Rapid population aging is raising concerns about the sustainability of public
pension systems in high-income countries. The first part of this study identifies the four
factors that determine trends in public pension expenditures: population aging, pension
benefit levels, the mean age at retirement, and the labor force participation rate. The
second part presents projections to 2050 of the impact of demographic trends on public
pension expenditures in the absence of changes in pension benefits, labor force participation,
and age at retirement. These projections demonstrate that current trends are unsustainable,
because without reforms population aging will produce an unprecedented and
harmful accumulation of public debt. A number of projection variants assess the potential
impact of policy options aimed at improving the sustainability of public pension systems.
Although the conventional responses are considered, particular attention is given to the
demographic options of encouraging higher fertility and permitting more immigration.
This analysis is illustrated with data from the seven largest OECD countries.