 I thought that was all automatic, but no. Thank you. I'm delighted all of you could join us this afternoon for the rollout of the Global Aging Preparedness Index. I'm especially grateful to the two discussants who volunteered to give their thoughts on the index and to amplify and critique Benedict Clements, who's Chief of the Expenditure Policy Division in the IMF's Fiscal Affairs Department, and Dalmer Hoskins, who's currently Director of the Division of Program Studies at SSA and until recently Secretary General of the International Social Security Association. I would be remiss if, also on behalf of CSIS, I did not express my gratitude to our financial sponsor, Prudential PLC, for its support of the project and also to its U.S. subsidiary, Jackson National Life Insurance. I'll talk for about 30 minutes. If I go longer, please start looking impatient and uncomfortable. Then I think probably the best way to do this is to turn immediately to the discussants and then we should have roughly an hour for Q&A. If there's a point that requires technical clarification, in other words, if I'm just plain old confusing, please feel free to interrupt and stop me, but for matters of interpretation and so forth, I could save that for the discussion. Very good. The world stands on the threshold of a stunning demographic transformation brought about by falling fertility and rising longevity. It's called global aging and it promises to reshape virtually every dimension of economic and social life. For most of human history, until well into the industrial revolution of the 19th century, the elderly here defined as adults aged 60 and over, not because aged 60, much less age 65 is the threshold of senescence or functional decline, but because in most countries in the index, in fact it is rather close to the effect of retirement age. So I'm just preempting criticism on that point. So the elderly here defined as adults aged 60 and over only comprised a tiny fraction of the population, never more than four or five percent in any country. In the developed world today, they comprise a little more than 20 percent of the population. Three decades from now in 2040, that share is on track to reach 30 percent and that's just the average. In Japan and the fastest aging European countries, the elder share of the population will be approaching or even passing 40 percent. Now the developing world as a whole is still much younger, but it too is aging, with some countries traversing the entire distance, demographic distance from young and growing to old and stagnant or declining at a breathtaking pace. By 2040, Brazil and Mexico will be nearly as old as the United States and China will be older. Meanwhile, Korea will be vying with Germany, Italy and Japan for the title of oldest country on earth. We live in an era of many challenges from global warming to global terrorism, but few are as certain as global aging and few are as likely to have such a large and enduring an impact on the size and shape of government budgets, on the future growth and living standards and on the stability of the global economy. Global aging promises to affect everything from business psychology and worker productivity to the structure of the family in the direction of global capital flows. Perhaps most faithfully, it could call into question the ability of societies to provide a decent standard of living for the old without imposing a crushing burden on the young. Now, up to 10 or 15 years ago, global aging barely registered as a policy issue. Today, it has become the focus of growing concern worldwide. Many governments are beginning to debate and indeed some have enacted major reforms. Most of the concern, especially in the developed world, is focused on the rising fiscal cost of government benefit programs. Most developed countries have expensive, pay-as-you-go public pension systems that were put in place in the early post-war decades when workers were abundant and retirees were scarce, but which have now been rendered or which are now being rendered increasingly unsustainable by the collapse in birth rates and the steady rise in longevity. Graying also means paying more for healthcare, a lot more for healthcare because the elderly typically consume at least three times more per capita in medical services and at least 10 times more per capita in long-term care services than the non-elderly. Meanwhile, in the developing world, countries are beginning to worry that they may grow old before they grow rich. Many developing countries, in fact, are aging before they've had time to put in place the social protections of a modern welfare state. In China, India, and Mexico, only a fraction of the workforce is earning any pension benefit, public or private, and the majority of elders still depend heavily on the extended family for support in old age. Yet the informal support networks on which elders depend are already under result by the forces of modernization and will soon come under increasing demographic pressure as populations age and family size declines. Here the problem is not so much the growing burden on the young as the growing vulnerability of the old. Yet despite the concern about global aging, there exists no satisfactory measure of how well countries worldwide a satisfactory and comparable measure of how well countries worldwide are actually responding to the challenge. The purpose of the Global Aging Preparedness Index, or GAP Index for short, is to meet that need. The index projections extend from 2007 through 2040 in order to capture the full impact of the demographic transformation now sweeping the world. The index covers 20 countries, including both developed economies and emerging markets. The overall GAP Index consists of two separate sub-indices, a fiscal sustainability index and an income adequacy index. The sub-indices, in turn, are based on indicators grouped into distinct categories, each dealing with a different dimension of the old age dependency challenge. Now, this is a little bit much to take in in the two minutes. I'm going to have this slide up here, for a summary handout. On the fiscal side, the GAP Index begins by looking at projections of the total burden of old age, public burden of old age benefit spending, including both pensions and health benefits. But the index also goes further. It takes into account the differing fiscal room that countries have to accommodate the growth in old age benefits. It also considers the degree of elderly dependence on public benefits, which may be a crucial factor in determining how politically easy or difficult it will be to enact cost-saving reform, or indeed to follow through on reforms that have already been enacted, but not yet phased in. Let's begin by looking at the first public burden category and the benefit level and benefit growth indicators. As you can see, today's emerging markets generally have low public burdens compared with the fully developed economies, both because they have relatively young populations and because coverage under their public benefit systems is often far from universal. Old age benefits in most emerging markets are projected to grow substantially over the next few decades. Nearly doubling by 2040 in India, nearly tripling in China, and quadrupling in Korea. Even so, only Brazil, where they are projected to reach... Where is Brazil? 20% of GDP will rank among the 10 highest burden countries in 2040. The developed countries generally have much higher burdens, although here, too, there's a wide range of outcomes. The differences are due in part to demographics and in part to the varying generosity of benefit systems, especially pensions. The lower burden English-speaking countries both spend... And here, I don't know if we have any Canadians, but Canada is classified as an English-speaking country, which gets me into trouble in Montreal. But the lower burden English-speaking countries both spend less per capita on old age benefits and are due to age less. The higher burden countries of continental Europe generally have the most expensive public old age benefit systems and also the fastest aging populations. Japan is a special case. It faces a massive age wave, but its pension benefits are already less than generous and are scheduled to be reduced even further in the future. A few countries, notably Korea and the United States, score much better on benefit level, the first indicator we were looking at, than on benefit growth. In the case of Korea, the explanation lies mainly in its unusually severe demographics. Between 2004 and 2004... I'm sorry, 2007 and 2040, the elderly share of Korea's population is due to rise from 14% to 39% by far the largest increase of any country in the index. The United States, in contrast, faces a relatively benign demographic future. The generosity of its public pension system, social security in other words, is also modest by developed world standards. What gives the United States its 15th place ranking on benefit growth is its exceptionally rapid rate of growth in health benefit spending. Not a big surprise. There are also a number of countries that score significantly better on growth than on level, notably Sweden, Germany, Japan, Italy, and France. All of enacted reforms that are scheduled to cut average public pension benefits relative to average wages over the next few decades. These countries spend a lot on old age benefits today and they're going to spend even more tomorrow, but total spending will grow much less than the aging of their populations would otherwise require. And I say much less advisedly. One of the things we do in the index is to compare current law projections with what we call a current deal projection. And the current deal projection calculates what the cost of the system would be if people continued to retire at the same average age they do today, and if average benefits remained, average per capita benefits remained unchanged relative to average per worker wages. And the current law projection for France is 33% less than the current deal projection as a share of GDP, that a third. Germany and Italy 36% less, and Japan 42% less. So these are very large relative benefit cuts, not always well advertised to the public built into current law in these countries. Now the benefit level and benefit growth indicators both add, we believe, an important perspective to the index. The absolute spending level as a share of GDP is clearly the simplest measure of the total resource burden of aging populations. Yet the rise in spending is also important since some societies may be institutionally and culturally better equipped to handle high levels of public benefit spending in large public sectors than others. From this perspective, the road ahead for a United States or a Korea may be as bumpy as for some countries that are projected to spend much more. Now while a large and growing fiscal burden is certainly a cause for concern, the magnitude of the burden alone doesn't tell us whether it's sustainable. It's also crucial to look at the fiscal room that different countries have available to accommodate the burden. And there are three ways in which a country can accommodate a rising fiscal burden. You can raise taxes, you can cut other spending, or you can borrow, or do some of all. The tax option is clearly unsustainable in most developed countries, particularly in most European countries. At some point, rather than generate new revenue, higher tax rates may simply slow economic growth, exacerbate unemployment, and push more workers into a growing grey economy. The tax option may also prove unsustainable in some emerging markets. Most start with relatively small public sectors and so would seem to have an advantage. This advantage may be more apparent than real, however, since many have large informal sectors which by definition cannot be taxed. While developed countries may have difficulty pushing the total tax burden much above 50% of GDP, developing countries may have difficulty pushing it much above 40% of GDP. Did I jump too far ahead here? Okay, there. Did I have the tax indicator slide up at all? I did? Very briefly. It's essentially just the current government, total government revenue at all levels of government as a share of GDP plus the projected growth and old age benefit spending. To the extent that taxes cannot be raised, countries may be able to accommodate the burden by reducing other categories of government spending. In other words, by cannibalizing the rest of the budget. The budget room indicator points to some useful policy lessons. Countries with large public sectors but relatively small old age dependency burdens tend to have much more budget room than tax room. So take a Sweden, which is the most striking instance. The implication is that such countries may be able to carve out a lot of extra space in their budgets for old age benefit programs since presumably they can find a lot of lower priority government spending which can be cut without much cost to society. On the other hand, countries with relatively small public sectors like Japan and the United States may be able to accommodate relatively little growth in old age benefit spending without crowding out vital public services. Now the final option, at least in theory, is to pay for rising old age benefit costs by borrowing. Except in a few emerging markets this just isn't a real world option. If governments were to simply borrow to cover the projected year to year growth in old age benefit spending, 11 of the 20 index countries would have a net debt exceeding 100% of GDP by 2040 and 6 would have a net debt exceeding 150% of GDP. This last high debt group includes not just high benefit growth countries like Brazil and Spain but also the UK and the United States which have already used up most of whatever borrowing room we had during the economic crisis. I think this slide in particular is something that Benedict may come back to. Let me just note that these projections are designed to isolate the impact of the growth in old age benefit programs alone on the public debt level. They assume that in the rest of government budget countries will run a debt neutral fiscal policy. I don't want to burden the presentation here with the technical discussion of what debt neutrality means but essentially countries take their fiscal money to take their fiscal medicine and get the rest of the budget stabilized and then we just look at the impact if you borrow dollar for dollar or euro for euro to pay for the rising cost of old age benefits. Obviously if we were to relax this assumption countries spin off the charts much sooner. Now how big is the risk that countries with large and growing old age benefit burdens will be able to make the necessary adjustments until they hit the fiscal wall. Just as important how big is the risk that countries which have made significant progress in curbing future cost growth will have to roll back the reforms when they begin to cut deeply into benefit payments and elderly living standards. Clearly one factor that will help or hinder reform is the degree to which the elderly in different countries depend on public benefits. So this brings us to the benefit dependence indicator and as you can see the level of dependence in most countries is quite high. It's worth noting moreover that these figures underestimate the absolute level of dependence of most elders since they are averages for all elders including the affluent. Even in countries with relatively low benefit dependence the figures for elders in the middle of the income distribution are much higher. This particular indicator we include in the index includes the cash value of health benefits. But if we switch just to cash income in the United States the shares for the average elder for cash benefits the public benefit share is 22% but for the median in other words the third quintile of the income distribution is 38%. For Japan 39% versus 61% for the UK 42% versus 69% and France, Germany, Italy and Spain more than 70% of the cash income of the typical elder arrives in the form of a government check. Suggesting that some of the countries that may most need well indeed do most need to make benefit reductions in the future may have the most difficulty doing so. Now although the overall level of benefit dependence is probably the single best indicator of potential political resistance to cost cutting reform the reliance of the low income elderly on public benefits may also be an important factor. We therefore include a benefit cut indicator in the index that measures the percentage of elderly households that would be pushed into poverty by a given in this case 10% cut in public benefits. Not surprisingly the countries that do best on this indicator are generally those in which overall benefit dependence is low. In India, Mexico or Korea you could zero out all public benefits without significantly increasing elderly poverty. The countries that do worse generally have expansive welfare states. In Sweden, Germany or the Netherlands where higher degree of benefit dependence any given percentage cut in benefits translates into a larger percentage cut in total household income. There are also some quirky results here which if you want to press me on we can come back to in the Q&A. Okay. Aging preparedness is as much about ensuring income adequacy as fiscal sustainability. On the adequacy side the gap index tracks the level of entrend in the living standard of the elderly relative to the non-elderly in each country based on income projections that factor in the impact of changes in public benefit programs, private pension provision and labor force participation rates. It also includes indicators that measure the robustness of old age safety nets and family support networks. The first two indicators look at total income and total income trend. That is the percentage change in total income between 2007 and 2040. And here just to be clear we are using a relative income measure. We're looking at the income per capita income of the old relative to the per capita income of the young. And what's most striking about the total income of the elderly frankly is how high it is in today's developed countries. Elderly in most developed countries are indeed quite well off compared with the young much more so than they were a generation ago. But the very high ratios for this indicator are also explained by two additional factors. First the measure of total income used in the index includes the cash value of government health benefits and as I've already noted per capita the elderly consume much more in healthcare than the non-elderly. Second the ratios refer to after tax income. And in most developed countries the non-elderly bear a disproportionate share of the total tax burden both because payroll taxes fall much more heavily on the young and because public and in some countries private pension benefits frequently enjoy favorable tax treatment. So the relative living standard of the elderly is generally lower in developing countries and in some cases much lower the two big exceptions of Brazil and Chile which not only have large contributory pension systems by developing world standards but also universal poverty floors in Brazil that's been in place for more than a decade now in Chile it's more recent but that is built into the projections. As it turns out there's considerable overlap in the rankings for the total income and total income level and total income trend or growth indicators. There are however some significant differences France Japan and Italy have average rankings on total income level but very low rankings on total income trend 1718 and 19 respectively. The main reasons for the downward trend large scheduled cuts and current law public pension benefits combined with relatively little growth of pensions or elderly labor force participation. While the total income category tracks societies overall how societies overall economic resources are shared between younger and older generations the income vulnerability category tracks the relative living standard of middle class elders if you will a group whose overall income will be much more affected by changes in the generosity of retirement systems it also takes into account the degree of elderly poverty in each country. As you can see the ratios of elderly to non-elderly income are significantly lower for the median than for the total the total income measure in part because the median income measure excludes public health benefits. Here we just want to look at a cash measure which better captures most people's understanding of their own living standard. Nonetheless the relative living standard of the middle class elderly is still quite high in most countries. In 2040 the ratio of the median elderly to non-elderly income is projected to be above .9 in 10 countries and above 1.0 in 4. In another 6 countries the ratio is projected to be between 0.7 and 0.9. And most retirement planners would consider a retirement income equal to 70% of pre-retirement income adequate and a retirement income equal to 90% or higher excellent. In only 4 countries Russia, Mexico, Korea and China are the median elderly projected to have incomes that seem unusually low relative to the non-elderly. The more important story however may be told by the trend indicator. The median income trend indicator is negative in more countries than the total income trend indicator and the projected declines are also larger. Part of the explanation is that the total income measure is buoyed up by rapid growth and health benefits but part is also that the relative living standard of the median elderly suffers much more than the living standard of the average elderly when the growth in per capita pension benefits fails to keep pace with growth in per capita wages. So the income prospects of middle class elders may have especially important implications for the future direction of policy changes. The UK to cite striking instance has already discovered this. Back in the early 1980s it switched the indexation of its basic state pension from wages to prices effectively flattening long term projected cost growth as a share of GDP and prompting policy analysts around the world including myself to note that the UK was the only developed country that had solved its long term aging problem. Well, as price indexing caused benefits to decline steadily as a share of wages calls for repeal of the reform grew and in 2007 and amid an emerging consensus that continuing on that path would impoverish the elderly they reversed direction and reinstituted wage indexing. So I mean it's possible to solve the projections without solving the problem and in my view that's the case in a number of European countries today. Along with the living standard of middle class elders the degree of elderly poverty is clearly an important dimension of overall income adequacy. Here we're looking at the standard relative poverty measure used in cross country comparisons this isn't an official poverty line measure it's the share of the elderly with an income less than 50% of the median for all people for people of all ages. As one would expect the Anglo-Saxon countries generally have higher poverty rates than the continental European countries and the emerging markets generally have the highest rates of all. The big surprise is Brazil whose extraordinarily low rate just 5% is a testament to the success of its old age poverty floor. In Mexico which is a similarly skewed income distribution but no universal floor of old age poverty projection the poverty rate is five times as high. The final category looks at an important dimension of security not fully captured elsewhere in the index namely the extent to which the elderly may be able to rely on the support of their extended families. There are two indicators in the category the first is the share of all elderly who now live in extended families with their adult children and the second is the project change in the average number of surviving children of the elderly to 2040. That was fun to calculate Nick. As you can see the share of the elderly who live with their grown children is generally much higher in the emerging markets than in the developed countries although a couple of countries Japan, Spain and Italy also have high levels of multi-generational living. Multi-generational living can constitute an advantage in confronting the aging challenge. It not only allows relatively poor elders to live with their more affluent children. It also allows relatively poor young adults to live with their more affluent parents something which may be familiar to a phenomenon that may be familiar to some in the audience today. It mitigates the old age dependency burden not just by providing an extra source of support for the old but by providing a form of trickle-down support for the young as well. The young of course can provide support to the old in many ways even if they don't actually live with them in particular in-kind personal care. The family size indicator which again looks at the change in the average number of surviving children of typical elder reveals that these informal support networks on which elders depend will soon come under intense demographic pressure in many developing countries. Excuse me. In China the average number of surviving children for elder is projected to decline by 1.6 between 2007 and 2040 in Brazil by 1.7 in Korea by 1.8 which is an enormous 2.5. Well it's time to wrap up and just take a quick look at the overall results. The gap index I think contains some good news and some bad news. You always want a good news bad news story. The bad news is that very few countries score well on both sustainability and adequacy. Three of the seven highest ranking countries on the fiscal sustainability index Mexico, China, and Russia are among the seven lowest ranking countries on the Incomadiquacy Index. Four of the seven highest ranking countries on the Incomadiquacy Index the Netherlands, Brazil, Germany and the UK are among the seven lowest ranking countries on the fiscal sustainability index. There's a trade off going on here. There are also two countries France and Italy that score near the bottom of both indices. Both have legislated large perspective cuts in the generosity of their public pension systems that threaten to erode the living standard of the old yet despite the cuts their benefit systems remain so costly that they will impose a large and rising burden on the young. The good news is that they're exceptions. Australia this is the point at which an assistant is supposed to rush in with a glass of water. The good news is that there are exceptions. Australia which combines a low cost means tested floor of public old age poverty protection with a large mandatory and fully funded private pension system scores in the top half of both indices. Several other countries moreover are clearly moving in the right direction like France and Italy Germany and Sweden have scheduled deep reductions in the future generosity of their public pension systems but unlike France and Italy they are on track to fill in the resulting gap in elderly income by increasing funded pension savings and by extending work lives. Although their fiscal burdens remain high they have been cut well beneath what they would otherwise be without undermining adequacy. Clearly global aging poses a daunting thank you Kaseke daunting economic and social challenge. Many fast aging countries especially in the developed world seem to face a difficult choice between relieving the growing fiscal burden on the young and maintaining adequate incomes for the old. Meanwhile in many developing countries the choice seems to be just the opposite whether to impose a new fiscal burden on the young in order to relieve the growing vulnerability of the old. Yet just as clearly there are many strategies available to address the challenge the gap index includes a reform guide that assesses the urgency of the fiscal payoff of seven key reform strategies from reducing pension benefits and health care cost growth to increasing fertility rates and immigration. During the Q&A I would be happy to discuss the strategies and also to explain the metrics we use to divide countries into different priority groups but I need to wrap up now that in our view two strategies in particular extending work lives and increasing funded retirement savings are especially important since they allow countries to escape or at least to mitigate the tradeoff between fiscal sustainability and income adequacy. They are in fact the principal means and perhaps the only means practical means by which aging countries can maintain or improve the adequacy of income for the old without imposing a new tax or family burden on the young. And I had some sort of purple pro's conclusion but I'm going to forgo that and pass it off directly to you Ben. Thank you. Thank you very much. We have about five to ten minutes to leave enough time for the next presenter in our discussion. Let's see if I can move this forward with the Should be, do we have the numbers lock on or something? Okay. Okay, thank you. What I'm going to talk about in terms of an overview of the comments is simply first I'll talk a little bit about the index and generally we feel it really does make a valuable contribution secondly talk about how the projection increases in age-related spending whether they're consistent, broadly in line with what we've been projecting at the IMF and number three, talk a bit about this fiscal room indicator which we kind of think is an area where it would be useful to have a further discussion. First, in terms of the index we really think it makes it quite a valuable contribution which first of all just calling attention to the aging problem and the fiscal cost of this is very welcome. Big theme at the IMF has been that with the financial, the aftermath of the global financial crisis and the fiscal consequences countries face very serious long-term problems and we really much welcome this attention to these problems. We also think it's very useful to see at both this issue of fiscal sustainability and the adequacy of systems is quite a valuable approach and helps draw attention to this issue of our systems adequate to achieve objectives of long-term income protection for the elderly. Also in terms of the policy recommendation is very consistent with one of the themes we've been pushing in our own work is that the best solution going forward is going to be to raise retirement ages. There's just no way around it. Life expectancy is increasing. Many countries' retirement ages have not gone up. Where we see systems are in best shape is where there's some kind of indexation of the retirement age to life expectancy and so therefore we very much welcome the policy recommendations here. What I wanted to do then is then move on more to the second point about how do we also see the health and pension spending going forward. In terms of where we see pension spending going forward, there's been an awful lot of work done of course by the European Commission looking at European countries and we also in what I cite below is a paper we did for our Executive Board last year looking at countries, country by country projections. This is in the handout and generally what you see if you look at pensions is not as much an area of concern as as health which we'll go to next. That is many countries as Richard has indicated have undergone a lot of pension reforms in which replacement rates will go down or they have done taken steps to increase retirement ages so when we look at say this PPP say a weighted country average of where we think pension spending is going it's only going to go up let's say about one percentage point of GDP on average over the next 30 years. So generally on pensions we see countries have actually taken a lot of steps of course there are differences here and as Richard mentioned some emerging economies such as Brazil they may look in good shape in the next 20 years after that they actually have quite serious problems but the interesting thing here is we don't find that pensions is the major area of concern it will contribute to spending pressures but not as much as if you look at health. On health this is the real concern. That is on the basis of current policies just running the demographics and assuming an increase in say average costs of excess cost growth consistent with historical averages you're going to have spending going up four percentage points of GDP so this is a huge huge fiscal challenge and you can see in the United States very the leader in terms of the increase in spending. For a lot of these spending increases for our own estimates where they were not available we did our own projections but for others this is based on the European Commission's aging report projections but an important caveat using one of their scenarios that's called the has a more realistic assumption about excess cost growth one of the problems is that European Commission's baseline scenario assumes that excess cost growth is practically zero that is which is a very optimistic assumption relative to the historical track record when they look at the next 20 years they get spending increases of the order of about less than one percentage point of GDP over the next 20 years whereas if you assume excess cost growth in their scenario and they're more which is more consistent with their own econometric work you come up with estimates that are over the next 20 years of spending increases of about three percentage points of GDP here push it to 30 years four percentage points of GDP so how do our projections line up with what's done here with the gap index report pretty consistent in terms especially on health we're looking at all health spending and as opposed to the gap index is looking instead at health spending for the elderly but pretty high correlation on the health side where there's some differences and might be useful in the report to kind of elaborate on some of the increases seem fairly large on the pension side on Brazil and Spain for example we are taking European Commission figures which seem quite sensible where there's some different there's a high correlation with the we better look into Spain because we're taking the European Commission figures too okay all right so we somehow we had so the figures seem to be a little bit seem a bit higher than ours but in general the story is different what's always difficult and one of the reasons for the emerging economies is the assumption about coverage is coverage going to expand or not if you look at a country like India they've had robust economic growth the last 15 years they have an increased health spending hardly at all to GDP so it's very hard to know when coverage is going to expand and with the economy growing rapidly you can have rapid increases in real spending without changing spending to GDP ratios so the picture here is there's a similarity then but some especially on the pension side some differences be useful to elaborate on okay now moving then to this issue of the fiscal gap or the fiscal room projections here's where in some ways the story is what I want to discuss is we think maybe countries have less fiscal room than what's indicated in the index and that our ranking of which countries have the least fiscal room to deal with aging problems differs a bit I mean as the precursor for this this is just looking at what our projections are for government debt to GDP over the next few years gross debt this is gross debt to GDP on a weighted average basis you see the economic crisis for the emerging economies has not had that large an effect in the sense of now the fiscal positions are such and their growth profiles debt to GDP ratios are expected to decline the advanced economies this is where the problem is that even under based on current policies our latest projection and based on on our projections of fiscal positions debt to GDP ratios are going to rise so in a lot of ways we feel countries are approaching the aging problem now a big hole and I know as Richard said is under their approach they're trying to isolate the effect of age-related spending with the debt neutrality assumption but here an alternative perspective could be that a lot of countries don't have room just to deal with aging problems they have to fix the underlying situation first to have more room to deal with the aging here is more of a complicated chart where the bottom line here I'll come to the story of it we really think it's the countries in the upper right hand corner that really are in the worst shape and that this probably is the best way to think about the fiscal sustainability or the kind of fiscal room story what this is saying is that what we did is an exercise of thinking of what kind of fiscal adjustment would countries need between now and say 2030 in order to bring debt back close to a pre-crisis median of about 60% of GDP so this is kind of then saying based on who's in rough shape who needs to make the biggest adjustment so under this perspective if you look on this X-axis this is saying Japan, Ireland the United States, the United Kingdom have very large adjustments they have to do if they were trying to get back to if they were going to get to 60% this is the change in their primary balance they'd have to do I also would say that in the United States then you're saying over 10% points of GDP of fiscal adjustment just to make sure that then the debt by 2030 would come down to say to 60% of GDP now the Y-axis this is looking at age-related spending that's going to go up in the next 20 years and this would mean that in addition you would have to take steps to offset age-related spending increases so this is pension and health spending in the United States we're saying this is also close to 6% points of GDP so what we're saying is to achieve that objective you would in the United States would need fiscal adjustment not only here on the X-axis here of the primary balance but take steps to offset the underlying increase in age-related spending so this generally is the point I want to make regarding the fiscal room that perhaps countries have even less room which I think is why then in the end this exercise is being done is very welcome to kind of call attention to some of these this challenge the countries face and that it may be that it's even a bigger issue than being underscored in the report thank you very much just purely in terms of positioning oneself on the issue I'd rather be having the IMF telling me I'm too conservative than that I'm way out there thank you very much for your comments well I'm sure you're all dying to raise questions to Richard and his team so I'm going to move right along here I just wanted to say that this is not an easy report and I probably wouldn't have read the whole thing unless you put me on the spot here particularly the technical part which is really one you have to do with a hot towel and a double scotch but it took that to write it it took, okay but I encourage you to dip into it and look at it closely because it's one of those reports that really makes you rearrange your thinking a lot I know that I was delighted to see that France doesn't come out on top like it usually does they're always the winner on being the happiest and so forth but they not so hot in this report we use Japan as the poster child of the dooms day future but Japan is not as badly off as Korea and some other countries and in particular there's a real contribution in this report with respect to casting light on some developing countries because countries like India which is are doing nothing virtually to take care of a rising aging population are going to be in very deep trouble and I was very sort of disturbed by how low Mexico comes out in this report with the poverty rates five times higher than Brazil is a cause for real geopolitical concern in my view now of course I'm going to quibble because that's what I'm supposed to do right and those of you who are old hands at this international comparison game will probably have a little doze off now but there are problems in categorizing public pension systems what is public and what is private now you put a lot of countries into the private group because they're mandatory their private accounts they're individually mandated and so forth I probably would quibble with that because countries like the Netherlands Sweden Switzerland to me they're almost if not all public because their workers are required by law to contribute to them the government regulates everything in these programs from the return rate to the administrative costs and so I'm not so sure that it's so easily with this public private distinction and it would be interesting Richard to know if we played around with that how your index would change with some of these countries the other issue for me is what about tax deductions they're very expensive for governments how do you factor that in and of course that kicker of all are we going to be richer and more able to pay for these things in the future what are we predicting there are very divided opinions about that I think now of course everyone grabs the report and looks for their favorite country which probably means all of you in the room look for the US right so did I and I'm not sure Richard in the end of the day because you can see in your chart here about expenditures for the elderly we're not so bad we're kind of in the middle we're not in those really generous countries but we've got some neighbors who are awfully suspicious with India, Mexico and so forth we certainly are not in the top group where taxes are concerned so you would I'm not sure Benedict would agree with me but there seems to be some room for tax change in the United States because we aren't among the highly taxed of the world however this table is quite disturbing because I think quite rightly in this report they measure poverty as 50% of the median income which of course all of you in this room know is not the way we do it officially in the United States but here we don't do so well in the United States where we have over 20% of the elderly living in poverty and other countries also come out surprisingly high even countries like Switzerland which we think of as a very generous country with respect to all these benefits has quite an impressive level of poverty so all in all we get to your gap index and the US comes out pretty well as far as adequacy so you need to explain that a little bit more to us particularly countries like Russia and I see Nick over there don't look so bad but I'm surprised that Russia would be anywhere near Switzerland so this table I think causes us some concern Russia is 15 Switzerland is 14 I hardly think they're neighbors in respect to protection of older people but that's why we like this report you have to keep reading to figure it out now there's one statement that I'm going to take real exception to and Richard stated it in his oral address too and that's where we get into what some of us would call politics or social security because the report says most developed countries have expensive pay as you go pension systems which have now become or are being rendered unsustainable now I take a little bit the opposite view in the sense that I'm impressed by the Sweden's the Germany's France which just passed a law in November which considerably ensures the solvency of the French pension system up to 2024 now Bravo to Mr. Sarkozy I have to say I'm much more impressed by the kind of the flexibility of countries in addressing these public pension systems now this is not anything new and I put this quote up here in order to give us a little sense of modesty Social security assumes that Americans are irresponsible it assumes that old age pensions are necessary because Americans lack the foresight for their old age the social security law is unjust unworkable, stupidly drafted and wastefully financed now I guess who said that I see Commissioner Hardy here and the Deputy Commissioner of Social Security doing enough you're going to kill me it's Alph Landon which just shows you that this debate has been going on for some time we have been trying to reach a consensus about social security about private savings for some time and I guess it's going to go on for some time in the future now what worries me at this point in time is one of your seven strategies and your heavy emphasis on the importance of better retirement savings through mandated private individual accounts and I think we all agree that we're in favor of adopting and promoting multi-pillar systems I would contend that we have reached a real crossroads in the world and we are in a kind of a state of a crisis if you just look at what is happening in Eastern Europe Hungary has just nationalized the second pillar scheme Argentina did it before there is incredible interference in Slovakia and the Czech Republic in Romania in Bulgaria as governments are finding it very difficult to pay for the first pillar and the second pillar at the same time and so they're forcing people back into the first pillar now I would think that this is a very confusing and dangerous public policy situation to be in I don't know what the average worker in these countries thinks about where their pension is going to come from in the future this is not good but I think we have to address in promoting that strategy is the fact that people have very small accounts this is the case for 401CKs in the United States and in a country like Australia if I get my little figure here the average level of an account in Australia is only $25,000 although Australia comes up pretty well in the adequacy index I think it masks the fact that there are disparities in how much people are saving in these accounts a country like Chile which is considered really a leader only 60% of the workforce is contributing on a regular basis 40% of women contribute so there are real problems of people having a sustained activity over the lifetime to put into these funds we have not learned all the lessons yet that we need to about how you pay out these benefits the annuity markets administrative costs these remain very largely unaddressed we spend a lot of time talking about what a great idea multi-pillar systems is but we don't spend much time talking about how we pay out into these countries and the most sort of pessimistic view that I've heard recently comes out of countries like Netherlands which came up very very high on this list Switzerland which are talking about the long run return of their pension funds and the Dutch are the first country that has taken steps to actually reduce pension benefits to current beneficiaries from the individual schemes because of the low interest rates that are prevailing in all of these countries what we're going to do if we're going to promote this as one of the principal strategies now all this leads me to one of my favorite topics but no one wants to listen to it and that is whatever happened to develop a national policies on aging that means all seven of your strategies have to be pulled together into a comprehensive coherent kind of approach few countries have it some have tried I put Australia up here because remember Mr. Rudd he did it, he issued the report and his government fell because one of the recommendations is they needed more immigrants to pay for the aging population that didn't meet the preferences of the voters and so he is no longer a prime minister but I liked one word that you use very much but a lot in the future when I do these comments if I remember I ask again and that is perceptions we used to call it the politics of social security but you coined a new phrase I think and that is changing public perceptions very clever because I think what we're talking about here is political leadership and it means that we have to have governments who actually tackle these problems and my final conclusion is on the basis of your report I'm actually moving in with my adult children let me just take two minutes to respond to a few of the more technical points steering clear of the more perhaps political ones which we can delve into in the discussion of you if you like the big difference the difference on the health care side between the IMF sure okay the difference on the health care side we actually assume a convergence across countries and excess cost growth over time to the long-term average for all countries so we're not we're not simply cranking out in each country and I can talk about the justification for that assumption but our excess cost growth assumption for some countries in particular the United States and a few others would be significantly lower than the IMFs the point on the that room indicator is perfectly well taken I couldn't agree more at the actual sort of economic and policy juncture we're at today most countries and particularly the Anglo-Saxon countries have less fiscal room particularly less borrowing room than the gap index projections would indicate but the metric we developed as Benedict explained served a different a different purpose in terms of the categorization of public versus private the fundamental criterion we were looking at was funded versus pay as you go as opposed to the particular institutional arrangement or nomenclature tax expenditures extremely important that's for the second edition think about how to how to build that into the build that into the model I would note there has been a significant amount of interference lately in ostensibly personally owned funded pension systems which presumably would enjoy some kind of property right protection the nationalization in Argentina and now in Hungary I mean that does sort of undercut one of the arguments for funded savings it's often I've argued to the extent that it is funded and personally owned or contractually guaranteed it's more likely to be economically real than if it's simply a memo account within a government budget such as the U.S. Social Security Trust fund so that's certainly something that bears further consideration to clarify I'm not advocating mandatory personally owned accounts I do strongly advocate mandatory funded retirement savings there are different ways that can be organized I think that the system Australia has of mandatory employer pensions is certainly a good way to go depending on the particular political preferences in country so the emphasis isn't on personally owned but on funded and this high level of interference with the funded accounts we have a pretty high level of interference on the pay as you go side too as witnessed by all of these reforms that have supposedly rendered these systems sustainable I guess what I would argue look at both halves of the index these systems are unsustainable Francis system is not sustainable because the benefit cuts built into the system given Francis failure to fill in the resulting income gap is going to lead to an erosion on the relative living standard of the elderly that will not be politically sustainable so I have a real concern there we deliberately did not add up the two halves of the index and present a single measure and that was because we are dealing with countries at such disparate stages of economic and social development some that have mature welfare states and others that don't you have an India that does poorly on adequacy but right at the top on fiscal sustainability because it spends nothing so its average score puts it in the middle which makes it comparable to a Germany and that didn't make a lot of sense sense to us but it is important to look at both halves and with that let's just open this up for discussion thank you both very much I really appreciate your patience and reading the report thank you Richard what would you say to Dalmer's point about the US benefit adequacy as I recall its found to be high it is high by the total income measure and it is high even by the median income measure the US does very poorly on the poverty measure depending on depending on the different weight you give to the indicators you could get a somewhat different result but I think the story in the index is that the US is vulnerable on income adequacy for lower income elders and is doing a very poor job there and in our reform guide where we prioritize the importance of different reform strategies strengthening the poverty floor in the US gets 2 out of 3 stars so that is a real concern but when you look again we are looking these aren't stylized replacement rates we are looking at total income based on national accounts and household income surveys and when you look at the average income of the elderly relative to the young the elderly in the United States have a ratio that is at the higher end which is why they come out better in the index than you might otherwise expect Steve Richard just a real quick question I am wondering if each of you would just address a little bit this relative poverty concept because if you are defining poverty and this is kind of new to me the percentage of your population is below half of the median this is really nothing more than a measure of what the variance and your income distribution is if you have a really really poor nation or nobody makes hardly anything but they all make the same you will have zero poverty if you have a really really rich nation it has a great variation and the level of earnings you can have a very large percentage in poverty so I am not sure I would really concur in terms of poverty I will comment briefly and then pass it on down the line here I agree with you Steve that the measure is problematic and I am not advocating replacing however imperfect our existing poverty line measure is in this country I am not advocating replacing that with a relative measure however in cross country comparisons the relative measure is a very useful tool which is why we I did not want to be in a position of defining absolute currency poverty thresholds in 20 different countries and projecting them over time I would agree that is an important consideration especially if you are looking replacement rates are going to be going down in the future yet even with relatively weak growth rates in the future now this could be even higher absolute level of real income for the elderly than we have now and that could change your perception of whether now systems are protecting the elderly from poverty now a report that was made in the report and I think it is worth repeating here is that I think also mentioned in your presentation that there is a real risk of an increase in poverty in countries which have reduced their benefits over time and it is interesting that you mentioned the UK because the new government in the UK is going probably back to where they were before so you know the relative concept is important politically isn't it, when people feel that a growing number of the elderly are falling below an acceptable level of living then it becomes a political issue and that issue is emerging in countries like France, Italy where we think that poverty doesn't really exist but the numbers are quite high by any measure yes thank you Richard wonderful presentation and excellent commentaries I have two clarifying questions looking at the last chart that Benedict poured up would it be fair to say that these are cumulative so if you look at the US you have 6 plus 12 adjustment that needs to be made that's question number one question number two on the poverty has there been any attempt to sort of adjust that based on housing because generally older people own their housing and if housing costs are 25% of the income has there been any adjustment in that regard to adjust for the elderly having their own houses do you want to go first? one word answer yes cumulative yes I'm sure there are specialized studies that address that it was not possible to do that in this particular study I should note though that the relative poverty measures are on an equalized basis meaning that they do take into account household size you do get economies of scale from living with other people in households but they don't actually take into account home ownership or non-home ownership and other factors you might want to take into account you can imagine if you start going down that route what's going to happen to energy costs and what do the elderly spend on that relative to the non-elderly and so on one of the nice things about having been around the block for a while is that you get a certain perspective and when I was a young official at SSA and serving internationally we used to go to a lot of meetings talking about a special cost of living index non-elderly we had lots of meetings on this but no one has really done it there must be a reason why I wanted to raise an issue about labor force participation and I'll explain my question we tend to talk about all those above 60 and all those below 60 thinking of them as groups of people that are all equal but obviously they aren't I'm thinking of two specific areas where they're very different one is the participation in the labor force of women which was very low and has been growing steadily and the other is the young who are taking longer and longer to enter into the productive group of labor force participants you did flag very briefly labor force participation and mention it could you say a little bit more about how you handle this and projected it sure first of all despite the the arbitrary age cutoff between old and young which we need if we're going to compare old to young over time the projections do of course fully take into account actual labor force behavior labor force participation rates in each country at each age so they fully select the fact that not all young people work and that not all old people are retired as to how we handled the projections the fundamental assumption underlying the index is a current policy and current behavior baseline in other words we want to we want to see where we end up if we're too stupid to change course and by implication be able to measure the magnitude of the policy or behavioral adjustments that would be necessary to achieve more satisfactory outcome on either the sustainability or the adequacy side we do make a couple of important exceptions to the no policy change and no behavioral change assumption and one of them involves labor force participation we do build in a cohort effect so if labor force participation has been rising as it has been very sharply in Europe among adults in their late 50s and early 60s then that will feed through the projections labor force participation has also been rising somewhat in the United States as well at older ages and not just as a short term response to the economic crisis and the gutting of 401ks and iras we also allow for increases in labor force participation due to policy changes such as increases in normal or early retirement ages so to that extent in some countries the projections reflect a rising incorporate a rising trend in labor force participation at older ages but we're not assuming any we're not building in a behavioral response because we want to look at we want to measure the magnitude of the response that would be required it's a simple actuarial approach to the projections actuarial projection scenarios Steve as opposed to the economists general equilibrium black box one point that you made earlier was the presumption of a regression to the resolution on excess cost growth internationally which is I mean just in the U.S. that would be as Joy says a really big you know CBO and SSA that's a pretty big deal because excess cost growth is really big here and assuming for the U.S. and for all the developed countries that's a real deceleration in per capita health cost growth and proper acceleration for the end of the development historical average for excess cost growth across the developed I guess the 10 or 11 developed countries in our index is GDP per capita GDP plus 0.5 so for the U.S. that is quite a it is and we phase that in case a case of 2040 or 2050 the U.S. would be two or three percentage points of GDP higher without that assumption but in a number of countries we're assuming an acceleration an increase in excess cost growth that's the case in I guess the U.S. France and the Netherlands are the ones that come down Canada comes down Sweden the number of others go up the rationale besides the obvious thing is that if you just run it off run it out at the historical rate there's nothing left in GDP to pay for events like this or anything else right it's that particularly in a world in which access to information about healthcare is much more widely available that countries which have up to now been more successful in keeping a lid on it are going to find that increasingly difficult whereas the countries that have very rapid growth rates are going to have pressure from the other side we have a sensitivity analysis on that in the appendix and other assumptions certainly are possible Richard Firstly congratulations to you and your team it's really a great piece of work I would suggest provides a very serious and I think even exciting analytical framework for what intuitively as you're suggesting we know is the case so with that background but it's terrific and congratulations I guess my question goes directly to the policy suggestions and it's around whether you have any work or insights as a result of that into you know sort of the 80-20 rules of if let's take healthcare for example which the data points out is a particular challenge put to find a point on it if one were to address three or four of the critical non-communicable diseases what would that do I mean if we were to find solutions to Alzheimer's Diabetes Cardiovascular or if you were to start really modeling medical home I mean these are the sort of things that are the innovative solutions to you know how we get through this sustainability question so it's really and then what would be what it would require on the investment side well I mean in my view Mike that would certainly improve welfare whether it would reduce cost growth is another question entirely you know there are some people in the audience here who are surely familiar with the concept of next competing cause of death you cure one ill and the population then succumbs to the next competing cause of death but I think more broadly what's driving this excess cost growth is the ability of technology to address ever not just a wider but an ever subtler range of conditions it's rising public expectations about care and about cure and I see us moving into a future in which healthcare becomes sort of a life long process of monitoring and fine tuning and I I mean from a policy and a public health and a welfare perspective I think we need to go at all of what you said but I'm skeptical that that would solve the cost problem without some fundamental reform that puts a budget constraint on the system and that's my view the other panelists may have other nobody may want to take that one on I I mean it's a similar I take a point I've remitted on a lot so there is that but to me it's a similar question as we asked on the working issues namely 68 what does that mean if they work with 73 what does that mean and similarly on the health side if we can address you know major costs that we currently have and we just had this study earlier this year as many or last year as many know the global cost of all time is at 604 billion well you know something may something else may develop in 20 years from environmental concerns but I mean that's not a small number no it's not and so I'm just talking about the sustainability of these things on the two sides what are the sort of numbers and I'd like to see those and I think we have to look at them what are the sort of numbers what do they look like if we begin to bend these curves if we begin to bend what it costs for the NCDs and we begin to say let's keep people working until you know 67 what is that 73 what is that those are the same questions what are the calculations on the retirement side we have one set of calculations I'm not sure if they're featured in this report or not but we we look at let's say your goal is to keep pension spending public pension spending from rising as a share of GDP between now in 2040 or now in 2050 what would the how much would you have to cut per capita benefits relative to per capita wages or alternatively how many years would you have to raise the effect of retirement age the answer to the retirement age point ranges between 7 years on the low end in the United States to 11 or 12 years on the high end in Japan over the next 30 or 35 years if you wanted to balance it purely on that end raising retirement age is to the extent that higher retirement age is accompanied by well extending work lives particularly if that's accompanied by later ages of public benefit receipt has a whole as a whole host of benefits which is why we emphasize that solution so strongly I mean you're not only reducing benefit costs but you're increasing contributions and the tax take you're potentially making up for shortages of workers at younger ages workforces are going to be growing very slowly in all developed countries and they're going to be contracting sharply in many so there's a broader economic benefit and if we have any gerontologists in the audience I'm sure they'd second me that the I hope they would that the literature bears out that some continued degree of productive engagement at older ages even leads to better health and more happiness proxied in various ways so we've done that on the retirement side on the health care side one thing you do have to remember to get back to this excess cost growth point is that we're already building in perhaps inappropriately a fair amount of cost curve bending into these projections so we're going to need some significant progress on that front if things actually aren't going to cost we're projecting since I was so unfair to the French I'm going to say something in their favor now buried in the French pension reform that was adopted in November of last year is I think a very interesting policy innovation the kind that you're talking about and that is the requirement that people in order to get a full benefit have to work 41.5 years and is indexed to longevity life expectancy so it's expected to go up to 42, 43, 44 45 and it didn't get very much attention and I don't think the French know the population got it yet because everything was focused on retirement ages you know the 60 to 62 the whole thing but it's an interesting I think an interesting innovation to require in order to get a full benefit a longer working life as you recommend in principle you know there's no reason why average retirement ages couldn't go up by 7 or 10 or 12 years over the next 30 or 40 years they've gone down by that much in many countries over the past 40 but there's libel to be particularly when these reforms are not fully disclosed and advertised significant public resistance I don't think many French people understand that the second tier of the pension system has been price indexed that's what accounts fundamentally for that big relative that erosion benefits relative to wages on excess cost growth I'd be more optimistic that if you look Japan and Germany since 2000 health spending to GDP has been practically flat other countries are doing a much better job in the United States and kind of converting technology into actually healthcare so I think there's actually a lot to learn from other countries and of course in the US we have a large amount of research being done on how much savings you can get from health information technology etc but what's always striking for us to look across countries is in the US the problem is there's just not the hard budget constraint there is in other countries in terms of forcing people to kind of stay within the budget even if you look let's say at the Ryan Rivlin proposal the CBO cost it out a lot of ways the essence of that is in some ways reducing the rate of real growth of health spending but even that the estimate I understand gives you about the savings relative to the baseline of 2030 so still quite high in increase even after that we have other other questions yes thank you Richard you were saying that you like to see funded pension systems and I appreciate what you're saying and I appreciate the benefits and the risks that come with that I work in emerging market countries you know we're actually leaning toward that we see that if the money's there then it might even go to the people that deserve it but they always come back to but the IMF is telling us not to do that we can't get what we want from the IMF if we're also making a funded system and I was just wondering if both of you would comment on that is there any truth to 100% of the countries I've worked in yeah no I meant the IMF 100% I think the issue is always this looking at this trade off that whatever budget deficit you have it has to be financed and ideally when the second pillar was introduced Chile was more the model and I'm going to quote Sandy's paper I even read recently saying or talking about recently on this you know you ideally should finance the transition to a new private scheme with other fiscal adjustment and when countries don't do that that's when the issue becomes relevant so the whole problem is that when you have budget deficits they have to be financed and so therefore it's more this issue of what is the right speed of transition to these funded systems but I think also I mean the whole question is introducing new private schemes is not really a panacea in the sense of you have to fix the first pillar you have to do something about that and so I think there are many difficult tradeoffs especially down an era of a crisis where countries are already undertaking large fiscal adjustments and the question is an interesting period now to think of what is the appropriate role of these of the private systems when you're undergoing a serious fiscal crisis I concur completely I mean if a if a transition to an unfunded first pillar to a funded pillar is debt finance then it isn't economically funded I'm not necessarily advocating that kind of transition which in any case in most developed countries because of the double burden problem really really isn't the starter at all it might have been 25 or 30 years ago but it's possible to have a mandated add-on which is certainly something that I would seriously consider as a policy option in the United States it's also worth pointing out that you do need some level of financial market development and rule of protection of property rights and rule of law but if you have that and you can move you can shift the balance a bit more towards funded and it's genuinely funded economically funded then there is a big potential potential advantage in a pay-as-you-go system you are a slave and on demography the projections are driven by the change and the dependency ratio and there's no way to escape that you either pay more you get less in a funded system particularly if the system is free to seek a global rate of return if it can be invested and an internationally diversified portfolio, that then you can escape, at least to some extent, that box. And so I would consider that a significant advantage with all of those caveats that I prefaced that with. Lou. I certainly agree with you that it's very important. You've given us a lot to argue about over the next several years, at least. But I just wondered, and I agree with increasing retirement age or years of work, but I wonder, does your study take into account any of the effects of disability in this? Are pensions for the disabled included in your pension categories or the adequacy of, you know, pensions for the disabled are included in the other benefit category? Every government benefit paid to the older young is included in the projections. For the developed countries, we start with the OECD social welfare expenditure database. We have a variety of sources we use for emerging markets. But the public pensions category, this is true for the private pensions as well, is its old age retirement benefits and survivor's benefits. And the disability part, to the extent we were able to, with the sources we were using, is included in the other benefit category. And we, does that answer the question? Well, it's just. And we don't make any attempt to project changes in disability rates over time, except to the extent that they may be built into the SSA projections we're using for social security or into the EC projections we're using for the EC countries. To the extent, we're not projecting public pension spending from scratch for all of these countries. We're taking, there's a lot we are projecting that's generated by the model. But that's an input, sometimes normalized to our definitions. So the changes in disability rates are certainly built into a lot of the public pension projections, but we're not explicitly representing that. I guess my question is the adequacy of the disability benefits when you're going to have a significant increase in the disabled population by definition when you increase the retirement age. Right. And the adequacy of disability benefits is a very big question in most countries, including the US. Well, I very much doubt. Well, we have somebody here who could answer the question for the US. Does the increase? I have a question, but I think what we might be getting at, if you raise a retirement age, say, by seven years, not how long people work with the return rate by seven years, you'll save a lot of money in not paying retirement benefits for those seven years, but there are going to be a lot of people in that seven-year age ban that you'll probably be paying disability benefits to. Right. If you're taking that into account in your estimation of the reduction in costs. No. But that's not our baseline scenario. OK, that's just an illustrative calculation. But you're right. You would need to do an offset. Absolutely. 15% of our rather than all we're friends. So you'd actually have to raise it by eight or nine years and to get the same dollar or not. And then the adequacy of the benefit, while the US benefit is certainly not high, it's much lower. But again, our adequacy measures here are not simply looking at the adequacy of Social Security. If all most seniors had in the US with Social Security, we would be doing pretty dismally in these international adequacy comparisons. But although it is not universal, we do have a substantial private pension system. We have state and local pensions. We can talk about after hours about how we handled the unfunded liabilities there. But we're trying to look at the total economic resources available to the elderly and the non-elderly. And one of the reasons the numbers are surprisingly high may be surprisingly high to some people. The income ratio of old to young in the United States. We are using a national accounting framework. We're not simply taking unadjusted household income survey data. We use household income surveys to do our age allocation. But it's a broader, more comprehensive income definition. I think, Lou, you put your finger on probably one of the naughtiest public policy questions that are going to be facing in many countries. Because raising the retirement age and making people work longer is kind of the result of that issue that you're talking about. And a lot of countries are masking it through unemployment insurance. They've got special provisions for the 55-plus that they can get on the unemployment rolls more easily and so forth. So OK, patch it up a little bit. But it's clear that it's emerging as a very big challenge. And the French, now I'm going to say something not very nice about them. They did something that was very similar to what was in one of our commission reports. And they said, we don't want to medicalize disability. This is occupational disability. It's people who can't work for some reason. So figure it out, they said, to the Social Security people. And we'll pay for it from the Workman's Comp Fund. To my mind, France is really one of the most, maybe the most startling story in the index. Our adequacy measures for France are forward-looking. Our indicators are the ratio of the per capita elderly to non-elderly income in 2040. If you rank them by 2007, France is near the top. What we're projecting is a very substantial erosion in this retiree's paradise. Elderly labor force participation in France today is overall, I think, 5%. Retirement ages of young benefits are relatively generous. This may change dramatically in the future. I have some skin in the game, too. I guess my wife is French, though I won't qualify for a French pension. Yes? Is it possible you're underestimating the difficulty of retaining or regaining employment if you're, say, 65? Because in this country, it's no main feat these days if you're the typical person who, say, loses a job. You can spend many, many weeks looking for one. And many people will simply become discouraged. And my feeling is that with a spreadsheet, you can easily change the parameters. But what has to change here is an attitude, I think, both towards hiring older people and perhaps older people's views about what they are worth economically speaking. And neither of these things is going to change overnight. I mean, I hate the phrase ages. Major discrimination is, I think, reasonably rampant in the United States. And I don't think the United States is unrepresentative in that respect. Right. Well, I think you're absolutely right. It's a big challenge. But the United States is toward the high end of the spectrum, certainly in the developed countries on elderly labor force participation. And we do not make that a high three star priority for the United States. What we do is we have projections of elderly labor force participation out to the year 2040, given this current behavior with cohort effect assumption. And we prioritize the need to raise participation rates based on the projected participation rate in 2040. And the US is really toward the high end there. Raising it much higher may be difficult in the future. You can't take one of these reform strategies and make that bear the whole brunt of bringing the books into a better balance. Some countries need, I think, in the long run, in the very long run, to raise fertility rates. I think if you crank out the numbers for a Japan, which looks OK in our index through 2040, if you crank them out to 2060 or 2070, it doesn't work anymore. The Japanese government actually projects the date. There'll be only one Japanese citizen left living. This is not a sustainable. You can't have a sustainable long-term economy and society at a 1.2 or 1.3 fertility rate. But that's not an issue in the United States. We have replacement level fertility plus substantial net immigration. For the United States, controlling health care costs and improving the poverty floor would be the absolute top two priorities. I think that fall out of the index. For other countries, they would be quite different. Yes, I think that we could use a mandated savings-based system. Because I think we've amply demonstrated by this point that tax incentives only get you so far and that you're just moving money from one untaxed pocket into another account into another taxed account. So I think that would be important. But because you have the entire bottom half of the income distribution still highly dependent on the unfunded first pillar, and that's a concern going forward. And these are also the same people who'll be probably least stable for the most part to work longer. But certainly, the poverty concern and the health care cost concern are the two biggest ones in the United States. We're not at the desperation end of the spectrum here. We're more at the opportunity end, except for the fact and, Benedict, you made this point very well, that going into this, we're not terribly well. We're not certainly not as well positioned as we were a year or two ago. Let me shut up and just see if my two co-panelists here have a closing order or two they want to say. We're out. Cover the ground. OK, thanks, everybody.