Monday, May 15, 2006

What pension crises?

So what's with this pension crises?

Stories like this:

..claim that because more of us will be older, without new young people to support us, there will be some sort of government financial meltdown.

All the facts show that young people tend to be better educated and better qualified than older, due to e.g. spread of best-practise teaching, interactive whiteboards, more of them going to University, the availability of Wikipedia. Better qualified people get paid more. People who get paid more produce higher tax revenues per person.

So why can't we have a smaller number of people contributing enough to support a larger number of old people?

I've not done the maths so I don't know how realistic the idea is - but there's enough truth in it to make it worthy of mention in the debate. Yet it never is. Why?

Similarly 'ooh Europe has a problem because its population is shrinking relative to other regions' - but if it's the most powerful and has the best ideas.. who cares about numbers?

Both theories make the mistake of assuming people are of equal economic or cultural value. Generally, younger > older.


Chris said...

Surely there's an inflationary factor to take into account though? I agree the smarter people = smarter society = make more money, but are you creating any more actual REAL wealth? Yes smart people on trading floors and big corporate lawyers and the like make lots of money on paper, but this just puts up the prices of various commodities, which we still have to supply to the old people. What we need to do overall is increase productivity whilst holding back on inflation. I'm not an economics expert, but that's no easy feat!

Mach said...

I'd argue that these newly-affluent young people drive up the prices of luxury items that they seek, but the prices of basics are constantly driven down.

I remember people saying 5 years ago that beer would be £10/pint by now. It's £3 a pint (and I live in London).. and I paid that in places in 1999. Milk is 40p a pint, now that I buy it from Sainsbury's. It was 35p in 1996 when I bought it from a corner-shop..

So I think economic's conception of inflation is inconsistent with most people's experience of it.

Old people often already own their own homes so house prices don't affect them.

So I think you have a fair point, I just recommend remembering that inflation is a measure that takes so many things into account that aren't relevant to this specific impact.

Mach said...

Labour restored the link between pensions and earnings today (rather than prices) that was broken by the Tories in 1981.

It's a strike for social equality sure.. but I prefer equality of opportunity to equality of outcome. This policy doesn't appear to be in-line with that!