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Global Economy GLOBAL PENSION PROBLEM:
Dynamics and Solutions
GLOBAL INCREASING LIFE
PENSION CRISIS EXPECTANCY
The pension crisis is not related
It is important to know how the directly to the reduction of population.
government pension system works to But as of 2021, developed economies,
understand the current crisis. Currently, and the developing world in total,
three kinds of economic backup systems have had tremendous success in
can be classified as pension plans. One maintaining a higher average life
is individual savings and another is expectancy than previous decades.
private funds, namely through banks. Take Japan for example. The
However, the major pension system is retirement age is 60 in Japan. This was
the one funded by the government. fine in the 1960s and 1980s when the
Public funded pensions draw from country was facing population growth.
current workers' salaries to pay But with time, Japan’s highly modern PROPOSED SOLUTIONS
pensions to retirees. living standard has ensured people
Currently, all the 32 OECD countries, live longer and a reduced fertility rate. Welfare systems in OECD and many developing countries set
plus China, India, and other major Thus, Japanese life expectancy has aside large amounts of cash for public subsidies. In developed
economies of the world owe a large shot up from 67 in the 1960s to countries, issues of medical or education subsidies are the
portion of the money to retirees and almost 84 in 2015. So naturally, the cornerstone in politics. Now the looming pension crisis has
upcoming retirees. Most of these government has to pay pensions for raised difficult questions like how to afford to pay retirees.
countries have a strong social security longer and longer terms for each For decades, China has maintained a strict one child per
plan which takes care of citizens’ retiree. While the population is also family policy. However, the situation is reversed now as the
unemployment, medical care, housing, As the number aging at the same time, numbers of Chinese government is encouraging young couples to have
and many other basic facilities through of retirees is new workers are declining. As stated more kids. Many well-developed economies offer various
public funds. As the number of retirees earlier, government pension plans are forms of support, money, and other facilities to encourage
is growing fast compared to new entries growing fast simply finding it difficult to pay for population growth too. Most of
in the job market, public funds are compared to such a long duration. The problem is the developed world has a median
running short of what is needed to pay THE CYCLE OF also acute in other major Western age of more than 40. Encouraging
to older generations in the future. new entries in nations like Germany, the USA, and the growth of the younger
Various estimates put the number of the the job market, POPULATION the UK. With the growth of average population is viewed and enforced
shortfall at 70 trillion USD by 2020. At life expectancy, the median age is as a suitable solution for many of
this rate, by 2050 pensioners will be public funds GROWTH AND increasing, creating a cycle where them. Another solution is
owed a whopping 400 trillion USD by are running DECLINE former workers are to be paid for immigration. But the issue of
the governments. The sum is five times longer durations for 2 decades or immigration itself has major
larger than the projected world economy short of what is A 2017 study by The Lancet more. socio-political consequences and
at that time (80 trillion USD). Major needed to pay shows global fertility rate and is a topic of hot debate.
economies are trying hard to solve the to older the number of live births per In OECD states, less than half of
puzzle without disturbing the living woman halved from 4.7 to 2.4 SOCIO- people aged between 55 and 64
standard or average life expectancy. generations in as it is continuing to decline. ECONOMIC are employed. Many choose early
Economies just cannot sustain paying the future. Stats show the population of a retirement or other forms of
more and more to a bulging retired certain country starts to fall if ISSUES exemption given that most of
population. the birth rate is below 2.1. As The rise in obesity, environmental those countries have strong social
for evidence, most of the factors, poverty, urbanization, and all security systems. Countries are
developed countries are
REASONS experiencing a shrinking population and even mammoth of its complexities, has reduced the also trying to stop the chances of early retirement to fight the
bulging payment. Proposed solutions include an overall
As of 2015, at least 75% of shortfalls in populations like China will also shrink in the future. The overall interest of younger generations remodeling of retirement plans, encouraging people to have
a global pension are due to a lack of Lancet report predicts the global population to peak by 9.7 to form a family or give birth. longer careers, the use of automation to help older people in
public funds. The rest of the shortfalls billion in the 2060s and then drop to 8.8 billion by 2100. The Housing, medical care, school, and the workplace, etc.
belong to personal savings and private pension crisis rose as a sign of this versatile problem. other expenses, flexibility for working In the case of major developing and newly industrialized
pension systems. While the public fund On a local scale, developed or major economies strongly mothers, etc. all are somewhat countries (India, Brazil, South Africa, Philippines, Indonesia,
shortfalls are already prevailing, private depend on immigrants to cover the lessening workforce but, contributing to reduced growth rates etc), a large part of the economy is in informal sectors, the
funds are also short of cash. Ongoing the global trend of population decline is uninterrupted as of across the globe. Delaying to start a population is largely younger, and social benefit plans are not
pandemics and economic recession have 2021. Developing nations have been experiencing a declining family due to a career or other reasons well encompassing so governments are not yet burdened to
impacted every sector of private-public growth rate as governments there have strong policies to is also lessening the chance of pay. But with fast-paced developments, pension crises are to
economic life. reduce population size. conception. soon loom over these economies too.
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