Throughout much of this discussion, we have emphasized the need to consider the implications of population aging within the broader context of the macroeconomic burden that aging dependency will pose across all segments of societies. Discussions of population aging often devolve into debates over how to reduce pension costs or the more general costs of government operations. An alternative approach is to explore policies and institutional changes that would promote economic growth. Economic growth both supports rising standards of living and fills the public coffers that finance public pension programs.

In this section, we look at several scenarios in which countries can pursue enhanced economic growth. Namely, we estimate how the growth in standards of living would change if policies were adopted to: 1) increase workforce activity rates and 2) enhance labor efficiency. In addition, we sort through how increasing economic growth can raise standards of living for both the elderly and non-elderly segments of the population.

No one disputes the prediction that population aging will increase the future costs of public pension and health care programs. In recent decades, rising age-related spending has been exacerbated by the trends toward earlier retirement and longer life expectancy. The combination of these two trends has reduced tax contributions and increased retirement expenditures because more pensioners are collecting their retirement benefits for longer periods of time.