The big problem with having 7 billion people: They’re too old
The world’s population is expected to hit 7 billion sometime today. And the biggest part of the story, for me, is that we’ve reached this figure in large part by extending lifetimes rather than by having more babies.
Check out these two graphs — the first is from the Washington Post and depicts rising life expectancies at birth; the second is one I generated on Google with data from the World Bank, and it depicts falling birth rates:
Life expectancy at birth by region; graph produced by Washington Post with U.N. data
—
Fertility rates world-wide and in top 5 economies; graph produced on Google Public Data Explorer with World Bank data
These trends suggest some serious implications: for the use of resources, for the future strength of today’s strongest economies, etc. For today, I want to focus on what they mean for the systems the United States and other rich countries have built to redistribute wealth from the young to the old.
(And before someone objects, “Hey, I paid for my Social Security and Medicare! There’s no redistribution!” No, you didn’t; and yes, there is. You paid for your elders’ Social Security and Medicare, in exchange for the promise that future generations would pick up the tab for you. And that tab will be greater than the amount you paid in, just as your elders ran up a larger tab than they paid in. It is how the system was built, and the chief reason it is not wrong to liken it to a Ponzi scheme. How we reconcile past promises made and present/future financial realities is the question before us.)
The top five economies in the world are, in descending order: the U.S., China, Japan, Germany and France. In 1960, the fertility rates of all but Japan were above the so-called replacement rate of 2.1 children per woman. In 2009, the latest year for which data are available, the closest any country comes is the American rate of 2.05. China is at 1.77. Japan and Germany are both below 1.4. For most of these countries, fertility rates have been below the replacement rate since the 1970s. World-wide, the fertility rate is 2.52 — about half the rate a half-century earlier.
The trend lines for the largest emerging economies — Brazil, Russia, India, China and South Africa, aka the BRICS — are similar. Russia alone is experiencing a bit of a baby boom…all the way up to a fertility rate of 1.55.
Simply put, leading economic powers will be less able to direct their resources toward economic growth as their populations age and their pension systems are strained. Modern medicine has made great strides and is expected to continue doing so, but it has yet to enable 75-year-olds to be as productive as 35-year-olds.
Where’s the economic growth going to come from?
The irony is that our allocation of resources is getting out of whack in large part because of “population bomb” fears. Malthusians have long preached that the world’s growing population would sap the planet of resources. Societies have slowed their birth rates partly in response to such predictions, China’s one-child policy being the most dramatic example.
But it is more reasonable at this juncture to ask whether the problem isn’t that we will have too many people using up resources, but that we will have too few prime-age people working to produce innovations in the types of resources we use and the ways we use them. The trend for innovations in the energy sector, to name one example, is to make available resources more expensive in order to encourage the use of resources that are harder to harness. Working-age people stand to be ever-more burdened as they are asked to maintain old-age welfare systems built for a differently proportioned population.
In a way, the Occupy Wall Street crowd has cottoned onto this problem, with their emphasis on college debts (to the degree the OWS crowd can be said to have an emphasis, that is). But there’s no indication that they want to deal with this problem by making a college education cost less, only to make students less responsible for paying the cost of a college education. Nor is there any indication that they recognize the seriousness of the problem at the other end of the spectrum, that younger Americans will also be asked to pick up a larger and larger tab for their elders.
Speaking of Wall Street, it’s possible that the aging of the population will undermine equity markets’ ability to continue generating the wealth retirees need. If pensioners each consume less while, as a group, representing more of the population, it will be more difficult for companies to produce the profits needed to make investments in them pay off. That goes for private retirement accounts as well as public-sector pensions.
Absent a series of technological breakthroughs and/or a sudden, large uptick in birth rates, the growing-yet-aging population will be one of the political conundrums of the coming decades, here and abroad. And there is little evidence that elected officials and policy makers are prepared to deal with it.
– By Kyle Wingfield
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90 comments Add your comment
Real Athens
October 31st, 2011
5:11 pm
I Report … : I didn’t realize Karl Rove still worked for the White House.
http://www.politico.com/news/stories/1011/67223.html
Don't Tread
October 31st, 2011
5:21 pm
Adding to the “population bomb” is the fact that kids cost too much to raise these days. It now costs an average middle-income American family $222,360 to raise a child from birth to 18, according to the NYT. This does not include the cost of college.
Now multiply $222,360 x the number of protesters involved in OWS and you get some idea of how much money is wasted these days. (This is just the tip of the iceberg, though.)
1961_Boomer
October 31st, 2011
5:29 pm
Kyle said “In every scenario, no matter which year someone turned 65, the expected benefits were higher than the accumulated taxes paid (which were adjusted for inflation and interest).”
But, that is for the AVERAGE worker making the AVERAGE salary. If one makes much more than the average for very long, he/she will pay in WAY more than will ever receive.
Jefferson
October 31st, 2011
5:33 pm
SS solution is simple, remove the cap, raise the rate .25%.
saywhat?
October 31st, 2011
5:58 pm
Jefferson
October 31st, 2011
5:33 pm
“SS solution is simple, remove the cap, raise the rate .25%.”
But, but, but, haven’t the wealthy suffered enough?
Michael H. Smith
October 31st, 2011
6:00 pm
In a way, the Occupy Wall Street crowd has cottoned onto this problem, with their emphasis on college debts (to the degree the OWS crowd can be said to have an emphasis, that is). But there’s no indication that they want to deal with this problem by making a college education cost less, only to make students less responsible for paying the cost of a college education.
Glad you chimed in on this point too, Kyle.
I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...
October 31st, 2011
6:07 pm
Look^^ at the clown^^ who believes what Politico has to say, hahahaha, what a maroon.
What’s next, sap, you gonna tell us that the Urinal is credible, compelling and complete?
~~~~~~
“Other than Hoover and Obama, no modern American leader has presided over negative job growth for a comparable period,” he reported, drawing on data from David Weir’s “A Century of U.S. Unemployment: 1890-1990″ and the U.S. Bureau of Labor Statistics.
Herbert obozo, meet baraKKK Hoover.
Lil' Barry Bailout (Revised Downward)
October 31st, 2011
6:14 pm
SS is simple. Save for your own retirement so you don’t become a parasite living off your neighbors while excoriating them for being greedy.
redneckbluedog
October 31st, 2011
6:21 pm
The GOP will soon be the GVOP (Grand, Very Old Party)….Yikes…Better come up with something other than privitizing Social Security, destroying Medicare, denying Climate Change, defaulting the US credit, and Rush Limbaugh…..or you will soon be the (Gone Old Party)…..
Lil' Barry Bailout (Revised Downward)
October 31st, 2011
6:30 pm
November 2010
Real Athens
October 31st, 2011
6:34 pm
An a@$ clown quotes an opinion piece from The New American — out of context — that was hatcheted together from National Review, Keystone Research Center, Investor’s Business Daily and Fox News and complains about media bias.
Sheesh. Advice for I Report: When at the urinal, pay attention to the task at (in) your hand or wind up the next Larry “wide stance” Craig.
Hope & Range
October 31st, 2011
6:41 pm
Gingrich has carved out a solid place for himself and will doubtless continue to strut his stuff in the 14 remaining televised candidate debates, not to mention his latest vanity project: a “Lincoln-Douglas style” one-on-one tilt with Herman Cain in Texas. And while it would still take a miracle or some apocalyptic development for him to win the nomination, there’s no denying that Newt has survived the earlier disasters of his campaign, just as his spokesman Rick Tyler predicted in a press release for the ages back in the dark and stormy nights of May:
A lesser person could not have survived the first few minutes of the onslaught. But out of the billowing smoke and dust of tweets and trivia emerged Gingrich, once again ready to lead those who won’t be intimated by the political elite and are ready to take on the challenges America faces.
Thirty-eight years after his first, failed run for Congress, the ever-talkative former history professor isn’t going anywhere—and against all odds, a new generation of Republicans is eating it up.–CBS
Keep your eye on Newt. Experience is beginning to matter.
I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...
October 31st, 2011
6:47 pm
I guess when you’re dreaming about gay sex you can’t read.
drawing on data from David Weir’s “A Century of U.S. Unemployment: 1890-1990″ and the U.S. Bureau of Labor Statistics.
I wouldn’t know.
MarkV
October 31st, 2011
6:54 pm
The weakness of Kyle’s arguments is that he only incidentally mentions technology (“Absent a series of technological breakthroughs …). Advances in technology and resulting increases in productivity can balance the decrease in birth rates. This makes it important to distribute the wealth more fairly among those who create it, so that the consumption keeps the economy growing, rather than to use the increased productivity to enrich the already wealthy
Cal
October 31st, 2011
7:01 pm
Axelrod (Oct. 30): “Obviously the American Jobs Act, all economists agree would have a marked effect on economic growth and would create millions of jobs. We just have to get the Congress to act on it.”
Axelrod’s claim is particularly cheeky. Obama himself has been much more cautious — claiming that “independent economists” say his jobs bill “would create nearly 2 million jobs.” But even that was an exaggeration, as we reported Oct. 18.
[snip]
And those are high estimates compared with those of 28 economists who estimated how many jobs would be created by the bill in a survey taken by Bloomberg News. Of those, 28 economists estimated how many jobs would be created by the bill. The median estimate was 275,000 jobs in 2012 and 13,000 jobs in 2013, for a total of 288,000 jobs.
http://www.usatoday.com/news/politics/story/2011-10-31/axelrod-jobs-bill-claim/51015592/1
Hallucinating hyperbolics!
Lil' Barry Bailout (Revised Downward)
October 31st, 2011
7:28 pm
“distribute the wealth more fairly among those who create it”
————————
Wealth isn’t distributed, it’s earned. If you’re not getting any, it’s because you haven’t earned it.
David Green
October 31st, 2011
7:31 pm
Kyle wrote: (And before someone objects, “Hey, I paid for my Social Security and Medicare! There’s no redistribution!” No, you didn’t; and yes, there is. You paid for your elders’ Social Security and Medicare, in exchange for the promise that future generations would pick up the tab for you. And that tab will be greater than the amount you paid in, just as your elders ran up a larger tab than they paid in. It is how the system was built, and the chief reason it is not wrong to liken it to a Ponzi scheme. How we reconcile past promises made and present/future financial realities is the question before us.)
___________________________
Kyle when in office on the advice of a commission that ronald reagan asked alan greenspan and daniel patrick moynihan to form reagan nearly doubled the social security tax for the express purpose to pay for the retirement of the baby boomers. This money was to be placed in the social security trust fund however- reagan’s tax cuts on the wealthy led to massive deficits so on the advice of alan Greenspan reagan used the money collected from the baby boomers to pay for their retirement to hide the deficits leaving ious in the lock box.
So not only did reagan cut taxes on the wealthy by more then half he also created the most massive tax increase in the history of the nation which hit the working-class exclusively then borrowed that money on the advice of alan greenspan to hide the deficits his tax cuts on the wealthy created. As did george h. bush – bill clinton and george w. bush.
So not only did the baby boomers pay for their elders retirement they also paid for their own only to have 3 conservative republican and one democrat potus steal it from them leaving nothing but worthless ious in it’s place.
You can verify this by reading chapter 12 The Truth about the Trust Fund in Screwed the undeclared war against the middle class written by Thom Hartmann copyrighted 2006 – 2007.
Real Athens
October 31st, 2011
7:36 pm
I report:
Draw on the rest of David Weir’s opus on Employment in America:
http://seekingalpha.com/article/259727-you-don-t-get-to-make-up-facts-when-debating-jobs-picture
Tool.
Lil' Barry Bailout (Revised Downward)
October 31st, 2011
7:53 pm
Where’s the change your Nobel-winning genius was going to deliver? You remember, jobs, green energy, jobs, lower sea levels, and jobs?
Fail.
I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...
October 31st, 2011
7:54 pm
Hey, if Herman Cain is guilty of sexual harassment, that means all the dummycrats will be voting for him too, doesn’t it?
Real Athens
October 31st, 2011
8:15 pm
Hey, what a bummer that in your world harass is still two words.
I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...
October 31st, 2011
8:22 pm
I haven’t the time to read through your gibberish, stooge, I’ve already got the statistics from your beloved government and the undeniable reality that no president has created fewer jobs than Herbert obozo has.
Go play in the street, Nancy.
Real Athens
October 31st, 2011
8:34 pm
No one here expects you to read. Why start? You just type what you’re told to. For the sake of it I’ll quote from the last paragraph:
“W’s economy was the weakest period for the decline in the unemployment rate in that entire period”
Tool.
Oki
October 31st, 2011
8:48 pm
“Speak” actually makes a relevant, if not statistically stated point. The increase in average lifespan *has* accompanied an increase in healthspan. This is a phenomenon that is also well studied in the lab (where I spend my time). Manipulations of experimental animals (whether they be genetic or environmental) that increase lifespan all *inevitably* increase healthspan. 65 year old people today are indeed healthier and capable of more productivity than 65 year olds of generations past.
A part of the problem with social security not addressed in this article is that the retirement age hasn’t been pegged to lifespan. While the average lifespan of a 65 year old has gone up from 78 in 1940 to 83 in 1990 and the % of population of US adults reaching age 65 has increase from ~57% in 1940 to ~77% in 1990 (http://www.ssa.gov/history/lifeexpect.html), the age of retirement has only increased by 2 years in the 75 year history of social security.
That this needs to change is nearly a mathematical certainty. This shouldn’t be looked at as a bad thing either: numerous studies extoll the benefits (psychological and physical) of not retiring to human health.
I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...
October 31st, 2011
8:50 pm
Let’s try again, this time real slow for the simple minded among us.
No. president. has. created. fewer. jobs. in. his. first. two. and. a. half. years. than. barakkk. Hoover. has.
Take that Bushie pacifier out your mouth, stooge.
Real Athens
October 31st, 2011
8:54 pm
Harpy.
Just because you write it, doesn’t make it so — no matter how poorly you type.
Lil' Barry Bailout (Revised Downward)
October 31st, 2011
8:55 pm
Real Athens: “W’s economy was the weakest period for the decline in the unemployment rate in that entire period”
——————————–
Nine percent unemployment. Not on our President Bush’s watch.
Real Athens
October 31st, 2011
8:58 pm
Again. Sigh.
http://seekingalpha.com/article/259727-you-don-t-get-to-make-up-facts-when-debating-jobs-picture
I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...
October 31st, 2011
9:00 pm
Lil B- Not to mention that Nasty Pelosi controlled the House in 2006.
Who would hire any workers with that Freakshow in town?
Lil' Barry Bailout (Revised Downward)
October 31st, 2011
9:00 pm
Record numbers on food stamps. Not on our President Bush’s watch.
Lil' Barry Bailout (Revised Downward)
October 31st, 2011
9:04 pm
I don’t blame you for spinning, Real Athens. It has to be a huge letdown to see Obozo flailing and failing so badly. Such high hopes. Such elevated expectations. All based on…talk. Next time, vote for someone with actual qualifications.
@@
October 31st, 2011
9:26 pm
Lawd ah mercy! jay’s hit Cain with two pieces, back to back.
Does innocent until proven guilty not apply anymore? Even when the accused is a leftist, I reserve judgment.
Things have really turned ugly.
Sensationalized “journalism” contributes to much of what ails us.
Kyle’s was a thought-provoking piece.
I predict this WILL come to pass:
Transatlantic threat to Obama
Ironic! Obama sought to emulate Europe in so many ways, and yet…
what he so admired will bury him.
Oh well!
Not an Entitlement
October 31st, 2011
9:26 pm
OK. Let me walk you through this a step at a time…
1. Statistics suggest that the average rate of return on conservative mutual funds is 6-9 percent. However, good fund managers can earn much more than the 6-9 percent. As I said before, TRS reported a 22% rate of return for this year.
2. With the exception of the tax holiday, a total of approximately 12% social security tax is witheld from paychecks between the employee and employer contribution.
Now for my assumptions…
Let’s assume that a worker started working at age 25 and made $25,000 per year for ALL of his life. He would work for 32 years to collect full retirement. This would mean an annual contribution of $3,000 per year for his Social Security.
If the federal government earned 7% annual rate of return, he would have $353,800 in his social security account at retirement.
The federal government could pay him back at 99% of his salary for the REST OF HIS LIFE and never touch the principal. If we worked until age 60, they could pay him 56% of his salary for the rest of his life and never touch the principal.
The problem is *NOT* that we are underpaying into Social Security. The problem is that the federal government has for years mismanaged and raided the trust fund.
I’m not sure what study you are referencing Kyle but I encourage you to check my numbers for yourself. You’ll find they are right on the money.
Obviously, the more money you make, the better funded your social security account is – especially as the interest compounds.
Fast and Furious Spending
November 1st, 2011
12:15 am
Kyle,
Good article…. Mark Steyn writes somewhat on this issue in America Alone at least regarding American and European birth rates and consequences. You should definitely read it if not already.
What you say regarding central planning ought to be yet another argument against central planning. Paul Ehrlich, great prophet of doom from the left, will never be proven wrong in leftist circles anymore than the dippy truthers, haunting Jay Bookman’s blog.
Yet another reason to distrust the political left so much that the rule for conservatives this election season might be: do everything that makes our liberal/progressive countrymen hopping mad.
marko
November 1st, 2011
6:09 am
Americans pay much more for health care than any other people on earth. After wasting the better part of two years debating the problem we come up with zilch. Perhaps we should stop worrying so much about the care and feeding of billionaires, and figure out why hard working Americans are required to pay so much for inferior services. Congressional approval ratings currently stand at 9%. I can’t figure out why they’re that high. I guess their mothers still like them.
Buzz G
November 1st, 2011
8:28 am
And if we don’t don’t get our southern border under control, a couple billion of those people will reside in the US of A. $7.50 will not be minimum wage, it will be maximum wage.
Lil' Barry Bailout (Revised Downward)
November 1st, 2011
8:59 am
marko, dear leader got his health care power grab passed and insurance premiums are still rising multiples of the rate of inflation. Mine went up over 30% for next year. Thanks so much for that health care deform.
Obozo: Fail.
Shunquantell
November 1st, 2011
9:50 am
All this talk about overpopulation and too many geezers got me thinkin about one of my favorite movies from years ago, Soylent Green.
Brandon
November 1st, 2011
12:35 pm
Enter your comments here
Audra
November 1st, 2011
3:09 pm
The problem with Social Security is simply that we don’t have the funds to pay for what we promised. Why? Because overall people are living longer and the birth rate has declined. I think this is Kyle’s point. So the funds that people have paid in are now not adequate to cover our obligations, especially given the fact that the program has been expanded several times and now is not what it was meant to be when it was created – a safety net for the elderly without means.
Also, yes, this is an entitlement. An entitlement is simply a payment based only on your fitting into a certain group: in this case, it’s people over 62. If you fit that description, you’re entitled to the funding. Look it up. But why does it matter anyway? We just need to fix it, no matter what we call it. Let’s not get hung up on rhetoric and lose sight of this.
The program’s budget is not calculated using projections (as would a business model) to estimate future population, so that everyone pays their “fair share.” It simply takes in x amount from paychecks and pays out via its stated obligations – if you fit into the criteria (age), you are entitled to Social Security. What we all have to come to grips with is that there are going to have to be fundamental changes to the program for it to survive. I have no idea why this is anathema to some people – I am not talking about taking money from current retirees, but changing the guidelines so that people in MY age group (30’s) will not expect and rely on social security the way that past generations have. This is simply applying the “you can only spend what you have” approach to a government program, which if you ask me is a pretty good idea! I wouldn’t think that so many Republicans would oppose it. No doubt the AARP has a really strong lobby!
Either way, Kyle is right, we need leaders who will do the dirty work of addressing this long-term issue, and so far no one on either side has had the political will to do that.