While the countries of the developing world that are projected to see rapid increases in their elderly population are generally on track to experience considerable economic growth and attendant improvements in living standards, most will not have the luxury of becoming rich before becoming old, the situation of the industrialized world. These second wave countries will need to prepare today for the high costs associated with being an older society, especially the high costs of medical care and pension support.
In Latin America, Uruguay, Barbados, Argentina, Chile and Trinidad and Tobago already have the demographic profiles of developed countries yet lack the fiscal stability and wealth of industrialized countries. By 2030 the only 'young' countries will be those in sub-Saharan Africa, the Gulf States and a few in South Asia (Bangladesh, Nepal, Pakistan).
For developing and emerging market economies, an aging population will begin to compete for savings that are desperately needed for investments to sustain economic growth. The countries that make up the second aging wave lag far behind industrialized countries in terms of current and projected levels of human capital formation. Many will become old long before they approach the level of social and economic development that has allowed the industrialized world to provide for its older citizens.
Policy responses are available, including changes in the retirement age, altering how increases are indexed, and changes in income allowances - all ideas that have been and will continue to be debated in the United States and other developed countries. But as with the U.S., any reductions in benefit payments will be politically difficult.
Demographics and Public Finance will be the focus of a future lecture, details to be determined. For current information on lecture dates, times and locations, and to RSVP, see the Lecture Series Overview.