Gee the Swiss must be awful stupid, 'cause that is what we do and yes of course it works. A Swiss state pension at the max makes up about 20% of a pension's annual income the rest comes from the assets you claim will make no difference, plus savings. Mandatory pension contributions starts at age 25 (7%) and increases over the years until it reaches about 11% in your mid 50s by law this is matched 100% by employers, but most actually contribute more often as high as 200%.
It is correct that significant personal savings won't affect the dependency ratio but they will mitigate the impact of the changing dependency ratio - which is what is important. If people have significant assets saved, they can rely less on the state. Relying on the state for 1/6 of your post-retirement income rather than 1/2 of it equalizes the impact of a dependency ratio changing from 6:1 to 2:1.
As an aside, I do find it a bit odd that you have another thread on the go bemoaning the poor quality of postings on AAM these days and then you are this rude/patronising to a poster who does indeed understand pensions and the problems surrounding their provision. But I digress...
Am I missing something here? Sufficiently increased savings could eliminate retiree's "dependancy" on workers, right? Or does inflation or some other macroeconomic factor torpedo this notion?But the idea that increased savings can address the problem of a huge shift in the dependancy ratio simply does not stack up.
Am I missing something here? Sufficiently increased savings could eliminate retiree's "dependancy" on workers, right? Or does inflation or some other macroeconomic factor torpedo this notion?
Are you suggesting that workers today, in aggregate, cannot defer consumption to provide for their retirement?
I take the point that a very high aggregate saving rate would adversely impact economic activity today.
That is precisely what the world's most sustainable pension systems (New Zealand, Australia, Norway) are doing. Are you suggesting that they are wasting their time?
That is exactly what I am saying. I wish I had expressed it so well.
They may have a bigger slice of the pie than other countries in the future but it doesn't make the pie any larger.
It's a nice analogy, but in "Farm Ireland" maybe 10 of your 36 workers are engaged in producing real value for humanity (stuff like agriculture, industry, infrastructure, transport, vital services). These are also the areas where automation and technology has (and will continue to have) the most impact. The amount of labour needed in the transport industry will plummet over the next 20 years, for example.Let me try an analogy. If 42 people live on a farm and 36 work and 6 are retired that describes the situation we have now. In 40 years time only 28 people will be working and 14 will be retired. That will be difficult. It does not really matter who owns the farm.
Let me try an analogy. If 42 people live on a farm and 36 work and 6 are retired that describes the situation we have now. In 40 years time only 28 people will be working and 14 will be retired. That will be difficult. It does not really matter who owns the farm.
And your assumption is that everything must be produced on the one farm and there will be no productivity gains etc
If we maintain the current ratio into the future...
It's a nice analogy, but in "Farm Ireland" maybe 10 of your 36 workers are engaged in producing real value for humanity (stuff like agriculture, industry, infrastructure, transport, vital services). These are also the areas where automation and technology has (and will continue to have) the most impact. The amount of labour needed in the transport industry will plummet over the next 20 years, for example.
Several more of our 36 are producing luxuries that retirees would be happy to produce for free - art, community services, hospitality and the like.
The rest of our 36 are selling consumer debt, nail care, dog grooming, or suing one another. Stuff that adds little or no value to humanity, in other words.
If the major impact of this shrinking dependancy ratio in the west was a shift from the high street and office to the farm and the factory, well, good. The west can consume and waste an awful lot less resources and labour without any significant loss in welfare or happiness.
Am I naieve in thinking that, when pressed, the world will value farmers more and lawyers less?
surely workers can set aside the excess from harvests during their working life and can consume same during retirement?
Even cash has produced a real return of 1.5% per annum over a 50 year period (Barclays Equity-Gilt Study 2015) and equities and gilts have produced far greater long term real returns.
Is this not because there has been real increase in the productive capacity of the economy, over the last 50 years. This will be very difficult to maintain in the face of a decreasing workforce.
I will have to think about the Japanese experience and deflation
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