Public policy analysts have been raising the alarm for a decade about the changing ratio of seniors to workers in the 21st century, the “old-age dependency ratio.” One symptom of the growing alarm about the old-age dependency ratio is the Bush administration’s unpopular effort to create private pension accounts to supplement senior incomes in the 2040s when the U.S. Social Security system is predicted to exhaust its trust accounts. Defenders of public pensions, in the U.S. and Europe, have argued that there is no problem in the system of social insurance that can’t be fixed by marginal changes. Unfortunately both sides in this debate profoundly underestimate the imminent and rapid change in the demographic variables that determine the dependency ratio: birth rates, death rates, senior disability, and labor force participation. This is equally true for the demographers advising the United Nations. The linear assumptions underlying most demographic and economic models are belied by the emerging technologies already driving rapid exponential change. Emerging technologies will drive a dramatic increase in the dependency ratio. Only a basic income guarantee (BIG) can establish a new social contract that addresses the problem of “intergenerational equity,” by expanding egalitarian social security to all and preventing a slide to a more atomistic and impoverished future. BIG will also need to be accompanied by a re-negotiation of the way the labor market is structured and the way the state is financed.
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