing by 58 million, or 77 per cent. One of the projected consequences of this demographic change is a decline in potential GDP growth from 2.2 per cent for the current decade to 1.3 per cent for the period 2031–50, with increases in productivity of those who are working, through advances in technology, being the primary source of growth. Another consequence of the increasing age dependency in the EU will be an increase in public sector age-related expenditures of 5 per cent (Economic Policy Committee and the European Commission, 2006). In southern EU countries, such as Italy, declining birth rates, a reluctance to...
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