Tag Archives: pension

Demographic cliff ahead

In many countries the working-age population now constitutes the highest share seen in decades. That will not be the case in the upcoming years. The European “peak workforce” that this blog has discussed earlier is not unique for Swedes, Germans, and Italians. In fact, in most of the world’s richest countries, the dependency ratio (the number of people younger than 15 and older than 64 per person in working age) has been shrinking for the past half century. More people have, relatively speaking, had to provide for fewer people. Until now. As the graph shows,  the dependency ratios will now start to increase, and do so substantially over the coming five decades.

demographic cliff 3

These 42 countries are the member states of either G20 or/and OECD (the EU is excluded from G20 because it is not a country). Between 1960 and 2010, only three of these states (Japan, Sweden and Germany) experienced a growing dependency ratio. In economic-demographic terms those decades were thus on average favorable. In thirty-nine countries the working-age population grew faster than the number of children and seniors. Between 2010 and 2060, in sharp contrast, only two countries (India and South Africa) are expected to face declining dependency ratios. This is related to the fact that both India’s and South Africa’s populations are predicted to continue to grow in the coming decades. The remaining forty countries are likely to have to deal with severe demographic troubles.

This expected demographic pattern is worrisome for several reasons. While increasing longevity is inherently a good thing, it will increase the pressure on pension schemes and healthcare systems. An increasing dependency ratio means that unless employment is increased – through a higher statutory retirement age, sooner average entry on the labor market, or other measures – fewer will have to provide for more. Will this be the end to social security as we know it?

Another troubling outlook is debt. Greece, Italy, Portugal, Ireland, Spain, France, United Kingdom, Canada, and United States all piled up their debt while the dependency ratio in each country was falling, and population on average was growing. How that debt should be repaid n0w that fertility rates slow down, and the dependency ratios are set to increase is a question that is equally mind-boggling as it is alarming.

There is a demographic cliff ahead. Are we going to jump or at least try to climb down?

Simon Hedlin

Are shrinking populations only good news?

From Thomas Malthus to Paul Ehrlich and thereafter many predictions have been made regarding the effects of population growth. Malthus thought that people would be kept at subsistence level, and that productivity gains would result in population growth until the economy converged again to subsistence level. In The Population Bomb published in 1968, Ehrlich argued that overpopulation would lead to mass starvation.

What we see today is a different story. Productivity gains have made obesity a bigger problem than hunger in many countries. And almost everywhere, fertility rates are falling. Some countries do even experience negative population growth. From an environmental perspective this is likely to be good news. Fewer people, holding everything else constant, implies less pollution and less extraction levels of our planet’s scarce resources. A shrinking population does, however, lead to a few economic dilemmas.

One is debt. As The Economist’s Buttonwood columnist Philip Coggan points out:

First, debt is easier to service if your nominal income is rising, but nominal income growth has been very sluggish in [countries such as] Japan. Second, debt does not decline as the population falls; so the debt per capita rises, making individuals even more cautious. You are not going to go on a spending spree if you have high debts already and you are worried how you will afford retirement.

Another economic problem is the effects that the changing population structure has on social security. Having a pension system where today’s workers pay for today’s retirees has worked during times of a growing economy and an increasing population. But when growth rates in many countries are slowing down and the number of workers shrink relative to the number of retirees, the pyramid turns upside-down. Indeed, as has been discussed before in Buttonwood’s notebook, and on this blog, the projected changes in dependency ratios are striking. The next post will attempt to illustrate this problem graphically.

Simon Hedlin

Demographic challenge ahead

After being inspired by a blog post by The Economist’s Buttonwood correspondent, I drew the following graph.

One picture raises more questions than a thousand words:

(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

Glöm a-kassan och satsa på att hjälpa företagen

Jag såg precis gårdagens SVT Debatt som handlar just om Saab och dess framtid, apropå mitt tidigare inlägg. Många som deltog i programmet påpekade att staten borde ingripa. Jaha, säger jag. Och göra vadå? Ska de köpa Saab och sitta med företaget i tjugo år tills man har lyckats sälja företaget?

Det som är fint med marknadsekonomi är att alla får rätt att äga allt som finns på marknaden. Istället för att endast staten, korporationer eller liknande har rätt att äga, har även du och jag möjlighet att köpa exempelvis företag. Att GM inte lyckats sälja Saab innebär i princip att ingen i hela världen har velat investera i Saab. Varför ska då svenska staten skjuta till medel för att ta över ägandeskapet? Det låter nästan som att människan bara är tänkt att utföra en typ av arbetsuppgifter, och bara dessa – livet ut.

I Sverige finns det nämligen en märklig föreställning om att det värsta som kan hända i livet är att man byter jobb. Förutom att det är ett tecken på att man har det rätt så bra säger det också något om hur arbetsmarknaden ser ut. På somliga låter det som om man ska ta ett jobb när man är 18 år och sedan arbeta på samma plats tills man fyller 65. I mina öron låter inte det särskilt tilltalande. Speciellt inte då många klagar över hur de vantrivs på sina jobb, och fackmedlemmar säger hur underbart det vore att få sluta vid 60 eller 55 eller 50.

Jag kanske är blåögd, men jag lever i alla fall i tron om att var och en ska försöka hitta ett arbete som man faktiskt trivs på; att det inte handlar om att må dåligt åtta timmar per dag, träffa kollegor man inte tycker om, ha en alldeles för kort lunchrast och utföra arbetsuppgifter man avskyr, tills man äntligen få gå hem och vila ut – bara för att karusellen ska börja på nytt nästa dag.

Alldeles för mycket tid ägnas åt att debattera a-kassan. Det handlar inte om den. Prioritet nummer ett är att underlätta för företag att anställa. Gör vi det behöver man inte vara lika rädd för att förlora jobbet, för då vet man att chansen är god för att man kan hitta ett nytt jobb inom kort. Som det har varit, framförallt innan valet 2006, har a-kassan nästan setts som ett bidrag man ska leva på från det att man har blivit arbetslös tills man får ut pensionen.

Hur sunt är det?

Simon Hedlin Larsson