DISCUSSION PAPER PI-0602
Analyses of proposed reforms and the viability of immigration
based policies in response to ageing demographics
This paper briefly examines the options for reform proposed by the Pensions
Commission in 2004 to sustain the UK state pension system in response to an
ageing population. It further explores, under various scenarios, the long-term
viability of immigration as an alternative policy response by developing a population
projection model to determine the replacement migration levels that would be
required to maintain contributions (taxes) at current levels, using population data
and assumptions in the public domain. The economic and social implications of
immigration-based policies are also considered.
The results indicate that not only does each policy option proposed by the
Pensions Commission require changes that are too large for the policy to be
implemented on its own, but that a combination of options too is likely to require
discomforting changes at the individual level when considered under plausible
scenarios. Economic and social implications aside, the results also indicate that
immigration is an inefficient and ineffective way of salvaging an ageing society.
The required replacement migration levels are abnormally high and too volatile for
it to be considered as a viable policy alternative.