page_title: Pensions crisis
section_title: Demographic transition
hierarchical_section_title: Pensions crisis / Criticisms / Demographic transition
caption_attribution_description: English: Inverse dependency ratio (workers per dependent) in world regions, 1950–2050 (historical and projected).
context_page_description: The pensions crisis or pensions timebomb is the predicted difficulty in paying for corporate or government employment retirement pensions in various countries, due to a difference between pension obligations and the resources set aside to fund them. The basic difficulty of the pension problem is that institutions must be sustained over far longer than the political planning horizon. Shifting demographics are causing a lower ratio of workers per retiree; contributing factors include retirees living longer, and lower birth rates. An international comparison of pension institution by countries is important to solve the pension crisis problem. There is significant debate regarding the magnitude and importance of the problem, as well as the solutions.
  For example, as of 2008, the estimates for the underfunding of the United States state pension programs ranged from $1 trillion using a discount rate of 8% to $3.23 trillion using U.S. Treasury bond yields as the discount rate. The present value of unfunded obligations under Social Security as of August 2010 was approximately $5.4 trillion.
context_section_description: Some argue (FAIR 2000) that the crisis is overstated, and for many regions there is no crisis, because the total dependency ratio – composed of aged and youth – is simply returning to long-term norms, but with more aged and fewer youth: looking only at aged dependency ratio is only one half of the coin. The dependency ratio is not increasing significantly, but rather its composition is changing.
  In more detail: as a result of the demographic transition from "short-lived, high birth-rate" society to "long-lived, low birth-rate" society, there is a demographic window when an unusually high portion of the population is working age, because first death rate decreases, which increases the working age population, then birth rate decreases, reducing the youth dependency ratio, and only then does the aged population grow. The decreased death rate having little effect initially on the population of the aged (say, 60+) because there are relatively few near-aged (say, 50–60) who benefit from the fall in death rate, and significantly more near-working age (say, 10–20) who do. Once the aged population grows, the dependency ratio returns to approximately the same level it was prior to the transition.
  Thus, by this argument, there is no pensions crisis, just the end of a temporary golden age, and added costs in pensions are recovered by savings in paying for youth.
caption: Inverse dependency ratio (workers per dependent) by world regions, 1950–2050, notably showing demographic windows in the US and East Asia.
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