Inverted population pyramid – economic turbulence ahead

The US Census tracks global demographic indicators and makes information available to the public at its International Data Base.  The following countries have population structures that are at different stages of an inverted pyramid.  When the cohorts that are now in the 35 to 50 age range reach retirement age, the burden of paying for the benefits expected by these older groups will be very difficult for the working age population to support.  The charts shown here indicate that the crux of the demographic crisis is still ten years or more in the future.

A country with an inverted population pyramid must significantly increase productivity and exports in order to cover the government’s debt obligations without a significant increase in the tax burden on workers.  Failure to achieve productivity and export increases will result in either significant tax increases on the workforce or reduction of benefits to retirees.

Any pension obligations supported by investment in non-government obligations will require that these investments be liquidated to get cash to pay the pension obligations.  This can be referred to as “dis-saving”.  In a society with an inverted population pyramid the saving by the working age population is not enough to offset the dis-saving or liquidation of assets by the retiree population.  This puts downward pressure on asset values.

Finally, the following chart shows survival probability for an individual to any specific age.  The steep drop that begins around 55 years shows that eventually a population’s structure will exit the inverted pyramid simply through the inevitable process of human mortality.

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1 Comment »

  1. […] nurses, eldercare assistants, babysitters, hairdressers, and masseusses. And in a society with an inverted demographic pyramid, in which there are far more of the elderly than young people to support them, as we will see in […]

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