Implications of Aging Populations

and Increased Longevity

for National Governments

Steve Goss, Chief Actuary

United States Social Security Administration

GAO/CNAO Joint Seminar

Impacts of Aging Populations on National Governments

March 13, 2018

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Developed Nations Are “Aging”

“Macro aging”– Changing age distribution—getting older

» Mainly from drop in birth rates

“Micro aging”– People are living longer

» Lower death rates

» Increasing longevity

Different challenges—different solutions—consider the U.S.

Micro Aging We are living longer, but there are limits, and progress is slowing

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0 10 20 30 40 50 60 70 80 90 100 110

Survival Curve U.S. Female: Period Data

1900

1925

1950

1975

2000

2013

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Survival Curve U.S. Male: Period Data

1900

1925

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2000

2013

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Cause of “Macro Aging”Mostly drop in birth rates

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1865 1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 2015

U.S. Total Fertility Rate: With and Without Adjustment for Survival to Age 10

TFR Adjusted TFR

Notes: TFRs prior to 1917 are for whites only and survival rates prior to 1900 use Massachusetts data only.

1865-1895 4.44 3.09

1896-1925 3.36 2.801926-1965 2.86 2.71

1966-1990 1.99 1.951991-2015 2.00 1.98

Average Average

TFR Adjusted TFR

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U.S. Drop in Birth Rate after 1965 Causes Dramatic Level

Shift; Continuing Longevity Gains Are Gradual and Small

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1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Aged Dependency Ratio 2017 TRPopulation 65+/(20-64)

Actual and TR Intermediate

TFR remains at 3.0 after 1964

TFR remains at 3.3 after 1964

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Social Security Beneficiaries per 100 Workers Rise substantially due to this aging of the U.S. population

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1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Historical Estimated

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Social Security Cost as Percent of GDP For U.S., rises from a 4.2-percent average in 1990-2008, to about 6% by 2035

Cost for public and private pensions and health care rise similarly

3%

4%

5%

6%

7%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Non-interest Income

Historical Estimated

Cost

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Implications of “Macro Aging”What will we need to do?

It is a pay-as-you-go world

– In the aggregate, consumption = production

Solutions for dealing with aging population

– The older age distribution for the U.S. requires:

» Elders consume less: 2/3 as much

» Working age share more: 3/2 as much

» Get elders to work a lot longer: 5 years, and more

» Or some combination

We Are All Aging Together

Canada, China, Denmark, Japan, Sweden, U.S.

– World Bank international population projections

Birth rates have dropped for all

– Resulting in sudden shifts in age distribution

Net immigration can help slow macro aging

– Or can hasten it if young individuals emigrate

Increasing longevity is gradual

We all have similar challenges

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Birth Rates Now Below “Replacement” (below TFR of 2.1 for all six nations)

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1.5

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2.5

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3.5

4

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Total Fertility Rate

Canada China

Denmark Japan

Sweden United States

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Adding in Net Immigration Puts All But

China and Japan Above “Replacement”

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1

1.5

2

2.5

3

3.5

4

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Adjusted Total Fertility Rate--Adding Net Migration to Births

Canada China

Denmark Japan

Sweden United States

Population Over Age 65 Is Increasing For All of UsBut this is not really our challenge

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1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Population Age 65+; 1960 = 100

Canada China

Denmark Japan

Sweden United States

In 2000, 65+ Were Less Than 30 per 100 at Working AgesBy 2050, all but U.S expect over 40, Japan over 70

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1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Aged Dependency Ratio--Population age 65+ / 15-64

Canada China

Denmark Japan

Sweden United States

Implications for our National Governments,

our Economies, our Populations

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GDP and total income will grow slower

– So we will at least avoid overpopulation

Those over 65 will live AND work longer

Workers will share more of their income

We may encourage more births

Immigration can help, but we cannot all gain

Our governments must plan for changes

– Changes are needed VERY soon

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For More Information…http://www.ssa.gov/oact/

Annual Social Security Trustees Reports (U.S.)https://www.ssa.gov/oact/TR/index.html

Documentation of Trustees Report data & assumptions https://www.ssa.gov/oact/TR/2017/2017_Long-

Range_Demographic_Assumptions.pdf

International Population Projections—World Bank

https://datacatalog.worldbank.org/dataset/population-estimates-

and-projections

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