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The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

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Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#61

Post by jerf »

anovikov wrote: post #4

How can a shortfall happen, technically? I mean, why not just print enough money to inflate it, to cut real values of pensions to make ends of the system meet? After all pensioners aren't likely to riot.

At this scale, it's not just about money. You have to think about social structure as well. Suppose we did inflate the heck out of our currency and hand it all to our retirees. What would that do to the economy? Well, it would make it so that you'd make a lot more money serving old people, be it for their needs or their wants, than doing other things that people current profitably do. It rearranges the entire economy, in ways that are not necessarily sustainable in the long term. For instance, just as a limit exercise, you can't afford everyone go into geriatric care and stop growing food because food is no longer profitable enough. You can't actually get to that point because everyone would starve, of course, but you can get seriously deep into that sort of misallocation at smaller scales. (More realistically, "should I go into a STEM career or go work at the old folk's home?" Of course you can't get 100% to the latter but you can reallocate a lot in that direction.) Individually the economy doesn't care if one person goes into engineering or goes to work for retirees, but at scale that matters a lot.

The real problem with these pension promises isn't just that we're promising money we don't actually have... the problem is that we're promising a quality of life we can't sustain. We can't give every retiree a life that matches their pre-retiree life in most material ways (perhaps minus a mortgage), and promise them all the best health care that they could possibly want, and promise them that they can retire into this at 65 and keep all these benefits no matter how long their life span may improve, and that no matter how the social winds may blow in the future or how the economic winds may blow in the future that these benefits are written in stone. This ultimately isn't about the money, it's about what they expect this money to be buying them. No amount of accounting tricks can fix these problems for real; focusing too much on "dollars" obscures this fact.

The entire concept of fixed benefits in the future is a lie. It was always a lie, even if some people have managed to cash some in. The future is not predictable enough even before we consider people trying to game the predictions themselves or changing their behavior in light of the predictions.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#62

Post by lr4444lr »

Retric wrote: post #56
verelo wrote: post #49

Earlier quoted context omitted.

The US has to pick model for right or wrong. Saying it's in everyone's best interests to look after people is totally true, but it's not really the design of the US social system. The US is free market, in a free market you look after yourself and in return are a little less regulated and/or taxed. Both work, but yeah...in the current model, it anticipates people looking after their own retirement plans. In my opinio…

US pension model (Social Security) does do redistribution just from the middle class to the lower class and single people to married people.

I doubt that's true, in fact, could be the reverse. SS is not enough in many cases for poor people to live on because they have less in savings, but if they earn too much working, they can't qualify for SS. They also have shorter lifespans. Middle class people in general live longer and can afford to retire earlier because SS complements their savings, which transfers to them the taxes on the wages of the poor.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#63

Post by RobertoG »

SilasX wrote: post #57
RobertoG wrote: post #3

I get how an excess of pensioners (not enough workers) in an economy can be a problem. I get how an excess of unemployed people (people without a job) can be a problem. What I don't get is how both can be a problem at the same time.

By being unable to find productive work for the workers. You can't produce anything for the retirees, and you can't find out how to make the workers produce.

So, we have enough of everything? It sounds like good news for the pensioners.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#64

Post by PaulHoule »

QuarterReptile wrote: post #24
RobertoG wrote: post #3

I get how an excess of pensioners (not enough workers) in an economy can be a problem. I get how an excess of unemployed people (people without a job) can be a problem. What I don't get is how both can be a problem at the same time.

I think you're simplifying the relationships too much. First of all, you can't very easily make more qualified workers because you promised too much to too many pensioners. Those pensioners are counting on promises from their too-big-to-fail governments. Meanwhile, the government is funneling an ever-greater percentage of revenue from productive pursuits to pensions. Once you're in the trap, it's not as simple as pen…

Government and private pensions have the same problem, because even the stock market is "pay as you go" in the sense that somebody has to buy stocks in the future at a high price to support future price appreciation.

Either private or government investment could, in principle, lead to economic growth that could expand the physical size of the economy. If people saved more money, I see the price of stocks going up, but I don't know how that translates to real growth in the economy, more jobs, better jobs, etc. Look at how Apple and so many other companies pile up cash, how telecoms refuse to invest in better broadband, the EU can't put together a realistic plan for Greece, and how economic investment is channeled through a series of "bubbles"; just yesterday I heard an acquaintance just bought a GM Suburban, than I heard on the radio that Banco Santander was not happy with their subprime auto loan portfolio in U.S. and then that GM is closing a factory.

Yes, American consumers didn't wait one minute after the price of gas dropped to get big, expensive vehicles because they assume the low prices are permanent. Ray Diallo had a bad year because he assumed high oil prices are permanent. It is completely predictable that oil prices are volatile on a five-year horizon because producers and consumers will change their behavior a LOT on account of a 5x change the price of crude, but people get blindsided every time.

The lesson of history us that people don't learn from history. Add up another 30 years of economic mismanagement in large and small ways and 2050 is not looking so bright.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#65

Post by Retric »

lr4444lr wrote: post #62
Retric wrote: post #56

Earlier quoted context omitted.

US pension model (Social Security) does do redistribution just from the middle class to the lower class and single people to married people.

I doubt that's true, in fact, could be the reverse. SS is not enough in many cases for poor people to live on because they have less in savings, but if they earn too much working, they can't qualify for SS. They also have shorter lifespans. Middle class people in general live longer and can afford to retire earlier because SS complements their savings, which transfers to them the taxes on the wages of the poor.

The gap is large enough it's really just math. TLDR; Some people get 70+% more per dollar put into the system.

Further, there is no income cap on social security, you simply get deferred payments, but at 70 earnings stop counting. AKA if you take it at 62 and make enough money to get 1/2 as much from SS at 70 it's recalculated and you get more money than if you had started at 62.

Anyway try some numbers: https://www.ssa.gov/OACT/quickcalc/index.html Date of birth: 6/15/1950 Current earnings: $40,000.00 Retirement month: 6/2020 = $1,564.00/month.

Double earnings to 80k and keep other number the same and you get: $2,510.00 which is much less than 3,128 or 2x $1,564.00/month. Drop that to 20k and it's still $1,090.00.per month which 73.7% better ROI than someone making 80k per year.

Now yes lifespan is critical, but not enough to make up the 73+% gap. Marriage on the other hand can provide more than a 50% benefit on it's own which shifts things even more dramatically.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#66

Post by arjie »

RobertoG wrote: post #43
arjie wrote: post #37

Earlier quoted context omitted.

Yeah, but the number of jobs is independent of either of these numbers. You could have no jobs and lots of pensioners. Then everyone wants to work but can't and those who once were working have retired.

OK, so, there are not jobs because the economy doesn't need them. So, the economy is producing the same with less jobs. So, where is the problem for covering the needs of the pensioners?

Haha no. There's too much wrong with your understanding for me to help. Good luck but you're on your own.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#67

Post by SilasX »

RobertoG wrote: post #63
SilasX wrote: post #57

Earlier quoted context omitted.

By being unable to find productive work for the workers. You can't produce anything for the retirees, and you can't find out how to make the workers produce.

So, we have enough of everything? It sounds like good news for the pensioners.

That doesn't follow at all and isn't implied by the above model.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#68

Post by RobertoG »

SilasX wrote: post #67
RobertoG wrote: post #63

Earlier quoted context omitted.

So, we have enough of everything? It sounds like good news for the pensioners.

That doesn't follow at all and isn't implied by the above model.

Ok, why are we unable to find productive work for the workers?

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#69

Post by pixl97 »

RobertoG wrote: post #42
pixl97 wrote: post #35

Earlier quoted context omitted.

Because you're ignoring problem 3. Not enough work. Modern economies run into issues with lots of investment in bubbles that don't increase productivity. Housing booms that rapidly increase the cost of housing don't increase productivity. Investing in ever riskier twisted financial exploitations does not increase productivity. Having huge amounts of taxable income filtered out of the country robs a country from futur…

OK, but now I don't get how 'not enough work' (I suppose you mean jobs) is a problem. I get how not enough real resources (not enough food, not enough housing, not enough infrastructure, not enough knowledge) is a problem but 'not enough work' doesn't sound like a hard problem.

Distribution is the hard problem. Capitalism has operated in such a manner that labor has been the means of income redistribution. After you work some time you can invest your income in a market that will provide and even more productive future.

When labor becomes disconnected from gaining capital things become problematic in countries that do not believe in wealth redistribution. If you don't have a job "It's your fault for not working hard enough", if you are getting money from the government "you're a welfare queen". You can run into a system that deadlocks. There is plenty of production. There is lots of need. But there is no means of wealth transfer between those two groups and you can run into a state of consumption collapse.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#70

Post by PaulHoule »

RobertoG wrote: post #3

I get how an excess of pensioners (not enough workers) in an economy can be a problem. I get how an excess of unemployed people (people without a job) can be a problem. What I don't get is how both can be a problem at the same time.

Disability is an increasing issue, particularly mental health related disability.

A very intelligent and agreeable but severely depressed man came out to my farm and I tried to get him to move rocks from one pile to another. He could do it as long as I supervised him, but could not sustain the effort when I was away.

Any employee takes a certain amount of time to manage, and that sets it's own floor on the "minimum cost" of hiring an employee.

The opiate epidemic is related to a syndrome of chronic pain which is very much a mind-body phenomenon from the viewpoint of biological psychiatry. People get back pain, neck pain, headaches, etc. and there is really no safe and effective treatment -- contacts with the medical system usually make it worse, but often the problem clears up when the patient gets a new job.

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