Aging Population (Social Security and Medicare)


Many countries in the world are experiencing several fiscal challenges especially in this current age characterized by various changes in all sectors. Major challenges are inclusive but not limited to identifying suitable areas of investing, reducing the tax burden as well as high levels of the public debt. However, although such factors pose great challenge to public finance, population ageing is incomparable with the rest. Aging population is described as the change of age distribution in a particular population such that the majority falls under the older ages. The situation is characterized by an increase of the elderly population and a decrease in the population composed of the young people. The population mean and median ages also increases to quite a great extent.  For instance, in a country like Canada, aging population will very soon represent more than eighty percent of the total population (King & Jackson, 2000). To complicate the situation even further, studies indicate that life expectancy is on the increase and therefore the burden will continue to increase. Based on that background, this paper shall expound more on the relationship between aging population and public finance and narrow down to social security and Medicare.

Background Information

Population ageing is an issue of concern in relation to public finance because it leads to an increase in public expenditure. This is due to the fact that costs of health care and social security are bound to increase as they affect old people more than any other age group in the population. Moreover, the problem also affects the growth of the labor force and eventually leads to a reduction of revenue. On the same note, it is important to point out that unless an intervention measure is implemented, the problem is bound to continue since it is expected that the older population will increase greatly in the next fifty years. This is due to the fact that all children who were born during the baby boom period from 1954-1964 will attain the age of sixty five from the year 2011. Further studies illustrate that the population of the older adults will increase by nineteen million by the year 2020. It is further projected that after about forty years, one out of ever person in America will be an old person over the age of sixty five. The problem will be aggravated by the fact that there is better nutrition and health care services and a result it is expected that by 2050 people over the age of eighty five will increase by 377 %.  The problem will increase the expenditure due to the health care in the view of the fact that immunity of the old people is always low compared to the immunity of the younger people. The following graph clearly illustrates the trend of GDP from the year 1900 up to the year 2050. The trend illustrates that the expenditure as a result of those people over the age of sixty five years is on the increase and will continue to increase even after forty years (Center for Health Workforce Studies School of Public Health, 2006).

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