International Comparisons
A Balancing Act: Opening Remarks by Nancy LeaMond
Speech
March 2004
Nancy LeaMond, Director
AARP Global Aging Program
A
Balancing Act: Achieving Adequacy and Sustainability in
Retirement Income Reform
Brussels, Belgium
Good morning and thank you for joining us for this conversation about an issue that faces the whole of the developed world – the sustainability and adequacy of retirement income. How this issue is addressed has implications not only for the world financial system, but also for the financial safety and security of millions of older people around the world.
First, let me thank the Center for European Policy Studies for agreeing to co-host today’s program with us and thank each of our panelists who will share their expertise and observations with you on this most important subject.
AARP is a 35 million member nongovernmental organization representing and addressing the needs and interests of persons age 50 and over.
Through the AARP Global Aging Program, we facilitate understanding and dialogue around the global aging agenda by convening and participating in international social and economic policy debates worldwide. Working with governmental and nongovernmental organizations to exchange ideas and establish "best practices" in addressing aging concerns, the AARP Global Aging Program is currently focused on the issues of pensions, labor markets, age discrimination, health care, long-term care, and advocacy.
Our goal at AARP is to create a constructive discussion about the aging of the world’s population and how these changes will create new opportunities and challenges across our societies. What better partner for this endeavor than CEPS, one of the leading independent research institutions in Europe and one with proven interest and expertise in the economic and social implications of aging.
Worldwide, the number of people aged 65-84 is projected to grow nearly threefold by the year 2050. Demographers tell us that, by then, older people will outnumber children for the first time in history. The older population is increasing much faster than other age groups in the G-7 and other industrialized countries, making it an even larger share of the population. Today, the average life expectancy is 66 compared with 46.5, 50 years ago. We, at AARP like to call this achievement a “longevity bonus.”
But it is only a bonus if we are able to maintain or improve a high quality of life and independence for older people in retirement. This is a multi-faceted test: aging populations affect nearly every sector of public life: our economies, health care systems, our infrastructures - such as transportation and housing - our social involvement in virtually every way. However, policymakers are only just beginning to address these demographic changes for the broad and revolutionary impact they represent. It is a balancing act: between what is politically feasible in the short-term - when reforms are relatively mild - and later, when changes will be more painful, but with political action necessitated by crisis.
How governments should address retirement income in this context will be our focus today. Retirement income, of course, derives from three primary sources: private savings, public pensions, and occupational pensions. All three need to be girded to withstand the demographic pressure as the boomers reach retirement age: more retirees, a shrinking labor force, a smaller tax base. Savings are already at historic lows around the developed world and occupational pensions still represent a small percentage of retirement income. Yet beyond these three primary sources, increasingly, a fourth and more controversial source of income--continued employment--is emerging as a major contributor to retirement income.
I am not trying to paint a pessimistic picture at all. Quite the opposite. By meeting these challenges, we will strengthen our economies for the future and we will lift and keep older people out of poverty. It is a test and a measure of our commitment to future generations.
The challenge of retirement income is more than economics. It is also cultural and attitudinal. In other words, we must reach a new consensus on what retirement means in the era of global aging. Government leaders, employers, stakeholder groups and individual citizens must openly weigh various policy options—from creating opportunities for older people to continue working if they want to work, to promoting private investment; from increasing payroll taxes to cuts in benefits; from expanded immigration to increasing birthrates - and try to strike a balance that is humane, fair and politically viable.
Here we will explore these and other policy options with our distinguished leaders and thinkers. And as we gather here today, not far from here, so do employment and social affairs ministers from the EU member states to discuss among other topics, pensions and social security and prolonging worklives in the context of the Lisbon Strategy goals. The discussions of today’s conference are quite timely, and will hopefully offer food for thought and options for action for those of us here, as well as for the ministers.
Now, our Chairman for the morning session will introduce our first speaker. Thank you.