Blog
Grey hairs, pensions and the trend growth rate
4th August 2008
Is the ageing of the US population a contributing factor to a shrinking of the USA’s trend growth rate? Yes according to Stephen King writing in the Independent today.
“As the proportion of people in retirement swells, so the burden on workers tends to increase, as does competition over resources. Whether or not people have funded pension schemes, the ultimate problem relates to claims on output. If there are fewer people in work, there may simply not be enough output to satisfy all the competing claims.”
A shrinkage of the trend growth rate will have serious implications for the rate at which living standards can rise but the essence of King’s piece is that it will also contribute to growing inflationary pressures unless the USA can raise its game on productivity and/or become less unfriendly when it comes to net inward migration. It is a reminder that the root causes of inflation are not always on the demand-side.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.