Conventional economic wisdom suggests that because of the aging process, social security 15 systems will have to be retrenched. In particular, retirement age will have to be largely 16 increased. Yet, is this policy measure feasible in OECD countries? Since the answer belongs 17 mainly to the realm of politics, I evaluate the political feasibility of postponing retirement under 18 aging in France, Italy, the UK, and the US. Simulations for the year 2050 steady state 19 demographic, economic and political scenario suggest that retirement age will be postponed in 20 all countries, while the social security contribution rate will rise in all countries, but Italy. The 21 political support for increasing the retirement age stems mainly from the negative income 22 effect induced by aging, which reduces the profitability of the existing social security system, 23 and thus the individuals' net social security wealth.
Postponing retirement: the political effect of aging
GALASSO, VINCENZO
2008
Abstract
Conventional economic wisdom suggests that because of the aging process, social security 15 systems will have to be retrenched. In particular, retirement age will have to be largely 16 increased. Yet, is this policy measure feasible in OECD countries? Since the answer belongs 17 mainly to the realm of politics, I evaluate the political feasibility of postponing retirement under 18 aging in France, Italy, the UK, and the US. Simulations for the year 2050 steady state 19 demographic, economic and political scenario suggest that retirement age will be postponed in 20 all countries, while the social security contribution rate will rise in all countries, but Italy. The 21 political support for increasing the retirement age stems mainly from the negative income 22 effect induced by aging, which reduces the profitability of the existing social security system, 23 and thus the individuals' net social security wealth.
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