Intergenerational issues: Uncertainty about the effects of population ageing, certainty about the problems facing young people

Demographic and intergenerational analysis is going to become increasingly important in OECD countries. First, one has to admit that there is high uncertainty about the economic effects of population ageing. In theory, one expects savings to shift into risk-free assets (which poses a problem at a time when risky and long-term investments need to be financed), the savings rate to decline and real interest rates and inflation to rise (which poses a problem in highly indebted economies). But are we sure that these theoretical developments will take place? The case of Japan seems to show the opposite. Second, it is certain that the situation of young people has become increasingly difficult: in many countries, education system quality is low and youth unemployment is high; the quality of jobs is deteriorating; real estate prices are rising sharply; public debt is not matched by efficient public investment. Public spending in favour of young people could be increased (education, training, access to housing), but this will be difficult if, at the same time, population ageing reduces savings, increases interest rates and increases public spending on pensions.