Voting has long been heavily age-skewed, with greater proportions of older people voting. Combine that with an ageing population across the developed world and a very bad vicious cycle can easily take hold.
As the median voter gets older, politics shifts to provide more of the kinds of things that older people like and fewer of the kinds of things that younger people like.
Superannuation policies become more rigid. Every year’s ageing makes it that much harder to change public pension systems. Tax and transfer systems put increasing burdens on the young, for the benefit of the old.
Housing policy gets more difficult too.
Town hall meetings where communities discuss potential zoning changes tend not to be dominated by younger cohorts, but kids need homes. When zoning is too strict, housing becomes scarce, forming families gets harder, and those families that do form have fewer kids. It is hardly the only explanation for what’s been going on, but it’s part of the explanation.
Higher net tax burdens on the young combined with housing policy that favours the old reduce birth rates, worsening the demographic problem and reinforcing the vicious cycle.
You might think that this sounds a bit like New Zealand. But that vicious cycle is far worse in the rest of the developed world. And that brings opportunity for New Zealand to create a virtuous cycle.
New Zealand is ageing. In 2025, there were 26 New Zealanders aged 65+ for every hundred aged 15 to 64. So about four under-65s for every person over 65. Let’s call that the elderly ratio; ‘dependency ratio’ isn’t right because many over-65s are in work. People are living longer and healthier lives, but superannuation policy does not keep up.
By 2040, the elderly ratio is projected to be 32.9. By 2050, 35.1.
But much of Europe has already aged. The elderly ratio in many European countries is already higher than New Zealand’s expected 2050 figure. Italy has 39 over-65s for every hundred people aged 15-64. The elderly ratio in Germany is 35.9; in Greece, 37.4. Portugal has 38.6. Finland has 38.1 and France 35.5.
And European ratios will worsen far faster than ours will. Across the European Union, the elderly ratio is expected to rise from 34.5 to 50.4 by 2050: two people under 65 for every person over 65. And public old-age spending across Europe is already over 10% of GDP.
Europe’s doom-loop seems almost locked-in. The continent’s ageing populations make substantial pension reform hard, though Denmark has bucked that trend by increasing its pension age to 70. The burden on European youths more generally will rise.
New Zealand also faces demographic pressure. We gain, on net, more than 25,000 people over 65 every year as some people turn 65 and as some over 65 pass on. But population ageing and superannuation affordability aren’t about those raw numbers. The cost of health and superannuation services for those over 65 relative to the broader population’s ability to bear that cost is what matters.
In short, the elderly ratio. A ratio compares two numbers. And there is something that can usefully be done about one of those two numbers.
New Zealand is a big country with a small population, a housing policy aimed at enabling more building, and room to grow. Germany alone has almost 16 million people aged 20-35. France has almost 13 million. Across the set of ageing European countries I mentioned earlier, there are over 43 million.
It would take fewer than 125,000 net migrants aged 20-35 per year to stabilise the elderly ratio. And the median voter would stop getting older.
If a targeted Immigration New Zealand campaign in Germany attracted less than 1% of German youths aged 20-35 per year, New Zealand would no longer have an ageing population. Or less than half a percent of young people from Germany and France. Or less than a third of a percent from the set of European countries I pointed to earlier: places with severely ageing populations and hefty resulting burdens on the young.
Targeting migration to offset ageing could be self-sustaining for decades because New Zealand starts from a very small number and Europe starts from a very big one. And relatively small changes to superannuation indexing, if politically possible, would reduce the number of net migrants needed for the numbers to work out.
The Immigration New Zealand campaign ads almost write themselves.
“Come to New Zealand! Your government forces you and two friends to share the support of one retiree, and it will only get worse. In New Zealand, three friends will help you share the costs of supporting one of our retirees. And you’re less likely to be overrun by the Russians.”
Immigration is already part of New Zealand’s de facto superannuation affordability policy. Treasury’s Long-term Fiscal Statement says that higher-than-expected immigration has slowed population ageing, offsetting the government’s reluctance to touch Superannuation.
Making it official policy could turn Europe’s vicious cycle into New Zealand’s virtuous cycle, so long as New Zealand’s housing reforms hold.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was sourced HERE
Housing policy gets more difficult too.
Town hall meetings where communities discuss potential zoning changes tend not to be dominated by younger cohorts, but kids need homes. When zoning is too strict, housing becomes scarce, forming families gets harder, and those families that do form have fewer kids. It is hardly the only explanation for what’s been going on, but it’s part of the explanation.
Higher net tax burdens on the young combined with housing policy that favours the old reduce birth rates, worsening the demographic problem and reinforcing the vicious cycle.
You might think that this sounds a bit like New Zealand. But that vicious cycle is far worse in the rest of the developed world. And that brings opportunity for New Zealand to create a virtuous cycle.
New Zealand is ageing. In 2025, there were 26 New Zealanders aged 65+ for every hundred aged 15 to 64. So about four under-65s for every person over 65. Let’s call that the elderly ratio; ‘dependency ratio’ isn’t right because many over-65s are in work. People are living longer and healthier lives, but superannuation policy does not keep up.
By 2040, the elderly ratio is projected to be 32.9. By 2050, 35.1.
But much of Europe has already aged. The elderly ratio in many European countries is already higher than New Zealand’s expected 2050 figure. Italy has 39 over-65s for every hundred people aged 15-64. The elderly ratio in Germany is 35.9; in Greece, 37.4. Portugal has 38.6. Finland has 38.1 and France 35.5.
And European ratios will worsen far faster than ours will. Across the European Union, the elderly ratio is expected to rise from 34.5 to 50.4 by 2050: two people under 65 for every person over 65. And public old-age spending across Europe is already over 10% of GDP.
Europe’s doom-loop seems almost locked-in. The continent’s ageing populations make substantial pension reform hard, though Denmark has bucked that trend by increasing its pension age to 70. The burden on European youths more generally will rise.
New Zealand also faces demographic pressure. We gain, on net, more than 25,000 people over 65 every year as some people turn 65 and as some over 65 pass on. But population ageing and superannuation affordability aren’t about those raw numbers. The cost of health and superannuation services for those over 65 relative to the broader population’s ability to bear that cost is what matters.
In short, the elderly ratio. A ratio compares two numbers. And there is something that can usefully be done about one of those two numbers.
New Zealand is a big country with a small population, a housing policy aimed at enabling more building, and room to grow. Germany alone has almost 16 million people aged 20-35. France has almost 13 million. Across the set of ageing European countries I mentioned earlier, there are over 43 million.
It would take fewer than 125,000 net migrants aged 20-35 per year to stabilise the elderly ratio. And the median voter would stop getting older.
If a targeted Immigration New Zealand campaign in Germany attracted less than 1% of German youths aged 20-35 per year, New Zealand would no longer have an ageing population. Or less than half a percent of young people from Germany and France. Or less than a third of a percent from the set of European countries I pointed to earlier: places with severely ageing populations and hefty resulting burdens on the young.
Targeting migration to offset ageing could be self-sustaining for decades because New Zealand starts from a very small number and Europe starts from a very big one. And relatively small changes to superannuation indexing, if politically possible, would reduce the number of net migrants needed for the numbers to work out.
The Immigration New Zealand campaign ads almost write themselves.
“Come to New Zealand! Your government forces you and two friends to share the support of one retiree, and it will only get worse. In New Zealand, three friends will help you share the costs of supporting one of our retirees. And you’re less likely to be overrun by the Russians.”
Immigration is already part of New Zealand’s de facto superannuation affordability policy. Treasury’s Long-term Fiscal Statement says that higher-than-expected immigration has slowed population ageing, offsetting the government’s reluctance to touch Superannuation.
Making it official policy could turn Europe’s vicious cycle into New Zealand’s virtuous cycle, so long as New Zealand’s housing reforms hold.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was sourced HERE
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