 By 2011, the first wave of the baby boom generation will reach retirement age, which will mark a new era for governments across the globe. One measure neatly summarizes this challenge: In the coming years, the ratio of working-age people (15–65 years) to children (0–14 years) and elderly (65+), otherwise known as the "dependency ratio," is likely to rise in most developed countries. The shifting demographics will force governments to rethink how they finance government services, because as the number of elderly people increases, there will be a smaller percentage of workers to cover the bulk of the tax burden. Given that income and payroll taxes can be raised only so much, governments will have to find other ways of generating the revenue they need to fund public services. This report outlines four trends that will likely become more prominent in the coming decades: Tax system modernization. Governments will have to update their tax systems to reduce their dependence on personal income tax revenues. This means fewer exemptions that poke holes in the tax base and a shift away from narrow-based, idiosyncratic tax structures. Rise in the average retirement age. The erosion of tax revenues from income and payroll taxes can be somewhat offset by extending the average retirement age. The retirement age in the Organisation for Economic Co-operation and Development countries has ticked up since the end of the 1990s, but a meaningful impact is unlikely without significant changes in the demand for older workers. Increased reliance on user fees. Citizens may be required to pay user fees for access to government services. Growth of public-private partnerships. The emergence of a much bigger and more sophisticated nonprofit sector will create new opportunities for partnering and leveraging private dollars for public causes.
How will the aging population change the way state governments deliver services and programs? Will state governments be able to cater to the very different service channel preferences between aging citizens and the younger digital generation? Can state governments cater to both of these groups without incurring additional costs? This study, written by Bill Eggers, global director for Deloitte Research, helps governments come to grips with the emerging and rapidly approaching challenges posed by an aging population. Learn more from the full report, available in PDF format at the bottom of the page. A global perspective on this issue also is available. Related Content
Article: Aging Population Expected to Impact Issue of Personalization/Standardization in Health Care
Article: Wealth with Wisdom — Serving the Aging Customer
Industries: U.S. Federal and State Government Services |
