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R:Live FilesIBK ManagementInboxADAIR TURNERln000rsm.ppt 06/11/2003 10:25:00 ( 1 ). Demographics, Economics and Social Choice. ADAIR TURNER. November 6, 2003. CONFIDENTIAL. DRAFT. Table of Contents. Presentation to The Economist. Table of Contents.

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R:\Live Files\IBK Management\Inbox\ADAIR TURNER\ln000rsm.ppt 06/11/2003 10:25:00 (1)

Demographics, Economics and Social Choice

ADAIR TURNER

November 6, 2003

CONFIDENTIAL

DRAFT

slide2

Table of Contents

Presentation to The Economist

Table of Contents

three dimensions of demographic change
Three Dimensions of Demographic Change
  • Increasing Longevity
  • Declining Fertility
  • Baby Boom Cohort
life expectancy at birth 1 male
Life Expectancy at Birth(1) - Male

____________________

Source: GAD for UK; United Nations for World

Note: These are “Period” Life expectations, which actually underestimate the expected life span of a baby born in the year specified, but which are easier to calculate than the correct “cohort” figures and therefore frequently used in international comparisons. See footnote x in lecture text for explanation

life expectancy at 60 1 male
Life Expectancy at 60(1) - Male

____________________

Source: Eurostat demographic year book; GAD for UK

Note: On “Period” basis

total fertility rates europe and north america 1950 2000
Total Fertility Rates – Europe and North America 1950-2000

In chart minimum value in y axis is 0.5 and crosses at 0.75

In PowerPoint a white fill box has been used to blank out the 0.5

____________________

Source: United Nations

total fertility rates asian countries 1950 2000
Total Fertility Rates – Asian Countries 1950-2000

In chart minimum value in y axis is 0 and crosses at 0. 5

In PowerPoint a white fill box has been used to blank out the 0

____________________

Source: United Nations

total fertility rates iran turkey brazil 1950 2020
Total Fertility Rates – Iran, Turkey, Brazil, 1950-2020

In chart minimum value in y axis is 0 and crosses at 0. 5

In PowerPoint a white fill box has been used to blank out the 0

1950 and 2020 are text boxes in PowerPoint with a white fill

1950

2020

-55

-65

-75

-85

-95

-05

-15

-25

____________________

Source: United Nations

slide9

B

B

A

A

From Pyramids to Columns

Age Group

100 +

95 - 99

90 - 94

85 - 89

80 - 84

75 - 79

70 - 74

65 - 69

60 - 64

55 - 59

50 - 54

45 - 49

40 - 44

35 - 39

30 - 34

25 - 29

20 - 24

15 - 19

10 - 14

5 - 9

0 - 4

p a y g pension systems key ratios

Average retirement income

Working years

No population growth

=

Average worker contribution

Retired years

No productivity growth

Implicit rate of return on contributions = 0

Population growth positive

R. I.

W. Y.

Population growth

*

=

No productivity

growth

W. C.

R. Y.

Rate of return = Population growth rate

Population growth

positive

R. I.

W. Y.

*

Population growth

*

Productivity growth

=

Productivity growth

positive

W. C.

R. Y.

Rate of return = population growth rate + productivity growth rate

P.A.Y.G. Pension Systems: Key Ratios
demographic drivers of support ratio
Demographic Drivers of Support Ratio

No. of Workers

No. of Retired

Working Years

Retired Years

“Support

Ratio”

Population

Growth

*

=

=

support ratio forecasts 2000 2050
Support Ratio Forecasts 2000-2050

Ratio of 20-64 Year Olds to 65+

____________________

Source: UN Medium Variant

p a y g schemes three alternatives
P.A.Y.G. Schemes: Three Alternatives
  • If support ratios for any given retirement ages fall, then three possible solutions
    • Increased retirements ages
    • Poorer pensioners
    • Bigger worker contributions
are funded systems different
Are Funded Systems Different?
  • In any pension system today’s pensioners are dependent on resource transfer from today’s workers
  • Funded systems only help overcome demographic challenges if they increase savings – in current and future generations
  • Funded systems face demographic risks
  • The implications are closely similar for funded and non-funded systems
demographic change in uk and china un medium variant

60+

15-59

0-15 Years

Roy Waterhouse 26-8-03:MS Graph charts.

This time, they have been doneas Stacked Bar charts, the X-axisrunning from 0% to 100%. To achieve the appearance of the charts, they are donein three rows, with the middleone containing the ‘real’ dataBlank values of equal amountsare put in either side (with thecolours changed to white),and the whole rowadds up to 100(see screen dump right).

The bars then have to bere-coloured manually .

The Legend is donemanually.

Demographic Change in UK and China – UN Medium Variant

% Population by Age Band

2000

2050

UK

China

____________________

Source: OECD Historical Statistics: OECD Economic Outlook

demographic conditions and investment attractiveness
Demographic Conditions and Investment Attractiveness

____________________

* Projection per UN Medium Variant

immigration only responses un migration scenario
Immigration Only Responses – UN Migration Scenario
  • To maintain the ratio of 15-64 year olds to 65+ year olds constant requires:
rising longevity fixed retirement age and stable support ratios
Rising Longevity, Fixed Retirement Age and Stable Support Ratios

RetirementAge

Initial Structure

PlusRising Longevity

Plus Immigration to Keep Support Ratio Constant

europe and its neighbours population
Europe and Its Neighbours – Population

Millions

Russia,Ukraine & Belarus

European Union

EasternEurope

WesternAsia*

Africa

____________________

Source: UN Medium Variant

* Note: UN definition plus Pakistan, Afghanistan and Iran

population density us and europe
Population Density – US and Europe

000s per Sq.km: 2000

____________________

Source: GAD

italy s population structure 1970 2050
Age Band

80-100

60-80

40-60

20-40

0-20

1970

2000

2050

Italy’s Population Structure 1970-2050

Millions

____________________

Source: U.N. Medium variant for 2050 projection

european fertility rates 2001
European Fertility Rates - 2001

____________________

Source: GAD