We live in a Democracy, and the elderly have the most free time and seem to be the biggest population right now (Baby Boomers). As such, the elderly are always going to be the most powerful voting block (doubly so now that Boomers, the biggest generation by population, is hitting retirement age).
Good luck "reducing spending on the elderly" in the coming years. Its politically infeasible on population dynamics alone.
When the "lack of children" issue starts to hit 40 years from now, Millennial are going to be retiring. Millennials are the 2nd largest population after the Boomers. So the same issue will hit us again in the long term.
If taxes to pay for the elderly do become very onerous, 85-75% of the population is going to be against them politically. There are relatively fair measures to pay for their healthcare, like wealth taxes for people beyond retirement age and increasing estate taxes. Or a more politically feasible measure is to make social security means-tested.
By far the best solution would be to mandate people to pay into their own retirement funds - Singapore does this. But of course, that would have had to be put in place decades ago.
More output while at the same time reducing workers means more productivity is required and to increase the productivity per worker we need far more automation. Things like truck/taxi automation might cause a temporary mass unemployment problem for unskilled workers but at the same time also solve the worker shortage that will happen when the population starts aging massively.
The idea that, the number of human being working is important at all, is rapidly becoming an obsolete issue.
And productivity is funny. When folks move down the economic spectrum (from technical to office to labor etc) its called 'full employment' but almost by definition productivity of point-of-sale or labor is very low. Definitely there's no improvement for the individual.
Most of the developed world has the same problem on that front. The desperation by these countries when it comes to figuring out how to patch up the finances of those programs will increase by the year.
Robot (productivity) taxes will be one small answer. Another will be ever higher income taxes, also eventually including heavy wealth taxes (that comes last). Most of the developed or semi-developed world is starting to get hit on demographics at the same time. The weaker economic nations are being forced to respond first, as in Russia having to raise their pension ages so high it starts to cut people off at the life expectancy line (plunging Putin's popularity numbers in a rather startling fashion, which tells you how important the pension promises were). France is being forced to confront similar problems, with Macron trying to dress that up as market reforms. The US is temporarily avoiding it thanks to its ability to run absurdly high budget deficits for now.
I also disagree heavily with the last paragraph. Creating disincentives for automation is the last thing a country needs when its workforce is shrinking. Automating jobs is a way of expanding the amount of labor available without actually needing more people in the work force. If anything, countries that are experiencing a population decline need to invest in more automation to maintain their economic output.
Someday, though...
Like the stock market, then. And pension funds.
Stop repeating propaganda please. Entitlement programs are just simple insurance programs. There is nothing ponzi about them.
Social Security isn't a Ponzi scheme in the sense that there was fraudulent intent. Nevertheless, a lack of political will to finance current benefits does burden future generations. "Adjusting benefits downwards" won't sit too well with people who worked 30 or 40 years and expect to enjoy a certain standard of living.
Why Was Social Security Designed Like A Ponzi Scheme? https://www.forbes.com/sites/johngoodman/2015/08/13/why-was-...
Is Social Security a Ponzi scheme? "Social Security has a funding gap equal to 0.7 percent of GDP over the next 75 years. We could wipe that gap out by lifting the payroll tax cap (right now, payroll taxes only apply to the first $107,000 of income) or by adjusting benefits downwards." https://www.washingtonpost.com/blogs/ezra-klein/post/is-soci...
For another, it’s still not a Ponzi scheme. It makes no promises for returns, and simply requires working age people to set aside money for retired people. If the ratio changes, there is no requirement for the retired people to be paid the same money they were a year ago.
It’s not a Ponzi scheme in any fashion. It’s pretty much a direct, transparent transfer of wealth from the young to the elderly.
Social Security isn't a ponzi scheme for a number of reasons, first it's not a security. Second there is no nonexistent enterprise. Instead it's structure is entirely that of an government mandated insurance program.
https://www.ssa.gov/oact/tr/2015/tr2015.pdf
> Total expenditures in 2014 were $859 billion. Total income was $884 billion, which consisted of $786 billion in non-interest income and $98 billion in interest earnings. Asset reserves held in special issue U.S. Treasury securities grew from $2,764 billion at the beginning of the year to $2,789 billion at the end of the year.
This is not in any shape or form a ponzi scheme.
Which the generally accepted way of analyzing insurance programs is by looking at the inflow and outflows plus interest on reserves.
> which in the early stages of a ponzi scheme can also be similar
The Social Security Act passed in 1935.
> The way that social security in the US is a ponzi scheme is that the benefits paid out are not interest or earnings on the amounts paid in by the people receiving the benefits. They are paid for by new people paying in to the system. That is almost the definition of a Ponzi scheme. That is almost the definition of a Ponzi scheme.
No that is the exact definition of an insurance program. Insurance programs are not investments they are about spreading risk. Which the Social Security Program in the US does a perfectly fine job of.
Social security is a pension. It guarantees a future stream of income in return for payments now. It is subject to the same actuarial risk as insurance (so, predicted payout period ends up being longer than expected, or returns on payments are lower than expected), but it is subject to an additional risk if it is unfunded (which Social Security is). That risk being that inflows become insufficient in the future to cover the outflows promised 40 years prior.
That being said, the important distinction still stands: Social Security is unfunded, which makes it subject to a kind of risk that funded insurance programs are not exposed to.
No.
> It protects you against a loss of some kind,
Social security protects you against outliving your savings when you can no longer work.
> and only provides that protection while you are paying for it.
This is an argument from ignorance. And it's incorrect.
Social Security is an insurance program. That you don't understand how insurance programs work is your problem.
The only way that anyone can retire is to rely on the productivity of people who are still working. Saving up money for retirement does not avoid this. Your saved up money just lets you buy someone else's future productivity, you can't actually live on it.
This clearly isn't viable so instead we have kids that take care of us when we become old.
Technically speaking, for all known biological species, the size of population is the primary indicator of health and well-being. Shrinking population indicates either inability to adapt, or some kind of malaise.
First world countries' with shrinking populations aren't falling apart. Sure places like Japan, Italy, and Spain have economic troubles associated with a growing retirement population, and shrinking workforce. But they're still pretty good places to live in.
While global growth would decline, I'm dubious of the claim that per-capita wealth would go down. With the same pool of resources spread across fewer people, the opposite seems likely. The labor force would reduce in size, too, so manufactured goods and services may not see their prices go down. But things that are zero-sum like natural resources, real-estate, etc. should drop in cost as fewer people are competing for them.
From an individuals point of view lower population means fix resources are spread less thinly. There is less competition for jobs so you can command a large share of the pie.
Instead of more natural resources available per person, a less productive economy eventually provides for fewer resources in terms of goods, services and capital like installed infrastructure per person that are necessary to thrive.