Why it is Possible that Wages and Pensions Can Increase Simultaneously in an Aging and Stagnating Economy

Abstract

This paper investigates the possibilities and restrictions of intergenerational income development for aging and stagnating economies. In a first step, the basic logic of aging will be investigated in a simple dynamic model. In particular, the investigation points out the existence of the demographic distribution mass and its meaning for intergenerational income development. It proves that the demographic distribution mass makes it possible for wages and pensions to grow simultaneously in an aging and stagnating economy. In a second step, the development of wages and pensions is simulated for the German case through to the year 2050. It is demonstrated that (under normal circumstances) it can be expected that the burden from aging can almost always be overcompensated by the economic growth of the respective year. Against this background, aging appears to be more a problem of acceptance and income distribution than of real income reductions.