5 ms·

I'm not sure how you would fund pensions without growth

asdfasgasdgasdg 7y ago
I mean it's obviously possible. "Just" require prefunding without any growth assumptions. Of course, it would be tremendously expensive and workers would not appreciate the effect on wages.
- dharma1 7y ago
  Imagining zero growth (-2% or so with inflation) and long life spans, I think the numbers would look pretty bad for most people
  - asdfasgasdgasdg 7y ago
    Zero real growth is 0%, not -2%. -2% would be contraction. Even still, yes, it's pretty bad. People would have to work longer. Assuming kids account for about 25% of consumption during child rearing years, and assuming 40 years of work and 30 years of retirement (i.e. you live to 90), you wouldn't quite have to save 50% of your net, but the fraction would be significant. Many Americans do not have the head room to make the type of sacrifice. But many do and choose not to.
digitalengineer 7y ago
Agreed. you can not. There are just too many pensioners: "Between now and 2050,the number of older persons will rise from about 600 million to almost two billion. In less than 50 years from now, for the first time in history, the world will contain more people over 60 than under 15" https://www.cassandracapital.net/post/the-unprecedented-demographic-boom-and-bust https://www.cassandracapital.net/post/the-unprecedented-demo...
- atemerev 7y ago
  This is why UBI is impossible. It is about 10x harder financially than pension funds.
- demosito666 7y ago
  And how is that a problem? As long as productivity grows at same rate as workers/pensioners ratio, the portion of gdp that should go towards retired ppl remains constant.
  - magicalhippo 7y ago
    That productivity will have to come from automation, and a robot doesn't get a salary so doesn't have to pay income tax. So that'll have to change if you plan on using the productivity growth to fund pensions, no?
    - okr 7y ago
      You might not need a pension if you have a robot that is highly productive towards you. Everything might be so cheap. All the externalities that one needs to pay for a lot today, might be vastly available tomorrow. I think it is hard to predict the future.
      - dharma1 7y ago
        This is an interesting thought experiment. I think it's conceivable the cost of many things one needs would fall as a result of automation - but there are many things which have limited supply and that there would still be competition for, many of them consumable - so you would still need a source of income for these.
    - demosito666 7y ago
      Either that has to change, or taxation in general has to change. If 10% of your population can produce enough goods for everyone and yet the nation is struggling with providing pension for 40%, this means that the problems do not lie in the economic plane. It gets messy when multiple competing countries are involved though.
Double_a_92 7y ago
A successful no-growth situation would imply that everything that the consumers require can be easily provided. So it would eventually become a distribution problem...
djrobstep 7y ago
I don't understand. You simply pay pensions with public money in the non-growing economy.
vkou 7y ago
Imagine that you have a steady state society, of 1,000 people. There are no technological advancements, there is no population growth, there is no growth. Each year, 12.5 people are born. Each year, 12.5 people die. The average age of death is 80. Each year, each person needs to consume 10 widgets to live. Each year, a healthy, working-age person can produce 20 widgets. This society can clearly sustain itself, as long as each person spends half of their life working. To keep things simple (And to stick it to the DINKs), let's pretend that everyone has children, and is responsible for raising them until they can start working. How would this society operate? Well, you'd spend the first 25 years of your life supported by your parent (Who would work for 25 years to support themselves and you). You'd then spend 25 years supporting yourself, and your child. You'd then spend 15 years hoarding widgets, so that you can support your retirement. You'd retire at 65, with 150 widgets in the bank, and die at 80. Essentially, you spend 40 years of life as a maker (Who can support two people in this time), and 40 years of your life as a taker (Who requires half of a maker's economic output to support them). Everything works out wonderfully, and nobody needs a pension! Just save all the surplus you make between ages 50 and 65, and retire..! Except that there's two important differences between this abstraction, and the real world. 1. You can't hoard widgets in the real world. Goods have a very limited shelf life. Money gets eaten by inflation. 2. Even if the average age of death is 80, most people aren't average. If you were solely reliant on your personal hoard of widgets (Which was consumed away by spoilage/inflation) to see yourself through old age, you might still run out of widgets, because you happened to live till 83. Or you might have dropped dead two years after you retired - and thus all your savings would go to naught. Pensions (Or social security, or some other similar instrument) are a solution to this problem. They solve the spoilage and inflation problem, by having your retired life being subsidized by widgets produced today (So they did not drop in value). They solve the 'average person' problem by pooling the risk, so that the very occasional person who happens to live to 90 doesn't go broke. They don't actually require any GDP growth, to work. What they do require is: 1. The same widget created today being more valuable than a 20-year old widget. (Due to spoilage or inflation. If we didn't have spoilage or inflation, we wouldn't need pensions.) 2. Proper levels of funding. The math for # of years worked, and # of years not worked has to add up. 3. There to not be GDP shrinkage. Things get problematic if your gdp or working population shrinks (Whether long-term, or short-term) - in that situation, pensioners have to take a haircut. Since #1 is a given of the world we live in, and you are not asking about #3, all you need to handle correctly is #2.

I mean it's obviously possible. "Just" require prefunding without any growth assumptions. Of course, it would be tremendously expensive and workers would not appreciate the effect on wages.

dharma1 7y ago
Imagining zero growth (-2% or so with inflation) and long life spans, I think the numbers would look pretty bad for most people
- asdfasgasdgasdg 7y ago
  Zero real growth is 0%, not -2%. -2% would be contraction. Even still, yes, it's pretty bad. People would have to work longer. Assuming kids account for about 25% of consumption during child rearing years, and assuming 40 years of work and 30 years of retirement (i.e. you live to 90), you wouldn't quite have to save 50% of your net, but the fraction would be significant. Many Americans do not have the head room to make the type of sacrifice. But many do and choose not to.

digitalengineer 7y ago

Agreed. you can not. There are just too many pensioners: "Between now and 2050,the number of older persons will rise from about 600 million to almost two billion. In less than 50 years from now, for the first time in history, the world will contain more people over 60 than under 15" https://www.cassandracapital.net/post/the-unprecedented-demographic-boom-and-bust https://www.cassandracapital.net/post/the-unprecedented-demo...

atemerev 7y ago
This is why UBI is impossible. It is about 10x harder financially than pension funds.
demosito666 7y ago
And how is that a problem? As long as productivity grows at same rate as workers/pensioners ratio, the portion of gdp that should go towards retired ppl remains constant.
- magicalhippo 7y ago
  That productivity will have to come from automation, and a robot doesn't get a salary so doesn't have to pay income tax. So that'll have to change if you plan on using the productivity growth to fund pensions, no?
  - okr 7y ago
    You might not need a pension if you have a robot that is highly productive towards you. Everything might be so cheap. All the externalities that one needs to pay for a lot today, might be vastly available tomorrow. I think it is hard to predict the future.
    - dharma1 7y ago
      This is an interesting thought experiment. I think it's conceivable the cost of many things one needs would fall as a result of automation - but there are many things which have limited supply and that there would still be competition for, many of them consumable - so you would still need a source of income for these.
  - demosito666 7y ago
    Either that has to change, or taxation in general has to change. If 10% of your population can produce enough goods for everyone and yet the nation is struggling with providing pension for 40%, this means that the problems do not lie in the economic plane. It gets messy when multiple competing countries are involved though.

Double_a_92 7y ago

A successful no-growth situation would imply that everything that the consumers require can be easily provided. So it would eventually become a distribution problem...

djrobstep 7y ago

I don't understand. You simply pay pensions with public money in the non-growing economy.

vkou 7y ago

Imagine that you have a steady state society, of 1,000 people. There are no technological advancements, there is no population growth, there is no growth. Each year, 12.5 people are born. Each year, 12.5 people die. The average age of death is 80. Each year, each person needs to consume 10 widgets to live. Each year, a healthy, working-age person can produce 20 widgets. This society can clearly sustain itself, as long as each person spends half of their life working. To keep things simple (And to stick it to the DINKs), let's pretend that everyone has children, and is responsible for raising them until they can start working. How would this society operate? Well, you'd spend the first 25 years of your life supported by your parent (Who would work for 25 years to support themselves and you). You'd then spend 25 years supporting yourself, and your child. You'd then spend 15 years hoarding widgets, so that you can support your retirement. You'd retire at 65, with 150 widgets in the bank, and die at 80. Essentially, you spend 40 years of life as a maker (Who can support two people in this time), and 40 years of your life as a taker (Who requires half of a maker's economic output to support them). Everything works out wonderfully, and nobody needs a pension! Just save all the surplus you make between ages 50 and 65, and retire..! Except that there's two important differences between this abstraction, and the real world. 1. You can't hoard widgets in the real world. Goods have a very limited shelf life. Money gets eaten by inflation. 2. Even if the average age of death is 80, most people aren't average. If you were solely reliant on your personal hoard of widgets (Which was consumed away by spoilage/inflation) to see yourself through old age, you might still run out of widgets, because you happened to live till 83. Or you might have dropped dead two years after you retired - and thus all your savings would go to naught. Pensions (Or social security, or some other similar instrument) are a solution to this problem. They solve the spoilage and inflation problem, by having your retired life being subsidized by widgets produced today (So they did not drop in value). They solve the 'average person' problem by pooling the risk, so that the very occasional person who happens to live to 90 doesn't go broke. They don't actually require any GDP growth, to work. What they do require is: 1. The same widget created today being more valuable than a 20-year old widget. (Due to spoilage or inflation. If we didn't have spoilage or inflation, we wouldn't need pensions.) 2. Proper levels of funding. The math for # of years worked, and # of years not worked has to add up. 3. There to not be GDP shrinkage. Things get problematic if your gdp or working population shrinks (Whether long-term, or short-term) - in that situation, pensioners have to take a haircut. Since #1 is a given of the world we live in, and you are not asking about #3, all you need to handle correctly is #2.