demographic time-bomb

Definition

Potential crisis situation in most countries (especially the developed ones, Japan being the leader) characterized by an increasing number of older people dependent on pension schemes—a direct result of demographic transition. As the dependency ratio rises, the income of the working segment (comprising of a declining number of younger people) of a population comes under increasing pressure to provide support for the non-working (older and growing) segment. In this scenario, pension schemes based on the contributions of the working population may have to be replaced by funded schemes based on favorable tax treatment.