Remarks by Ángel Gurría
8 June 2019 - Fukuoka, Japan
(as prepared for delivery)
Central Bank Governors,
Populations are ageing rapidly across advanced and emerging economies, even if at different speeds. The number of people over 65 for each working-age person will at least double in most G20 countries by 2060, and the share of people over 80 in the world’s population will triple.
The challenge is enormous, and so is the cost of inaction. Ageing creates deep pressures on fiscal sustainability. If nothing is done, rising pension, health and long-term care expenditures could increase public debt by an average of 180% of GDP in G20 advanced economies and 150% of GDP in G20 emerging economies over the next four decades, adding to already elevated debt levels. So what can be done concretely? In the report “Fiscal Challenges and Inclusive Growth in Ageing Societies”, which the OECD delivered to the Japanese G20 presidency, we outline the required key actions.
The first objective is to put the pension system on a sustainable footing. Pension reform is politically sensitive and the appropriate reform mix depends on country circumstances and social choices. Yet, policy action must be guided by an overarching principle that balances a triple objective: funding pensions in a sustainable way, fighting old-age poverty, and ensuring a fair sharing of the burden across generations. A major potential response to the funding challenges includes the development of properly regulated private pensions as a complement to public schemes. The OECD is the international standard setter for private pension regulation and as such is actively working on these issues.
Linking the evolution of the retirement age to life expectancy – taking into account differences within countries and social groups - and making it easier to combine work and partial retirement are among the key lines of action. Policymakers must also not tire in their efforts to promote higher integration of women, youth and migrants in the labour market, which will not only ease the pressures from ageing but also improve equity. Hence the importance of achieving the G20 objective of reducing the gender gap in labour market participation by 25% by 2025 – which would bring 100 million more women in G20 labour markets and would, in several G20 countries, mitigate, if not fully offset, the shrinking of the labour force.
Second, reforms are needed to contain increases in the cost of health care and to improve the efficiency of health and long-term care services in many advanced economies. Public health expenditures represented 7.0% of GDP on average across advanced G20 economies in 2017. Promoting healthy lifestyles and ageing as well as containing costs through approaches such as reducing wasteful spending, moving away from volume-incentive payment methods and enhancing competition among health care providers, are recommended. In emerging economies informality needs to be reduced to ensure sufficient coverage and financing of pensions, health and long-term care. Reforms must be equitable, protecting and further advancing access to quality health care for all, with particular attention to the most vulnerable.
But even this won’t be enough. A third line of action is to reduce barriers to the employment of older workers, and to equip them with skills to stay active and productive, especially digital skills where they lag behind. The OECD contributed its policy expertise to the work of the G20 employment workstream in this regard.
Last but not least, and as outlined in the now endorsed G20 Fukuoka Policy Priorities on Ageing and Financial Inclusion, which the GPFI Forum and OECD co-developed, as our populations age, people will be increasingly responsible for their old-age income through savings. Therefore, having appropriate and accessible financial products that cater for the needs of older people, and promoting adequate financial consumer protection and financial education should be a priority for all of us.
On all of these policy dimensions, G20 members have an opportunity to learn from one another, and to take action to make the most of increased longevity for all people, old and young. The OECD is ready to continue supporting you in this endeavour. Thank you.