Comparing Countries on Perceptions of Financing Retirement


”The country’s (retirement) system (will) drop steadily to zero by 2035.”

“The decline and eventual deficit concerns are being fuelled by a rapidly ageing population and shrinking workforce, with the gap between the number of workers who contribute to the pension fund and the number of retirees who receive benefits from it gradually getting smaller.”

““Young people don’t have as much trust as their parents in the government, they really doubt whether they will receive a proper pension after retirement. They tend to rely on themselves instead of pinning their hopes on government support.”


Heard all this before?  Perhaps.  Indeed, the 2020 Annual Report of the U.S. Social Security Administration did state: “The projected reserve depletion date for the combined OASI and DI funds is 2035”.  However, the three quotes above are from the South China Morning Post, quoting local citizens in Shanghai and citing data from the Chinese Ministry of Human Resources and Social Security.  So the worlds’ two largest economies appear to have this in common. 

Perhaps even more interesting is public reaction in the two countries.  A Pew Research Center Survey of Global Attitudes and Trends asked the question: “Is aging a major problem in your country?”.  In China 67% of respondents answered in the affirmative, trailing only Japan and South Korea among the 21 countries (Figure 1) in the survey.  By contrast, only 26% in the U.S.,responded in the affirmative, leaving only Indonesia and India as countries with less concern for well-being of the elderly.

Let’s explore the survey results more fully.  A key question asked was this:     Who should bear the greatest responsibility for the elderly?

Self   Family Government.

Results for all 21 countries are displayed in a triad visualization (Figure 2).

To guide proper interpretation of results, follow the three dotted lines extending from the U.S., indicating Self = 46% (left scale), Family = 20% (right scale), and Government = 24% (bottom scale).  The darker labels designate OECD countries, and the lighter non-OECD.  Several observations can be gleaned from the display:

  • Most (13) of the 21 surveyed countries placed greater responsibility on their government (rather than self or family) to provide for the economic well-being of the elderly.
  • Only South Korea (KP at 53%) places greater relative weight on the self than does the U.S.(at 46%) , and only Pakistan (PK at 16%) places less weight on government than does the U.S. (at 24%).
  • The 10 non-OECD countries place little reliance (maximum 13%) on self , whereas the median weight among the 11 OECDs is 23%.
  • At 77%, Pakistan(PK) places more than double the weight on family as does any of the other 20 countries in the survey.

We supplemented the Pew survey with two external measures (Age65: the proportion of a country population age 65 or older, and; GDP.K.cap: the per capita gross domestic product, expressed in $1,000s).  Pearson correlations are displayed in Figure 3.  Such broad associations among variables suggest plausible explanations for general trends, although causal inference is a complicated matter, inappropriate when N = 21.

Correlations among variables do cluster in meaningful ways:

  • The red box (upper 3×3 block) exhibits negative correlations, to be expected as the three measures (self, family, government) compete for selection; when one is chosen, the others are not.
  • OECD membership served as a cursory measure of wealth, but a more precise measure is attained by moving from a binary to a continuous measure.  The median GDP.K.cap equals $5.1 for non-OECD countries, compared to $40.8 for OECD countries.
  • Across the 21 countries, responses to the question: Who should bear the greatest responsibility for the elderly?” seem to be positively associated with self-funding, uncorrelated with government funding, and negatively correlated with family-funding.
  • The same three tendencies hold, but become stronger, when responses to the question are paired with Age65 and GDP.K.cap.
  • Responses to the question “Is aging a major problem in your country?” are positively correlated (+0.57) with Aged65.
  • Wealthier countries have a higher concentration of elderly (+0.79).

We conclude by looking at two specific questions.  First: “Is perception of a funding problem for the aged related to country wealth?”.  As shown in Figure 4, the non-OECD countries have comparatively low measures of GDP.K.cap, but most tend to agree with most OECD countries.  The proportion answering in the affirmative is below 50% for all but one non-OECD country (China at 67%) and four OECD countries (Japan at 87%, South Korea at 79%, Germany at 55%, and Spain at 52%).  The display makes clear the extent to which positive U.S. view is an outlier.  Let’s hope it lesrns to “bend the curve” as well with the coronavirus!

Second: “Is perception of a funding problem for the aged related to the proportion that resond in affirmative that primary funding source for the aged is self-funding?”.   As can be discerned from Figure 5, there is an upward-sloping, somewhat linear relationship, distorted by two high outliers (Japan and South Korea) and one very low outlier (the U.S.).  Regardless of functional form, most respondents from OECD countries (other than the U.S.) tended to be more likely to view self-funding as the primary obligation for the economic well-being of the elderly.

In conclusion …

News networks and mass media in the U.S. seem at times to obsess on the coming retirement crisis.  However, this comparative analysis of perspectives across an (unfortunately) small sample of countries suggests that Americans are not as concerned as those in other countries.  This finding reinforces other survey research, such as the Marketwatch report that “while 54% of retirees fear America faces a retirement crisis, only 4% of retirees describe their own situation that way”.

There are reasons for optimism, especially for those who plan ahead.

Jerry Platt, Ph.D., Emeritus Professor of Finance, San Francisco State U.

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