Tag Archives: debt crisis

From Here to Austerity

There is now not only a debate on whether austerity for Europe is good or not, but also on whether austerity in Europe exists or not. In a blog post by Veronique de Rugy at the Mercatus Center titled ‘Fiscal Austerity in Europe Doesn’t Mean Large Spending Cuts‘, she claims that many European countries “haven’t significantly reduced spending since “austerity” supposedly started in 2008”. Ryan Avent at The Economist did then writte a reply titled ‘Yes, there is austerity‘ in which he argues that “[t]he supposed absence of austerity in Ms de Rugy’s figures is mostly a product of poor graph scaling and a reliance on nominal, absolute figures”.

The following graph takes a slightly other approach to the issue, and shows not just what is today, but also what is expected tomorrow:

(Feel free to use this figure for your own purposes, but please do not forget to mention this blog as the source.)

Simon Hedlin

Peak workforce: How should Europe afford the future? Part 2

It strikes this blogger that the projections in the figure posted earlier today might not seem like a big deal. From sixty-something to fifty-something in share of total population in working-age. Why would it matter? Well, it does matter. A lot. The fifty-something needs to be put in relation to the sixty-something.

If there are six persons working in a company and one quits without being replaced the company loses one-sixth of its total workforce. That is a lot. And if the company in question needs to provide pension and other benefits to the sixth person, this will lead to great pressure on the remaining five workers. This is what happens when the workforce vanishes simultaneously as the ratio of people who do work divided by the people who do not work diminishes. Now multiply this problem by one hundred million and you have a rough idea of where Europe is expected to be heading in the coming decades.

So here is another version of the figure that shows the projections in percent relative to year 2010. It shows the pressures demography will put on the working-age population as they will in the future be 15% fewer in relation to the total population. Much fewer workers per non-working person, harshly speaking. And the size of the total workforce will decline by more than 20%. Is there anybody who thinks that the debts caused by 500 million people in working-age will be easier to repay when that number falls to 400 million?

(Feel free to use this figure for your own purposes, but please do not forget to mention the source, which is this blog.)

Simon Hedlin Larsson

Best of the (European) class

(Feel free to use this figure for your own purposes, but please do not forget to mention the source, which is this blog.)

Simon Hedlin Larsson