How the saving rate affected by age structure of the population in Canada

How the saving rate affected by age structure of the population in Canada

Introduction

Several decades from now majority of industrialized economies will face certain demographic changes as the current young generation of these countries is heading towards their retirement age and this will ultimately increase the population of 65 and above (Fourger & Merette, 1999).

Hence, it has been projected by the authorities that ration of old age population in Canada will approximately double in coming 50years. Increase in age of the population is normally referred to as population aging, which has a, tendency of causing certain hurdles to overall savings of the country (Fourger & Merette, 1999).

This population aging is causing increasing pressure to the majority of organization, as all of them have to bear the additional expense of pensions, medical expenditure, and others. However, majority of people believe that it has provided some benefits to government as it can control its expenditure on education and children welfare development.

On the other hand, enormous increase in old age percentage will have a negative impact on governmental expenditure, and overall public saving. Further, severe concerns are being raised that aging could lead to decrease in the private sector saving which would directly affect the overall output and investment of the country (Fourger & Merette, 1999).

The general behavior of family life cycle describes that most of the families consider saving for retirement as their prime motives. Moreover, it is also observed that all family members plans to save money in the working age by controlling their expenditures and plans to consume its saving during the period of retirement (Fourger & Merette, 1999).

This clearly explains that as people gets nearer to the retirement age has a negative impact on monthly saving. However, studies conducted by (Miller, 1999; Weil, 1994) have described that all age population people are known to save than the younger generation and prompted to reanalyze all previous theories with respect to the life cycle model.

Economist believes the age structure of the entire population can be useful in analyzing the performance of the economy, but considered it as unauthentic tool in controlling the economic problems. In addition to this, OECD has conducted a research from the period of 1950-1990 among his members by using life cycle model and human capital model.

However, result obtain from this research describes the attribute of the entire family rather than individual behavior, but this result can be found useful in analyzing the macroeconomic performance of the country. Further, authenticity and reliability of the country economic policy is dependent on quantitative and historical perspective of economic progress (Fourger & Merette, 1999).

Effects that are being predicted by this result and life cycle model are similar on social, economical and political aspects of the country, and economist argues that it is not possible to allow these possible threats to affect entire cultural and social aspects of the country; however, the effect of age can be observed successful for several ...