Given the hard budget constraint for many developing countries, this could mean lower government spending for programs that primarily benefit the young. With public pension schemes coming under increasing pressure to raise contribution levels or cut the size of social safety benefits, the issue of fiscal sustainability is one of the principal challenges facing policymakers worldwide, particularly in the context of intergenerational equity.
The experience of US, Western Europe and other OECD countries suggests that substantial demographic changes have occurred in the past few decades. Improvements in life standards, health care and nutrition have increased life expectancy. As a result, the old-age dependency ratio in OECD countries is projected to reach nearly 50 per cent by 2050.