Ageing Population

There are various problems with an ageing population, various things that are caused by it:

• Resource crowding out
• Financial crowding out
• Increase the national debt and annual interest payments
• A large increase in tax may be inevitable

There are things that can be done though.

People could be made to work longer, for example increasing the retirement age. This will help to combat the crowding out of resources, as more things will be being produced to cope with the demands of a high population. This refers to Ester Bultrup's theory which states that it will be human nature to adapt to change in our society.

If the government increase income tax, they will increase revenue to pay for the higher pension bill. However, higher income tax may lead to lower work incentives. It may discourage people from living in a certain country. Because income tax is low in the UK, a higher rate may not reduce incentives that much; however, there is a high opportunity cost of taxing for pensions. Pension spending does not increase productivity in the economy, and could add to the debt problem in the UK.

Pension costs could be decreased, maybe by only giving out pensions to those who had low incomes or do not have that much money. This would decrease pension costs as a result.