And not so much social security, but here in the US, rather medicare, which is actually going to be a bigger problem than social security. It reminds me of the ending speech Robert Shaw gives in "Force 10 from Navarone;"
"Yes, we did it. But before we can start awarding ourselves Victoria Crosses and Congressional Medals of Honor and so on and so forth and such like, I think I better point out, that;
1. We're now on the wrong side of the river.
2. We have no hope whatsoever of rejoining the partisans.
and 3. This neck of the woods will soon be crawling with very bad-tempered Germans.
And 4. I don't think that our little genius, Sergeant Miller there, has even got a box of matches left in his suitcase.
And so therefore I think we can it gentlemen, that we are going to have a very
long
walk
home."
And in a similar manner I like to point these dire things out. Which brings me to my chart o' the week; Pension Entitlements as a Multiple of Economy Wide Earnings
See, the concept behind this ratio is that pensions or pensioners have to be funded/paid with earnings from the economy. It's not like once you hit retirement age, the money just all of the sudden POOFS, there it is. It has to be funded some how. And as a means to measure how "generous" or "stingy" a country is with their childrens' money..er...I mean... towards it's elderly,
you can take the entitled pensions and divide it by the economy wide earnings to see how much in pensions people are entitled to for the amount of work they do in any given year. A lower multiple means you work a lot, but don't get a lot. And a higher multiple means you work a little, and get a nice big fat pension. I like to put it into political terms, basically calling it a measure that shows which politicians figured out they could bribe a voting block by promising grand retirement benies in the future, knowing full well they'd be dead by the time people figured out there was no way to fund those benies. But hey, those politicians had nice hair and nice smiles. And they cared. Can't forget that, they cared, and that's all that matters.
In any case, while we think it's going to be bad here in the US (as I surmise there is also a Baby Boom wave about to hit retirement in Canada and Europe as well) it's nothing compared to places like Greece where your pension "entitlement" is 15 times a year's worth of Greece's economic earnings.
Maybe I should visit Mexico.
I guess I'd better just remortgage the trailer and see what runs out first the food or the propane.
ReplyDeleteCapitaine, hey I've just received your book!!
ReplyDeleteHowever, I have never believed the rediculous promise of "state funded" old age pensions. My parents received it, but they were never expected to live beyond 65 years, which they did,and were therefore happy.
I expect to live to 80-90-100 years. And I expect to be working all that time. Hey, I keep healthy.
However, I really resent paying into the governmetn pension scam as I know it cannot support it's promiscuity.
Message to government: Stop taking my money, for cryibng out loud. Leave it with me and I will take care of me!
Aren't you mixing a stock and a flow, here? NPV of pensions is a lump-sum; earnings from the economy is a recurring event. Taking a figure of total pensions = 6x the annual economic earnings, roughly the US figure, I would argue that a typical pension assumes ~20 years of post-retirement benefit, so over a 20 year period the economy will have to transfer enough to pensioners to aggregate a PV of 6x the annual income (how defined, by the way?). This represents an annual transfer of ~40% of income, assuming 3% real growth in transfers (I think I have the adjustment right) - but that assumes no growth in the economy. If the economy grows at a similar rate, we are talking about a transfer of ~30% of the annual income. It wouldn't surprise me if pension assets constitute close to that share of the capital markets - so that is what pensioners, in aggregate, will be getting in any event.
ReplyDeleteI don't mean to minimise the problem - especially in countries (typically European) where unfunded pension liabilities are staggering. Over here the problem, while huge, is much less overwhelming.