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But I'm paying taxes for my pension, and my kids will pay taxes for theirs. I know that the economics don't actually work like this, but this is the social con

But I'm paying taxes for my pension, and my kids will pay taxes for theirs. I know that the economics don't actually work like this, but this is the social contract.

myrmidon 5mo ago
You need to pay taxes and have kids for the numbers to work out. If your pension benefits are calculated based on a 4 workers/retiree ratio, but then your whole generation has like 1 kid per family then the system will obviously break down...
- triceratops 5mo ago
  But why? That would imply a worker 30 years ago produces only as much as a worker today. Which is obviously untrue.
  - myrmidon 5mo ago
    No, it would only imply that the worker/retiree income ratio (and tax/pension burden) are somewhat constant which is arguably the case; german pensions specifically rise with wages and get adjusted for inflation. Productivity gains on the other hand get easily eaten up by increased consumption/expectations, or are overstated to begin with: producing 5 times more TVs/ipads does not make the plumber cheaper (nor a house), and unaffected professions actually suffer (=> baumol effect).
    - triceratops 5mo ago
      > german pensions specifically rise with wages Is that because higher earners make higher contributions to the pension plan?
      - myrmidon 5mo ago
        No, it is because pensions are scaled (yearly) proportionally to wages (simplified, the actual process is more complicated)
        triceratops 5mo ago
        People automatically get a higher pension because they make more money? Without actually paying more into the system? That's an obviously flawed and unfair system, bound to fall over no matter what.
        myrmidon 5mo ago
        Working people collect points each year based on their income relative to the average (this is proportional to how much they pay). Retirees then get paid based on how many points they have. Both the worth and the "cost" of those points scales with average income every year. This basically autocompensates for inflation and rising wage levels, but decreases in population size are problematic.
- SkiFire13 5mo ago
  As I said, this is how the economics of pensions work. But the social contract does not care about that.

But I'm paying taxes for my pension, and my kids will pay taxes for theirs. I know that the economics don't actually work like this, but this is the social contract.

myrmidon 5mo ago

You need to pay taxes and have kids for the numbers to work out. If your pension benefits are calculated based on a 4 workers/retiree ratio, but then your whole generation has like 1 kid per family then the system will obviously break down...

triceratops 5mo ago
But why? That would imply a worker 30 years ago produces only as much as a worker today. Which is obviously untrue.
- myrmidon 5mo ago
  No, it would only imply that the worker/retiree income ratio (and tax/pension burden) are somewhat constant which is arguably the case; german pensions specifically rise with wages and get adjusted for inflation. Productivity gains on the other hand get easily eaten up by increased consumption/expectations, or are overstated to begin with: producing 5 times more TVs/ipads does not make the plumber cheaper (nor a house), and unaffected professions actually suffer (=> baumol effect).
  - triceratops 5mo ago
    > german pensions specifically rise with wages Is that because higher earners make higher contributions to the pension plan?
    - myrmidon 5mo ago
      No, it is because pensions are scaled (yearly) proportionally to wages (simplified, the actual process is more complicated)
      - triceratops 5mo ago
        People automatically get a higher pension because they make more money? Without actually paying more into the system? That's an obviously flawed and unfair system, bound to fall over no matter what.
        myrmidon 5mo ago
        Working people collect points each year based on their income relative to the average (this is proportional to how much they pay). Retirees then get paid based on how many points they have. Both the worth and the "cost" of those points scales with average income every year. This basically autocompensates for inflation and rising wage levels, but decreases in population size are problematic.
SkiFire13 5mo ago
As I said, this is how the economics of pensions work. But the social contract does not care about that.