BPEA | 1994 No. 1

Do Saving Incentives Work?

John Karl Scholz,
John Karl Scholz University of Wisconsin at Madison
Eric M. Engen, and William G. Gale
William G. Gale The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Senior Fellow - Economic Studies, Co-Director - Urban-Brookings Tax Policy Center

1994, No. 1

AMERICAN SAVING RATES have recently fallen to their lowest levels since 1950. After averaging roughly 8 percent in the 1950s, 1960s, and 1970s, the net national saving rate fell to about 4.5 percent in the 1980s and has fallen below 2 percent since 1990. The personal saving rate has also declined, from an average of 7 percent between 1950 and 1980 to an average of 4.6 percent since 1990.2 These declines have raised concerns that the economy may be unable to finance investment and sustain growth over the long run and that a significant fraction of the baby-boom generation may not be saving adequately for retirement.