, and though still critical to a significant part of our economic value - added, today compose only about one - quarter of our workforce. to date, however, despite the improving feasibility of work at older ages, americans have been retiring at younger ages. but rising pressures on retirement incomes and a growing scarcity of experienced labor could eventually reverse that trend. of course, immigration, if we choose to expand it, could also lessen the decline of labor force growth in the united states. as the influx of foreign workers that occurred in response to the tight labor markets of the 1990s demonstrated, u. s. immigration does respond to evolving economic conditions. but to fully offset the effects of the decline in fertility, immigration would have to be much larger than almost all current projections assume. * * * it is thus heightened growth of output per worker that offers the greatest potential for boosting u. s. gross domestic product to a level that would enable future retirees to maintain their expected standard of living without unduly burdening future workers. productivity gains in the united states have been exceptional in recent years. but, for a country already on the cutting edge of technology to maintain this pace for a protracted period into the future would be without modern precedent. one policy that could enhance the odds of sustaining high levels of productivity growth is to engage in a long overdue upgrading of primary and secondary school education in the united states. we obviously cannot attribute recent productivity trends to a high level of national saving. rather, the effectiveness with which we have invested both domestic saving and funds attracted from abroad is the apparent source of our decade - long rise in productivity growth. as i have noted previously, the bipartisan policies of recent decades directed at deregulation and increasing globalization and the innovation that those policies have spurred have markedly improved our ability to channel saving to its most productive uses, and as a byproduct increased the flexibility and the resiliency of the u. s. economy. it is, of course, difficult to separate rates of return based on the innovations embedded in new equipment from the enhanced returns made available by productive ideas of how to rearrange existing facilities. from an accounting perspective, efficiency gains, broadly defined as multifactor productivity, have accounted for roughly half the growth in labor productivity in recent years. capital deepening accounts for most of the remainder. all else being equal, domestic investment would raise future labor productivity and thereby help provide for our aging population. but the incremental

alan greenspan : economic implications of population aging opening remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at a symposium sponsored by the federal reserve bank of kansas city, jackson hole, 27 august 2004. * * * i am pleased to be here this morning to discuss the economic implications of population aging and to provide a general overview of some of the issues that will be covered in much greater detail over the next two days. the so - called elderly dependency ratio - the ratio of older adults to younger adults - has been rising in the industrialized world for at least 150 years. the pace of increase slowed greatly with the birth of the baby - boom generation after world war ii. but elderly dependency will almost certainly rise more rapidly as that generation reaches retirement age. the changes projected for the united states are not as dramatic as those projected for other areas particularly europe and japan - but they nonetheless present substantial challenges. the growth rate of the working - age population in the united states is anticipated to slow from about 1 percent per year today to about 1 / 4 percent per year by 2035. at the same time, the percentage of the population that is over 65 is poised to rise markedly - from about 12 percent today to perhaps 20 percent by 2035. these anticipated changes in the age structure of the population and workforces of developed countries are largely a consequence of the decline in fertility that occurred after the birth of the baby - boom generation. the fertility rate in the united states, after peaking in 1957 at about 3 - 1 / 2 births over a womana€™s lifetime, fell to less than 2 by the early 1970s and then rose to about 2. 1 by 1990. 1 since then, the fertility rate has remained close to 2. 1, the so - called replacement rate that is, the level of the fertility rate required to hold the population constant in the absence of immigration or changes in longevity. fertility rates in europe, on the whole, and in japan have fallen far short of the replacement rate. the decrease in the number of children per family since the end of the baby boom, coupled with increases in life expectancy, has inevitably led to a projected increase in the ratio of elderly to working - age population throughout the developed world. the populations in most developing countries likewise are expected to have a rising median age but to remain significantly younger and doubtless will grow faster than the populations of the developed countries over the foreseeable future. eventually