Households increasingly dependent on public transfers

The longer working careers and higher earnings of those now retiring have caused a rising trend in earnings-related pensions. As this has been accompanied by a strong increase in unemployment expenditure and slow growth in aggregate income from wages and salaries on account of the recession, a growing number of households now depend on current transfers. Accordingly, household income and expenditure are now less dependent on the economic cycle and countercyclical policy. In addition, the impact of monetary policy on aggregate demand is reduced by the growing role of property income in financing consumption. Contrary to the life cycle hypothesis, elderly people’s savings rate has risen with age, and net wealth is highest amongst the elderly.