Wednesday, September 26, 2012

Work ‘til You Drop: Is This The Next European “Welfare?”

As Europe’s population ages, its widespread entitlement commitments will generate huge burdens on governments’ budgets.   The economic consequences are easy to foresee: just think of how pension and health expenditure, whom almost everybody is entitled to, could be financed. But what about the political consequences of an aging population?

As the population ages in a democratic system, it will become increasingly difficult to reform entitlements of which an increasing number of people are taking advantage.  Forget about economic efficiency: the path of reforming the welfare state would be blazed by political constraints, leading somewhere rather unappealing, especially for future generations. Should we call this majority dictatorship — or rather, elderly dictatorship?  Take the case of pensions. In most European countries, pensions systems are unfunded: revenue collected annually for social security is what is being shared by those who are entitled to receive pension. An aging population implies that, ceteris paribus, more pensioners should be sustained by fewer workers.

How can we defuse this ticking bomb?  To Read More.....

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