I don't think I'll ever get tired of posting the chart ZeroHedge put together with BLS statistics showing that the 55+ cohort has, in practical terms, monopolized the 'economic recovery' since 2008.
Anecdotally I've seen more and more 60+ workers doing line-level gigs like cashier or low-skill retail than ever. I think there's an undercurrent of discrimination against youth, actually, in that the 55+ group will be dependable and complacent because they need to work and therefore will show up to work.
In the modern US economy, longevity in one firm or role is actually bad for a young person's career! There are no pensions to earn. There are limited annual raises that are lower than inflation. On and on and on.
I'd be a lot more sympathetic to the plight of the elderly in such a position if they weren't, you know, basically kicking away the ladder they used to climb to the top, spend the country broke, and then continue to vote entitlements while passing a faux-future of success demanding everybody get a Bachelor's to even be a Secretary answering phones. This whole system is so broken pointing it out sounds extreme or mean, but it's just obvious to me over these past 15+ years of working.
I just got my SS statement the other day, and was extremely proud to see that every year I was eligible to work, even if I was going to school / college / etc, I did work. Not a single year without an above the board job. I don't think a lot of Millenials will be able to come anywhere near it, and I don't think it's entirely their fault. End of my $0.02 that is really worth about 1/8 of that...
> I'd be a lot more sympathetic to the plight of the elderly in such a position if they weren't, you know, basically kicking away the ladder they used to climb to the top, spend the country broke, and then continue to vote entitlements while passing a faux-future of success demanding everybody get a Bachelor's to even be a Secretary answering phones. This whole system is so broken pointing it out sounds extreme or mean, but it's just obvious to me over these past 15+ years of working.
It's funny to think that this was exactly what I was thinking when I'd been working for 10+ years in my early thirties looking for a house after they'd skyrocketed in value the previous few years. Inflation had eaten away at any savings I'd made, gas lines were a recent memory as well as several recessions one after the other. Oh, this was in the early 1980s.
I get it. I've got kids coming into this economy and I'm worried for them. I also get that there are a lot of people my age who really are self-centered a-holes and consistently vote to keep the pie moving up toward them.
What I think we need is massive infrastructure investment funded by both current taxes (to get the people with money to pay) and low cost debt (so the beneficiaries of the investsments can pay) to kick the hiring structure down to the people that can do those jobs.
For sure - I think there's a middle ground, a real sweet spot where infrastructure investment puts able bodies to work, pays them a fair wage (or maybe generous so they spend/kick-start consumerism/pay down debt), and actually improves the long-term outlook of the nation. Those FDR "make work" programs did a lot of good things that I think we'd be wise to study for potential emulation. The CCC initiative.
Politically, to a large voting bloc - disenfranchised Millenials - I think it could pull some water (not to mention stir up encouragement from the older population that "those dang kids" are doing something good with their time). People would have to go where the work is, more than likely, but that's a trade-off. Unfortunately a great deal of the "low interest debt" seems to be funneling into equities and buy-backs, only worsening the transfer of wealth to investor classes rather than working classes, at a time when, really, it doesn't make sense to do that.
I'm amazed that this is the first halfway-reasonable post to come out of this discussion. The real story here is the demographic breakdown the western world is experiencing, and that Japan has been knee-deep in since the 90s. This has tons of implications, from expected 401k returns that are expected to fund our retirements, to the evidenced fact that older people are working longer, retiring later, and hence eating up a lot of the income and job gains made in the last decade.
Honestly it took me a long time to turn 'anger' into 'acceptance' and then into 'context' regarding this subject. I was raised in a very frugal home that spent good money on "good" things (ex: education, learning experiences, an Encyclopedia Set for Christmas one year), avoided really buying in to materialism (ex: driving older, paid off cars) and I appreciate how different this was from apparently a great deal of my peers. It's unfortunate. If I could go back and tell my parents to cool it with the "success is earned here in the US more often than not" line of motivation and be a little more realistic about power dynamics, I wouldn't have spent as much time trying to figure it out, to see things as they kind of sort of work. I'm not angry anymore, per se, just becoming a grumpy old man, as one is wont to do.
What really angers me (coming from a similarly frugal upbringing and taking that into my adult life) is how frugality has been penalized at a macro level. The last 7 yrs of zero interest rates, the easy access to money prior to that, etc, have just made responsible living actually seem 'irresponsible'.
Frugality and responsible budgeting are "superpowers".
Your neighbors who took those zero interest rate loans and are living "the life" going on vacations and buying new cars... it's all a big show, and it looks grand from outside, but they're probably experiencing all kinds of stresses that you don't. These are the kinds of people who keep the psycho-pharma complex profitable.
Except that when the majority of the voting population succumbs to it, they end up voting for policies/politicians to paper over or backstop their problems.
I'm 59. I don't remember doing that. (And are we actually broke?) I do remember voting. Everyone I voted for said one thing to me, and did what they were told by their donors and the MIC.
I hope I live long enough to see what the currently upcoming generations get blamed for in their old age.
I guess it depends on how you define broke. Is our debt greater than 100% GDP? Yes is it. Is there any sort of plan to repay that debt in a lifetime? No, not really. A lot of people would consider that broke.
Any time there is a budget deficit, there is borrowing. The borrowing is done against future earnings by future taxpayers. Now it seems to me that if money is borrowed and not paid entirely back within a generation, then those who borrowed have essentially stolen wealth from their children and grandchildren.
That's (if the unit of analysis is "us", as in the country, rather than the government itself) arguably loosely analogous to one piece of one's personal debt exceeding 100% of annual income, and not at all the definition of being broke.
> Is there any sort of plan to repay that debt in a lifetime? No, not really.
That's having long-term structural debt, which, again, is nothing like being broke.
> A lot of people would consider that broke.
I don't really think that's true. The government is neither unable to pay its current obligations (it occasionally approaches choosing not to do so, but is nowhere close to being unable to do so).
But what if the money borrowed was invested in such a way that it will create returns that benefit the next generation? Education and infrastructure would be obvious examples. I'm not saying that this is what happened but borrowing in itself doesn't necessarily inflict any harm on future generations.
If any generation had the power to change things how things ended up today, it was yours. To pick one example: all the supreme court justices who presided over the Citizens United case were appointed during your prime years.
If a generation inherits a better world than they leave to their kids, I don't think they get to blame how hard it would have been to have done better. The buck's got to stop somewhere.
And having failed to do little but enrich themselves, at the very least your generation can stop talking about lazy and entitled the younger generation is. The hypocrisy is staggering.
If you're going to blame voters for the Supreme Court nominees of their presidential picks, then it's fair to say that the political class is completely disconnected from the common people. In other words, it's not their fault, but rather the Elites'.
Those nominated for the Supreme Court come from a short list of federal judges and other legal wonks. No average voter has any idea of the name of any of these people. Therefore, they cannot be said to be voting on a candidate based on their Supreme Court picks, except in the most liberal/conservative sense.
Case in point: Merrick Garland. He was on everyone's short list, including mentions by Republican leaders as a candidate who could be confirmed by the Senate. But the average voted hadn't heard his name before he was nominated by Obama.
It's really the political class that sold us out to privatization and globalization. That's where the buck stops. It happened regardless of who was voted in. Both parties were captured, and 3rd parties are not a realistic option in our system. We are /not really/ a democracy.
"Whoever is responsible, it's not me and my friends!"
> No average voter has any idea of the name of any of these people.
"I would like to not do any research, because taking responsibility is hard"
> the average voted hadn't heard his name before he was nominated by Obama.
Which is fine. The average voter knew (or should have known) what Obama stood for. What Bush stood for. What Clinton stood for. And so on. They could've then reasonably inferred what kind of judges they'd pick. And by looking at the age of SCOTUS judges, you have a good guess when replacements happens.
The only judge where you could've made the case is surprising given who nominated them is Scalia - he tipped a bit further on issues than Reagan.
Merrick is right in line with everything Obama ever stood for. Nobody is surprised that Obama would nominate a centrist with slight liberal leanings. The particular name might be unknown, but the choice isn't.
> It's really the political class that sold us out to privatization and globalization.
That political class didn't come into life fully formed. People voted for them, and shaped the direction of politics. And they're there because of money in politics. Which points us right back at the Supreme court, via Buckley vs. Valeo. (and Citizens United vs. FEC)
(Not to mention that many people liked the initial effects of globalization and privatization. It's not like nobody voted for NAFTA, e.g.)
Note: I still feel it's important to participate in local elections to try to have some counterbalance to the a-holes at the "Imperial" level of government.
> This fall's upcoming presidential election so perfectly illustrates that: which Wall St friendly New Yorker would you like? Both suck?
To the extent that's true, its the result of major party primary elections and other processes and the decisions voters made in those (including the decision to stay out of them.)
The grandparent didn't say anything about how the younger generations are lazy and entitled.
Her/his point was, I think, that, even people in a democracy, have very little control over what policies are followed. And that you will see that happening to you, too.
Because I feel it's necessary to challenge this...
> If any generation had the power to change things how things ended up today, it was yours. To pick one example: all the supreme court justices who presided over the Citizens United case were appointed during your prime years.
The laws overturned in Citizens United had only been on the books a scant few years, and those laws made exercises of free speech illegal.
Whether or not big money in politics is a problem, the Citizens United decision was decided in favor of free speech moreso than in favor of dark money, and it's quite likely that if you voted for the presidents who appointed the majority justices in citizens united that you also voted for the guy whose law was overturned by it. Ergo, casting it as a one-side versus the other form of complicity does not work.
It's a figure of speech. If you take the amount of taxpayer monies spent in questionably necessary war in Iraq (re: genuine threat to US Citizens - not interests - Citizens), toss in a large percentage of predatory student loans ($1T outstanding now), and make healthcare a ticket to insolvency, then yes, functionally speaking, we're broke. I'm just glad in 2008 the entire world felt the monetary swirlie as well, not that it improves the outlook of our species or anything, but purely from self-interest.
> I'm 59. I don't remember doing that. (And are we actually broke?) I do remember voting. Everyone I voted for said one thing to me, and did what they were told by their donors and the MIC.
You specifically, unlikely.
Your generation brought in Reagan. Your generation (along with Gen X) pretty much has run the government since 2000. The great shift to the right was largely your doing and would never have been sustained if your generation wasn't what it was. :/
You brought the country so far to the right your generation actually flipped from R to D. It was truly quite the amazing transformation from relative sanity to batshit crazy. It completely obliterated balance in this country.
> “Goldwater’s nomination in 1964 was a historical disaster for the conservative movement,” Roy tells me, “because for the ensuing decades, it identified Democrats as the party of civil rights and Republicans as the party opposed to civil rights.”
For better or worse, your generation and Gen X has to own the shift to the right in this country because you are largely the generations responsible for it. That rightward shift has gutted everything the Millenials depended on to climb economically from schools to infrastructure to rational tax policies.
I was 15. Eventually I realized wen I grew up what a disaster it was for (most of) the country to to reject a former naval officer, engineer, and family business operator in favor of an actor from monkey-movies. As well as allowing Reagan's cohort of clowns to reject Keynesian economics in favor of all this supply side fiction. Great for concentrating wealth, not so great for growing a bigger pie.
No generation is a monolith. I and lots of us were and are opposed to the rightward shift, although I'm not opposed to people having right/conservative viewpoints and acting on them. People have a right to speak, and to vote for their direction. Sometimes people win, sometimes people lose. Sometimes things go really badly, but we can't all be President or members of Congress.
You speak to your friends, you do what you can within your life, you support justice and oppose actual evil (not sloganed evil). You respect respectful people of all politics. You play with your kids and hope for the best.
You need to realize it isn't personal against you.
If a majority of a group vote in favor of X, they bear some responsibility for it. Particularly when they don't rebuke it after the fact.
> People have a right to speak, and to vote for their direction. Sometimes people win, sometimes people lose. Sometimes things go really badly, but we can't all be President or members of Congress.
Obama and HRC were (economic policy wise) 60s Republicans. Modern Republicans are basically Reagan-derivatives.
> One moment in the third Republican presidential debate encapsulates everything terrible about baby boomers and the way they’ve pillaged the U.S. economy. It came from Sen. Marco Rubio of Florida, a Generation Xer, who offered the standard line — you can hear it from the mouth of almost any American politician today — on how to keep Medicare and Social Security solvent. Rubio defended the idea that future workers will need to retire later or receive fewer benefits from those safety-net programs than current retirees. “Everyone up here tonight that’s talking about reforms,” he stipulated, was “talking about reforms for future generations. Nothing has to change for current beneficiaries.”
I don't feel the need to be polite about it when elected politicians are comfortable stating their plan to "reform" the system is to screw me and people my age in favor of another group of people.
I wish I could find the link to an American Heritage article on a female (I believe) that was on a failed crusade to overcome the amount of poverty, poor conditions and voicelessness in America for the elderly at (I believe) the turn of the century or first decades..
I am very glad many older Americans can make it. Taking care of the non-working elderly Americans is mostly a chore that I see in both my day job and my family's own history.
One true benefit of being an older worker is you don't ever have to put up with any BS at your job. I work now at the most hated retailer and love it, but will quit the minute I stop liking it. I will move on to the next part time job. When I was in the tech scene I never had the choice to leave because the pay was too good. But as an older dude, the freedom from saying "Screw you employer" is better than power or prestige
Err .. how does one get an SS statement? I'm 37 .. don't recall seeing one. Do you have to request it? As far as I know, I contribute into SS every paycheck.
I got these years in the mail several years ago, and then again last year. I looked it up at the time, and the mailing is infrequent and depends on the budget.
Serious question: I keep reading about high real unemployment in the U.S. and in Europe. Then 2 paragraphs later I will read something along the lines of how immigration is great because a large number of workers are needed in U.S. and Europe.
Can anyone point me to some well argued work that squares the above 2 sentences? I'm an immigrant to the U.S. myself, so I'm not anti-immigrant per se, it's just that some things have left me scratching my head.
While I don't have the links to provide right away, the "unemployment rate" in the US is around 6%, but to get to that number, a large number of people who haven't had a meaningful job for a long time and have "given up looking for work" are simply not counted as part of the labor force. Thus, in the US, labor force participation rates are at an all time low - directly in contrast to the low unemployment rate talked about.
A large number of workers are needed in the US to do low-wage tasks - pretty much so their employer can profit from their labor - and some of the issue is that illegal immigrants wouldn't be counted as part of the labor force (because they aren't supposed to be here), but in theory, they are displacing the opportunity for Citizens to do those jobs.
The issues are more complex than I describe, and they certainly will apply to skilled labor too (ex: nurses to care for an aging population). One of the major contentions is that companies, in reality, post jobs with requirements that are high (10+ years! X, Y, Z skills!) but offer a salary or compensation that is way, way below market value. This means that technically yes, the company can not find a qualified candidate to do the job, because they have targeted people who would be willing to do it for much less just to, well, have an opportunity to get into the US.
It is very backwards for the US to be "anti-immigration" as a general concept (it's the foundation of the nation!), so how the arguments get twisted make it hard to figure out in some ways. This explanation is simply my perspective using my observations and stuff I read, so it is not peer reviewed or anything like that!
> are simply not counted as part of the labor force
Which is why I said "real unemployment." The official rate may be 6% but the real rate may be 20% (if we were to count the people who have given up and are now on welfare).
You and I know that to be the wiser course of action, but tell that to the lady who lived in the house for 30 years and raised her family there. Maybe a low wage job is the more appealing option to that person. But that all assumes rational actors to begin with.
Or for that matter, tell that to the person who already lives in Bumphuck, IN. My wife has high school friends in situations like that. There is no cheaper place to live, but that mortgage still needs to be paid.
Land is really cheap in most of the US, that does not really help as much as you might think. Sure, your house might be 40-80k but good luck finding a good job or customers.
IMO, a lot of this has to do with housing subsides keeping people near city's who don't need to be near city's. If your rent has not kept up with inflation for the last 20+ years then why move? You don't have any equity to liquidate and rent control is keeping the price stable so just stay.
If you take SSN early you can only make so much before feds take back 50% of it for each dollar you earn. So, why lose 1/2 or more of your benefit and take a more stressful job.
I really don't see 70+ year old people working staff jobs for 50 hours a week with brutal commutes and skimpy PTO benefits, as is now the average for people holding a single role for less than 5 years.
I can see labor ages skewing upward, though, if a bigger share of the workforce adopts coworking, telecommuting and part-time/contract labor trends. This would make things easier for a share of the workforce that wants to take life a little easier than the average 30-year-old.
Recall that a union laborer with a pension plan can retire with a lifetime fixed income at age 55... and historically this sort of arrangement applied to a large share of the U.S. workforce (including many non-college-grads) not too long ago. And the people who lived/worked under that arrangement were either able to purchase cheap real estate that has since appreciated tremendously in value, or they were able to send children to college and post-college educations that secured high-paying professional incomes... or both... and this slice of society is weighing heavily on the rest of the workforce via high land prices, rent-seeking behavior, and anti-socialist politics. I think remedying this situation would help society far more than a mild economic boost due to retirement-age workers clinging to their jobs
Wait a minute my friend, people had it hard before WWII and people seem to be overly positive about the two decades following WWII. People's life expectancy has risen, so a pension plan would have to feed a person for a decade now, has to feed them for two or more. Sorry to burst your bubble, but if you are in a work force for 30 years its your responsibility to build a nest egg. Social Security was supposed to be a safety net, not a retirement plan.
Both the Left and Right, has to stop glorifying the 50s and 60s, yes they gave us 70s and stagflation and Regan.
My comment didn't speak to the pre-WWII era, but going back to the nineteenth century, the U.S. has always had a robust workforce more-often-than-not offering opportunity for upward mobility for those motivated enough to take on the work. What's significantly different now is that we have a much bigger safety net for the retired, young, ill and disabled.
But what's also different is the very recent lack of upward mobility. People born after the 70's are coming in behind their parents unless they inherit land or equity holdings. Does a worker stop paying rent to a landlord in order to build that "nest egg" as you admonish them to do so? It's hard to save for retirement when the landlord keeps coming back every year with a $300/month rent increase - because they can, because every landlord is doing it, and because elected officials and courts give them cover to do so.
That's actually why most financial advisers will tell you not to rent long term if at all possible. Purchasing a home (on average) will cost you nothing in the long term because you can refinance later in life or use it as an asset for other investments.
Essentially, not a single dollar paid to a landlord comes back to you. At least a percentage of every dollar will come back to you with a mortgage. Not to mention if you buy a home, you'll often pay less than you would renting. This makes perfect sense if you think about it, the landlord is trying to make money.
Point being, buying a home is a "nest egg" which is why 0-5% down was and is a thing.
If you don't like landlords move, and buy your own home. It's really that easy and will benefit you in the long run.
The average sales price of a home in my county is $2,000,000
The lowest county average sales price within a commuting hour of my workplace is probably $700,000, to live somewhere fairly isolated and dead.
It would only be "that easy" if I made $150k a year. That is still a top-10% salary in 2016, and yes my current salary is location-dependent, so I'm stuck between a rock and a hard place on that. I would start planning for a purchase 10 years out, but my down-payment savings money pretty much flies out the window toward debt and utilities. And most of the homes in my area sell in instant cash deals anyway, down payments are a joke. (Thanks, anonymous LLCs representing foreign wealth!)
I'm in a very particular situation with a lot of unusual disadvantages, but I'm also a web dev working for a large consultancy in one of the big US cities. Every one of my peers in the workplace is struggling with suburban homebuying expectations; while every one of my urban social peers holding less-prestigious jobs is almost certain to be working poor by age 50. The grind is already happening. There needs to be more political support for regulation and infrastructure projects that create the opportunity for working-class home ownership investments. It sounds like you support this, and your efforts are needed in politics too.
In most places around the country we need substantial decreases in infrastructure projects, scaling down of what already exists, and a much more thoughtful (does it fit the place, as well as fitting the urban road code?) application of the funding we do maintain.
We may be agreeing, but I'm always a little worried when people vaguely argue for more infrastructure. We pursue such enormous and unproductive road-building in this country in the name of growth. Induced growth is a siren's song to our governments; they've already driven us onto the rocks, but it would at least be nice if we'd address the problem before we sink the country anymore with huge debts, public and private.
Well, the climate sucks in Sacramento, but at least I'm not a rent slave! (I work as a developer, and most of us in this area don't make $150K, but we don't need to)
I love the SF/San Jose/Marin climate, but it's too crowded and too expensive to live there :-(
> The average sales price of a home in my county is $2,000,000
Why not buy a single apartment? Or buy and afterwards inhabit a house together with a small group of friends so that the amount of money is shared between the group?
Rent vs Buy definitely is geography-based. The number to compare against rent is mortgage - principal + expenses, and in some places that's much less than rent, in others it's similar, and in others it's much more.
In places where it's much more, buying is a bad idea (unless you're really committed to living there forever and are really committed to speculating that prices will only even go much higher there -- but that's taking on a huge risk, not decreasing it).
Remember, you can always just SAVE the money you would have put towards mortgage principal. Sure, with a mortgage after 30 years you have a house free and clear. But at the same price, a renter who saved the money that would have gone towards mortgage principal still ends up with a pile of money after 30 years -- a pile that is probably more diversified rather than being all in one single asset correlated to a single metro region's economy. I mean, who knows if the area I buy in will still be popular in 30 years?
I'm married & the thought of doing a "house share" with other married couples seems very cramped up & a recipe for disputes. This is aside the fact that it's absurd that dual-working married couples would have to resort to this at all, it's a completely unacceptable arrangement for most couples in the US at this point. But nothing's off the table it seems
It's not uncommon in the more expensive German cities as Munich to do a flat sharing even after you finished your studies. You often did a flat sharing when you studied, so you often are already used to the situation. On the other hand living space is too expensive to be able to afford (even renting) if you don't have a really good paying job.
But perhaps this is a different mentality between US and Germany.
Are you talking about married couples taking different bedrooms in one apartment? Or single individuals (not living as couples) taking different bedrooms in one apartment?
Yes, we do a lot of roommate shares here in the US; I lived in about 7 of them through my 20's. But I didn't live with my wife in a room share. I'm now married and I live with my wife, and we are effectively rent-sharers now.
It's still not enough to have a 20% cash savings rate, much of what would be saved as cash instead pays debt (mostly college debt + debt originating from emergencies/unemployment). But we almost certainly couldn't afford a local property of any type, save a studio apartment on the outskirts of the city, with a 20% savings rate over the next 5 years. And part of this has to do with down-payment financing arrangements nearly always losing out to deals paid in cash on-the-spot. (Indeed, there are people roaming the streets with certified checks from $800,000 - $2,000,000 who are viewing new-to-market properties daily)
> Are you talking about married couples taking different bedrooms in one apartment? Or single individuals (not living as couples) taking different bedrooms in one apartment?
I've seen both (OK, they were not married, but in a commited relationship), where of course the latter case is more common.
I know plenty of folks who bought homes on the assumption that it is somehow a good investment, they are paying themselves, etc. to find that taxes, fees and repairs eat up both their free time and expected profits.
Buying a home can be profitable, but it can also impact the career (e.g., tie one up in the wrong geography). Many landlords make this work by investing lots of time in it (and scaling it up to multiple properties).
A younger person working in tech will IMO be much better off investing this time into learning new things, networking. My 2c.
Was a thing. The 0% down have been thoroughly killed off by the financial crisis. I could agree with everything you said right up to 'easy', because it's incredibly hard. London is full of young renting professionals who aren't able to save enough to outrun house price inflation to even get a deposit together.
There is nothing to west of Oregon (technically pacific ocean), most of the 19th century is because of west-ward expansion. People can go to Montana and get homestead etc. Again, this is not beating up on people who are down on luck, My inspiration in life has been Helen Keller, who is blind, deaf and mute, she wrote damn fucking awesome books. You are trying to shoot the messenger, your argument is similar any thing that is worthy has already been discovered. Upward mobility is hard, it usually is and has been and historically there are only few times, when a raising tide rose all the boats, but there is a thing about tides, they raise and fall.
Your entire post is nonsensical - fact of the matter is that unlike Silicon Valley tech workers, the vast majority of the country doesn't get paid six figures for sitting on their arses all day, and the vast majority of what they are paid goes to necessary expenses. Building enough savings to survive for two decades is simply not possible unless you're decidedly upper middle class.
It doesn't actually change the quantity of economic output needed by old people whether their pension is private or public. Either it's routed through taxation or dividend payments, but the end result - diverted from accumulation/investment into consumption - must be the same.
Unless, of course, the move to push people into private pensions is so their value can be reduced without anyone in particular having to take responsibility for that. Philip Green passim.
Sure, living below your means is generally good advice; but my point was that as interest rates go down that affects the discount rate, and the amount of income required to achieve a particular nominal income in retirement increases dramatically.
(Also, there's quite a lot of people who are barely able to get over the first financial hurdle of paying rent, let alone buying a house, both of which are more important than pension saving. Being a renter even with a big pension is much worse than being a homeowner with a small pension.)
Read to the bottom and you find out what this article is really about:
"This all adds to the urgency of overhauling both the private and public pension systems to encourage later retirement, by shifting benefits to favor later retirement and reducing tax penalties on earnings for those who are already collecting Social Security. The payoff: a more solvent pension system and a more productive economy."
Wow, isn't that the submarine thesis. When the real solution is to remove the cap on social security taxable wages on income.
EDIT:
TL;DR Removing the cap at ~$118K/year on social security taxes (any income above that is not taxed for SS purposes) causes Social Security to become immediately solvent in perpetuity.
But heh, the highway trust fund is broke too [1], so why would I expect Congress to fix anything else related to tax collection for public services.
It would also represent a fundamental shift in the program, from social insurance to wealth transfer. Raising the retirement age is an acknowledgement that the actuarial data has changed.
And it would push the top marginal tax rates to ~55-60% (40+15+state).
Social welfare is social welfare. Taxes are at the lowest levels in (EDIT: modern) history; they must (and should) go up to support the must vulnerable citizens.
Or should we continue to allow the top income tiers to siphon from the economy while everyone else is slowly lowered into poverty?
We seem to have some disagreement about what "in history" means.
I also probably wouldn't aim a massively scoped wealth transfer program at enabling earlier retirement (admittedly you haven't stated a preference for this wealth transfer over other sorts of wealth transfer, you've just stated that it would make SS solvent).
> We seem to have some disagreement about what "in history" means.
It appears so; you're looking back 100 years. I'm looking back in modern times (which I'd consider starting around World War 1).
> I also probably wouldn't aim a massively scoped wealth transfer program at enabling earlier retirement (admittedly you haven't stated a preference for this wealth transfer over other sorts of wealth transfer, you've just stated that it would make SS solvent).
62 is considered the earliest you can collect social security, with a steep reduction in benefits for the remainder of the collection period. 65 is standard. I don't consider 65 early retirement.
If you have a better idea than removing the SS tax cap, I'd love to hear it. Reducing benefits are not an option when existing benefits are barely keeping seniors out of poverty as it is.
You could avoid such digressions with the more accurate and roughly equally pithy "in modern times".
As far as early retirement or not, it's another squabble over definitions. 50 years ago, the idea of social security was that people who survived into old age would have some reliable income. So when you propose ignoring that what it means to survive into old age has changed over time and propose using wealth transfers, you aren't just talking about making social security solvent, you are talking about fundamentally changing it.
There's nothing wrong with proposing such a change! But I think it makes sense to point out what a significant change it would be.
My understanding is that life expectancy hasn't really changed much in history, if you don't factor in infant death. The expected lifespan of someone who has already survived long enough to join the workforce hasn't actually changed much. So, for the purposes of SS, I would think that's not really an issue.
As I understand it, the entire thing would only have stayed solvent if each successive generation contributed significantly more than the previous one, presumably due to population growth and economic growth.
I may be wrong, just the understanding I've developed from previous discussions.
The number of people living to 65 has increased and they live longer after reaching that age.
Take a made up scenario: Say you plan on being able to pay 10 people for 10 years. Something like adding 1 person and 1 year smashes your budget (100->121).
Kind of interesting that sort of conclusion / assertion gets mentioned without inferring that moentary policy is so out of whack that "Saving" the old fashioned way is not a good course of action. Those pension plans were based on about a 7% return, which ain't crazy, but now seems nearly out of reach without significant risk (re: equitites afloat on easy money). Staggering the factors at play here...Fed Policy, Healthcare Inflation, Stagnant Worker Wages...ugh
It's very common (a) for 7% to be an unrealistic return for pensions, given their allocations; and (b) for pensions funds to estimate even higher (8 or 9%) growth rates.
I can't speak to the majority of pensions funds, but there are State funds that assume 8.5% returns while having 50-60% of the fund in bonds. Those are the Minnesota numbers, and they tend to be pretty good for a State. They're ~75% funded, and that makes them 19th best in the country. If you face the reality that their assumptions are insane, then you have the wrestle with more realistic projections of how much they've really funded.
At the end of the day, the important thing should be, can the real economy sustain the population (whatever they age)?
Do we have the resources or not?
I had that idea that the economy was a machine that we use for producing what people needs. Not anymore. It's obvious that it's the other way around.
Even the tittle of the article is about how some people is a problem for the economy.
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OK, I'm editing this comment, because reading the answers it's obvious that I'm being misinterpreted. My point:
I was trying to criticize the framework that is sold to us continuously, where the people is in the service of the economy (population poses a whammy), instead of the economy at the service of the people, because, how can population be a liability if the point of the economy is to serve the population?
> can the real economy sustain the population...?
> Do we have the resources or not?
It's strange to see that these comments are not exceptions but the norm. How can you be serious? (Or are you?)
We have a productivity orders of magnitude higher than anyone could ever dream of. A tiny fraction of the population is needed to produce the things necessary for living - the vast majority of people are doing "non-essential" work.
We may not be able to give everyone vacations abroad, a 2nd car, a road to their isolated dwelling in the middle of nowhere. We sure are able to give everyone the basics needed for live - and then some. With "we" I mean the industrialized countries. Although, when it comes to feeding the world even that may be doable in entirety, the problem there isn't production but distribution, so a lot of it are local problems we cannot easily influence.
A big reason for the huge military spending is that politicians try their hardest to keep the plants in their districts running - "for the jobs". We have a hard time finding work for a lot of people, and - just looking at http://dilbert.com/ - those who have a job are by no means all doing useful work, not even close. If we drastically reduce advertising, for example - by definition most of it a luxury, stuff that people need doesn't need to be advertised, just make it available - we un-employ a large amount of people not just in marketing but also producing the stuff people don't really need. But yes, let's ask with real concern, "how can our economy possibly take care of all those people?". Yeah, I really don't know, it's such a mystery.
And the argument in other comments "everybody should start saving early, if they don't it's their own fault. Let's roll with that for a moment.
Let's assume all people are reasonable and start saving for retirement early. For this assumption we need to disregard the large number of people who are unable to save anything (all their own fault).
If everybody starts saving early and saves enough for retirement, what is the difference between that and letting the government do it for them (the basic, minimum level)?
The difference is that you can't blame someone "it's your fault" any more, which seems to be a convenient excuse and distraction. It's not like anything in the economy works any better just because you force people to make decisions for which the vast majority is not qualified to do. Which is actually fine! Why on earth does everybody have to be in the business of business-forecasting (where to invest)? And if you say "use index fund", well, if it's so automatic then the government can just do it for you, if there is nothing gained by involving the people because they don't actually get to make investment decisions. Which is fine - humans have invented something called specialization, and to a very high degree. It's absurd that everybody should be "financially literate" to a degree that they manage their own retirement account. (And again: If the argument here is to use something simple as a savings account or index funds I repeat that then there's even less of a point of forcing people to do it.)
Not to mention that on the level of the economy you cannot save for the future. Not unless "saving" means things like not taking minerals out of the ground now so that they can be taken later. Everything else is a circle, and an ever changing one. What people eat and where they live in 50 years cannot be "saved" now - how does that look like, we keep areas for agriculture "frozen" to be unfrozen in 50 years for those living then?
That "you must save" argument conflates business thinking with economic thinking, which take place on completely different levels. From a business perspective you have input and output and from where to where you don't care about, and yes you can "save". But on the level of the economy you see the whole picture, where every input is an output and vice versa, and "saving" simply means shifting the stream of activity and goods in the economy between consumption and investment (which in this context means actually building stuff, not "financial investment", making money wit money).
And, slightly related, it's good when a business saves a few million dollars. When the economy "saves" it means less economic activity. When we don't build that #### that costs 5 billion - and don't do anything else with the same resources - it means there will be 5 billion less in income for businesses and people. So not doing #### is fine when there are better alternatives, it's not so good when there aren't.
In this context I recommend "The Secret History of Silicon Valley" - sounds ominous, but it's just a regular presentation of the Computer History Museum in Mountain View (believe me, it's so worth it!): https://www.youtube.com/watch?v=ZTC_RxWN_xo The TL;DR for the video: SV was made possible by HUGE amounts of very free spending of the US government on R&D during WW II. Private capital only came later, with that base established. And the best thing: They spent money they did not have (US debt made a very big jump during WWII).
If the GDP per capita is bigger that 40 years ago, it's obvious that we have the resource to sustain the population.
What I was trying to express, unsuccessfully it seems, is that the economy should work for all the members of society, specially when there are more than enough resources.
Also, I was trying to criticize the framework that is sold to us continuously, where the people is in the service of the economy, instead of the opposite.
Ah primary sources, my good men (edit: and of course women, though I used the phrase in the gender neutral, genitive case) - here's the actual paper[1] (31 pages). RAND is a think-tank, not quite Koch's Americans for Prosperity or the Cato Institute but caveat lector, and all.
Here are some brief assertions claimed:
>> Our analysis leverages this substantial variation in the rate at which states are aging
to estimate the effect of aging on the rate of state growth in per capita Gross Domestic
Product (GDP) ... "
One has to reject the null hypothesis that the aging out demographic are even related in part. (I could just as easily hypothesize that most of these retirees are those who were economically positioned to work until that late age and those who were comfortable enough to retire beforehand did so (if you buy the assumption that those who were highly-salaried throughout their career generated a proportional amount of value to said salary. I don't claim this, but it's an easy refutation.))
Page 6 is just aggregate analysis of population trends amongst certain ages binned by state, using Wyoming as their prime example. I'm not sure how much of the GDP/GNP Wyoming contributes to as a percent but I'd wager the trend is not indicative of the U.S. economy on the whole (in fact, you really can't make generalizations like this paper is trying to do correlating age against value lost -- whether it's in institutional knowledge delivered from master to apprentice in trade or actual quantifiable value. {Started skimming here due to the weak arguments.}
They use the US census as their data source in section III (Empirical Strategy), which, again, isn't granular enough to make any sort of trend assertion with a high confidence factor.
Section IV (Results) doesn't even try to normalize economic growth against any other market metric, domestic or international. {Stopped reading entirely at that point and went back to reading journal articles based on reproducible results rather than vague social theory and whatever these overpaid analysts remember from their 100 level stats class. Sigma summation, greek symbols and subscript don't make you seem smart, unless of course you're typesetting in TeX ;))}
"they found that everyone became less productive in an aging state."
On the other hand:
"Older workers may be slower to adapt to new technology. If laid off from a dying industry, their experience may be irrelevant to a new one. Older workers are more likely to suffer from injury or illness and less likely to have a college degree."
From the research, it would appear that the balance is in favor of including the aging workers in the work force.
I'd postulate that, as much as teaching younger workers 'tricks of the trade', older workers also may steer efforts around mistakes. "We tried that before and it didn't work because...".
All the more reason to be investing more than a pittance in the development of rejuvenation biotechnologies. So very close to realization, yet widely ignored.
Actually, it seems crazy to me that the economic argument gets more play than the humanitarian argument. People, including the old, seem happy to consign the aged to suffering and death, but that aging and age-related disease impacts the economy gets a larger fraction of them up in arms.
I thought so for along time, but now, growing older myself, I wonder if that would have a really bad impact and create even more static societies with people fighting even harder for no change because they might lose something. Not just in business and families, also in science, that old saying about new ideas only taking old when the people holding the old ones die still holds true since we have not changed (same brains) since it was first said.
Tbh there needs to be a better and respectful transition for old people. Someone who is 60+ and demands to be employed in a job that a younger person can do than I am sorry to say this but the younger person deserves a chance at that opportunity. You had 40 something years to save and build for your better future. It would be unfair to argue that "no the younger 20 something person has many more years to come to save and pave for his/her future". What most people seem to ignore is that 25-35 years in ones life are the prime and career pivoting years for people, make or break kind of years.
The similar problem is with the old people stubbornly not leaving government and policy making jobs. Someone who is 70+ does not have the right to make a policy for a generation who is in 20s and such policy can be (potentially ie.g. climate change policies) badly implemented for years to come. Why 70 something are even allowed to run for an office, heck currently both presidential candidates are touching their 70s. Please go retire to Florida or spend time with your grand kids or travel the world.
Also, there is a large number of well off old population living in dense urban cities. Take Manhattan borough in NYC for example. The city is very unique and always bursting with opportunities. Say a twenty something moves to NYC after college to work for an ad agency or a famous designer or a start-up but limited funds force her to live in eastern Brooklyn just to make ends meet. She spends and waste 2+ hours everyday on useless commutes. If the rent would have been cheaper and more affordable in the Manhattan borough then more young people can live nearby to the opportunities and make better use of their time. At the end of the day it is the game of money. Whoever has more money is always in the lead, where the young ones don't get fair opportunities in order to get ahead in this game. Unless daddy and mommy loans you their city condo (which many do).
Also, well off old people do not (frequently) invest in order to create opportunities for younger generation. We don't hate you, we just want you to adhere to natural, sociological and economical cycles.
Because when the now 30 year old was 0-18 they didn't have any say in the economic policy or leadership decisions.
Expecting an expiration is fair turnabout. There are some 17 year olds who work (I did) and maybe should've been able to vote. There are some 70 year olds who shouldn't be doing either right now I think. Just postulation.
< but the younger person deserves a chance at that opportunity. You had 40 something years to save and build for your better future.
Work harder and be better than the older person... Business is blind and choses the best.
< Please go retire to Florida or spend time with your grand kids or travel the world.
When you get to be 70 your body is failing and your sentence is a dream to the majority of older people. Most older people are like Fussell's Class, "Out Of Sighters." I suspect your comment was from one of a rich(er) perspective.
< Someone who is 70+ does not have the right to make a policy for a generation who is in 20s
There is a couple on my route that do not have kids. They are very active in their political party. They enjoy politics like others enjoy knitting, golf or reading. They are retired. I once said to them something to the effect, "Why do you care [about Obama and all the ills, etc..], you don't have a ticket into the future - you didn't have a child. It would be like my deceased childless uncle setting policy from his 1930's living room in New Jersey for me when I was born in the 60's." I reaized I was strong in my opinion, and they truly never gave it much thought. I will agree with you that the young people should set their destiny, not people my age. I have moved out of the way, so to speak. My opinions are less important than my son's and his generation. I think any reasonable parent would want that for their kids.
But I do see something I never recall when I was growing up in the "Heidi Bowl" and B&W to color transition days of life": A lot of people have a lot of money, and they seed their children with a very good start. At least half of the new howe owners on my route are under 30 children/couples who have been significantly helped.
So before you bash all the 70 year olds out there, they may be funding your spouse someday!
Your "Wow" threw me and gave me a suspicion that your reply will be biased :) Please allow me to clarify my statements and see if I can make any sense. (FYI i have two older parents as well and the whole point is not to "discard" old people instead create parallel opportunities that would require less consumption of resources. Honestly speaking medicinal science has caught up to the point where more and more people and enjoying longer lives but the economy is slowing down and consumption of natural resources is increasing.
And yes my comments were mostly targeted at richer older people. Come live in Manhattan and see it for yourself what I am talking about. I dont want to spend my life in NYC or SF. I want to spend 10+ good years here to learn and contribute towards the industry and move out of here and give the resources to younger generation instead of hoarding on them. My perspective my comments they are all revolve around urban dwelling and not most of the older class living peacefully in suburban sprawls.
< people instead create parallel opportunities that would require less consumption of resources.
I get that. How?
< I want to spend 10+ good years here to learn and contribute towards the industry and move out of here and give the resources to younger generation instead of hoarding on them.
I get this too.. and actually, you are way ahead of me as compared to my "youth" I wanted to be CEO and thought it was going to be as easy as a proof in geometry which required no effort.
Aging is a funny thing. Viewed from afar it is understood by way of observation. Viewed from inside it is understood by reflection.
Planning to retire in the next few years? Please reconsider: The economy needs you more than you know.
Economists have long expected an aging population to hamper growth for the simple reason that it means a smaller labor force. But new research has identified a potentially more powerful impact: Rapid retirements deprive companies of critical experience and knowledge, which undermines productivity across the entire economy. Demographics may thus be a critical factor in why the current economic expansion, which began as the first baby boomers qualified for Social Security, is the weakest on record.
The findings are contained in a new paper by Nicole Maestas of Harvard University and Kathleen Mullen and David Powell of the Rand Corp., a think tank. Because the 50 states are aging at different rates, they were able to tease out the impact of aging on economic growth. Their conclusion: On average, every 10% increase in the share of state's population over the age of 60 reduced per capita growth in gross domestic product by 5.5%.
This came through two effects. First, as more workers retire, the labor force grows more slowly. This, they reckon, explains one-third of the 5.5% growth hit.
But the bigger effect was through reduced productivity--that is, output per hour--of the remaining workers. The authors found that this couldn't be explained by emigration, mortality or an influx of younger, inexperienced workers. Rather, they found that everyone became less productive in an aging state.
So what explains this impact?
The authors note: "An older worker's experience increases not only his own productivity but also the productivity of those who work with him." All else equal, experienced workers are more productive. One study found that productivity peaks at age 50, when productivity is 60% higher than for the average 20 year old.
A journeyman carpenter doesn't just work faster than an apprentice; he also helps the apprentice learn the tricks of the trade. New doctors diagnose patients more accurately under the tutelage of experienced practitioners. A rookie salesman learns the territory faster in the company of longtime veteran.
Of course, aging can also cut in the opposite direction. Older workers may be slower to adapt to new technology. If laid off from a dying industry, their experience may be irrelevant to a new one. Older workers are more likely to suffer from injury or illness and less likely to have a college degree.
But these disadvantages have shrunk: The average 60 year old in the 2000s was as healthy as the average 55 year old in the 1970s, and in many occupations, cognitive skill matters more than physical stamina.
Since college enrollment began climbing steadily in the 1980s, older workers today are increasingly likely to have a degree.
So how much has aging hurt overall growth? In the past five years, the labor force grew just 0.6% per year, half the rate of a decade earlier, much of it due to retiring boomers. Meanwhile, productivity grew just 0.5% per year, the second-weakest such stretch since the 1950s. The productivity slowdown is a puzzle. Businesses appear reluctant to invest due to financing constraints, a dim sales outlook or a paucity of exciting new innovations. The new research suggests retirements could be part of the story. By applying their state-level findings to the whole country, the authors estimate that aging will reduce growth by 1.2 percentage points between 2010 and 2020, with two-thirds of the effect attributable to reduced productivity.
This could also explain the weakness of wages. When experienced workers retire, their younger, less-productive replacements earn less. Hourly wages are up just 2.6% in the past year, but up 3.6% when adjusted for the shifting demographic makeup of the workforce, according to the Federal Reserve Bank of Atlanta.
To be sure, the precise magnitude can be debated; most countries, regardless of demographic profile, have suffered a productivity slump. Nonetheless, anecdotal evidence is supportive. Many employers say they aren't short of skills but experience.
"As your employees who have been working in manufacturing start to retire, you're not just losing people, but that knowledge and experience is walking out the door," says Jenny Stupica of SSP Fittings Corp., a Twinsburg, Ohio supplier of hydraulic fittings who chairs a regional network for matching manufacturing workers and employers. She said people with basic skills and aptitude for math and mechanical learning can be trained to do manufacturing work, but what her company really missed was experience.
This all adds to the urgency of overhauling both the private and public pension systems to encourage later retirement, by shifting benefits to favor later retirement and reducing tax penalties on earnings for those who are already collecting Social Security. The payoff: a more solvent pension system and a more productive economy.
"So what explains this impact?
The authors note: 'An older worker's experience increases not only his own productivity but also the productivity of those who work with him.' "
Ok.. but I would like to propose another theory, that could be complementary to this one, not necessary an alternative, from what I see around me.
Younger people are poorly paid, understand that they could lost their job next week, and, in general, have a, in my opinion, justified feeling of being exploited. In consequence, they don't give a damn about the good of the corporation, because, they understand that the corporation doesn't give a damn about them.
Unemployment is highest amount the young. Sounds to me like companies are screwing themselves by not hiring the young before the old people retire so that there is a continual pool of people to replace those that retire.
This isn't a new thing. the company I'm working for now made that mistake in the 1980's - we were forced to have our first layoffs and for 20 years after almost nobody was hired (our corporate culture is very much based on once you are hired you have a job for life if you want it)... Now there is a plan in place to ensure that a few young people are hired even in the bad years so that retirement doesn't cost too much.
In context, it makes perfect sense even if the wording could have been better. It says that older workers are less likely to have a degree but that the difference has shrunk with older workers today more likely to have a degree than in the past.
> This is why immigration, which skews very young, is vital.
Immigrants are also retirees to take care of in the future. You can replace a whole population with immigrants from the third world you'll still have to the same problem 50 years later. Mass immigration is a short sided policy than doesn't fix any long term issue.
Actually, the survival curve of the population is "squaring" [1]. That means that even while the average age of the population is increasing, the age of the oldest is not increasing at the same rate. The consequence is that the recent increase in the ratio of younger to older people will not continue to increase at the same rate, and will plateau. This also means that increased immigration will increase the current ratio of younger to older but not increase the relative burden of the old later on.
As to the points in the article: Correlation does not equal causation. Now to two major points it conveniently left out.
- First, the overall labor participation rate is at 40 year lows, so there is no labor shortage. In fact, the rate for those 55+ has gone up and is at 50 year highs.
- The biggest danger from an aging population is how to fund our entitlements Medicare & SS.
The reason for a weak recovery and stagnant wages are pretty obvious and completely avoided by this study and article - which I think was purposeful.
Most 45 years olds could not survive for one year on their current 401k balances; they waited too long to start investing...or they invest too little. As a result, many will seek to work long after they would have traditionally retired. Eventually, they will drive down wages as they seek healthcare coverage as their primary compensation. The young will suffer as they cannot afford to compete with the old, and youth unemployment will continue to skyrocket
While I realize the power of compound interest is real, those at 45 can get into commodities trading in IRAs. ETNs allow people to short or long a commodity. Paying attention to the tax forms helps reduce end of year non business related expenses. I personally prefer this for 25% allocation to high risk because these markets are more rational. You can tell why oil will go lower. You might not get it perfect, but you can ride both ways by listening to NPR. This can speed up the interest compounding because you can ride both sides.
For shorting oil over a month or two, it's fine. The market doesn't get much more information than what we have on the news. Oil tends to move with violence. That's covered in the news. Gas inventories and oil glut is covered too. You do have to dig a bit for rig counts. My larger point is that commodities seem to be much more intuitive. That's up there with "invest in what you know." Besides the advice said only allocate 25% to high risk.
Congratulations on getting lucky for a while but this is terrible advice. Sure everyone knows that violence impacts oil prices. But all the other oil traders have access to the same news that you do. There is no reason to expect that you can predict the future better than them more than 50% of the time.
But that applies to everything. The commodity markets are more reasonable. When trading an etn you don't have to take on the contract risk directly. You still have to worry about contango, but not the contract.
Did I predict the blowout in February? No. But I could tell it was going to keep going down. Right now it's a bit hard to guess given the doldrums. Still it's far easier to have a rational position that stocks on general.
No, all publicly traded markets are now equally "reasonable". Arbitrageurs have traded away all of the differences. Don't confuse luck with skill; anyone can get lucky for a while...
http://www.zerohedge.com/sites/default/files/images/user5/im...
Anecdotally I've seen more and more 60+ workers doing line-level gigs like cashier or low-skill retail than ever. I think there's an undercurrent of discrimination against youth, actually, in that the 55+ group will be dependable and complacent because they need to work and therefore will show up to work.
In the modern US economy, longevity in one firm or role is actually bad for a young person's career! There are no pensions to earn. There are limited annual raises that are lower than inflation. On and on and on.
I'd be a lot more sympathetic to the plight of the elderly in such a position if they weren't, you know, basically kicking away the ladder they used to climb to the top, spend the country broke, and then continue to vote entitlements while passing a faux-future of success demanding everybody get a Bachelor's to even be a Secretary answering phones. This whole system is so broken pointing it out sounds extreme or mean, but it's just obvious to me over these past 15+ years of working.
I just got my SS statement the other day, and was extremely proud to see that every year I was eligible to work, even if I was going to school / college / etc, I did work. Not a single year without an above the board job. I don't think a lot of Millenials will be able to come anywhere near it, and I don't think it's entirely their fault. End of my $0.02 that is really worth about 1/8 of that...