Signal Public pensions carry most of the senior gap as support ratios shrink

Summary

The senior gap, in which retirees' consumption exceeds their labor income, is a key driver of the pressure that public pensions put on government budgets. In most first-wave countries public pensions cover more than half of that gap. In 2023 US Social Security covered about half, while in Spain and France public pensions filled nearly 80 percent, and other government programs added 15 to 30 percent depending on the country. The support ratio in first-wave countries has already fallen to 3.9 working-age people per older person and is projected to reach only 2 by 2050. The author warns that such heavy reliance on public pensions seriously threatens fiscal sustainability. If current systems are kept, the growing elderly population is expected to keep worsening deficits and debt.