GLOBAL – The head of research at the International Monetary Funds says sometimes too much is made of the challenges of population ageing.
“Now, the challenges posed by population aging for developed countries are serious, but sometimes we make too much of them,” by Raghuram Rajan, economic counsellor and director of the IMF’s research department.
“Policymakers sometimes overstate the magnitude of the challenges by focusing on single-point solutions,” Rajan said on a conference call.
“For example, if countries wanted to maintain their current ratio of workforce to population, using immigration alone they would have to have cumulative immigration of over 30% of population, and that's clearly politically infeasible in many countries.”
“However, if they use multiple policies, such as increasing participation rates, extending work lives, and allowing more immigration, the numbers involved, which the chapter documents, seem far more feasible both politically and even economically.”
He stressed that action on pension reform was “needed quickly”.
“For example, pension reforms will become increasingly difficult to implement as populations age because the reforms will hit the age who will become politically more powerful.”
Rajan said that demographic change would “change the balance between savers and dissavers”. He said Europe and Japan “will actually start dissaving”. Meanwhile, many developing countries, with negative current accounts at the moment, would start saving some more.