Around the world, social security and health care are today's hottest economic issues due to the rising dependency ratio : the proportion of elderly people relative to younger, economically active, workers. According to the Population Resource Center, this ratio will double in the world's more developed regions and triple in less developed regions by 2050. With so many more old people in coming decades, governments will be hard pressed to raise enough money to pay for their needs by taxing the young.
None of this is news. But that is the point: despite the vast attention currently paid to the looming old-age crisis, household saving rates have been falling in most of the world's rich countries.
Why aren't people saving more for their future retirement? Why are they actually doing the opposite by saving less ?
According to a recent study by the Organization for Economic Cooperation and Development (OECD), household saving rates declined between 1984 and 2001 in Australia, Austria, Belgium, Canada, Finland, Italy, Japan, Korea, New Zealand, Portugal, Spain, the United Kingdom, and the United States. In some countries, the decline has been dramatic: in the US during this period, the annual household saving rate - expressed as the share of disposable income - fell from 10.6% to 1.6%.