Japan and the Lost Generation's Looming Pension Crisis (2023) | Hacker News Reader

Japan and the Lost Generation's Looming Pension Crisis (2023)

nippon.com

27 pointsilamont18 comments

> This concerns the “macroeconomic slide,” introduced as part of the 2004 reform of the public pension system. The macroeconomic slide is an indexing mechanism that automatically limits total payouts of retirement benefits to keep them in balance with revenue from contributions (supplemented by fiscal subsidies), even while the contribution rate of working people is held to a legal ceiling.

In other words, the pension system was designed as pay as you go. Pay as you go system doesn't do very well with a decreasing working population because it relies on the current working generation paying for the previous generation.

Any kind of pension system does not work very well because a decreasing working population means decreasing supply of labor for the non working population, meaning increase in labor prices, which means someone has to take a reduction in the amount of labor they are able to purchase.

Unless offset by sufficient automation.

Japan does many things right IMO but the way they refuse to change their absolutely soul-crushing and toxic work culture can be their end. Of course the newer generations will disengage and actively stay away from the typical work arrangement, that's just called being a normal thinking feeling living being.

The article does an okay job demonstrating the problem but I am not sure it tries to address the root cause. Which is: make people feel they should participate and put money in the country's coffers.

So far the traditional old folk who seems to have an unilateral power in ruling the country is refusing to make it worth the younger people's while. And this is already backfiring for at least 10 years, if not 30 even. Not sure when will they stop being so stubborn.

And yes, not addressing properly how will the people not under regular employment contracts fare after retirement is a serious overlooking, too.

Most 20th century cultures are only a temporary thing because they lead to sub-replacement birth rates. Unless humanity is completely wiped out, natural selection will eventually see those cultures replaced by cultures where people for whatever reason have more children. But it'll probably be a painful transition to that new equilibrium.

IMO that painful transition is already in progress in Europe. But I am not sure there will be civilization to speak of after that transition is done.

Less is more, we've been warned about overpopulation since decades ago. There's no need to have an ever-increasing population unless you're running a pyramidal scheme. Humanity won't extinguish, there are already enough births to prevent that, it will reach a new equilibrium.

"Economic growth" is a pyramid scheme.

The point wasn't wether we should, it was that any group that does will outcompete groups that don't grow. By definition.

An acquaintance more or less seriously told me he's considering working into his 70s or 80s, I wonder how many other people are considering that option. It looks pretty bleak.

I have talked to people in Japan that feel similarly. Some have jokingly said that old people should commit seppuku, but even if they did, old people and their disposable income are a huge driver of the economy, and having a whole generation with little money is a cascading disaster waiting to happen. This is a problem all aging countries will probably encounter, but it will hit those with "lost generations" especially hard.

If they did commit seppuku, their money presumably doesn't vanish

That's true, but the problem is that they don't have much money :(

In which case

> old people and their disposable income are a huge driver of the economy

Cant be true. You either have money and drive the economy, or you don't have money

??? Did you read the article? The problem is that Japan has a generation of workers with no pensions and reduced social security benefits that are coming up.

Most people retire sooner than they had planned. Average retirement age in the US is 62. Most of the people who retire at 62 don't retire at 62 because they want to, they retire at 62 because they don't have any other reasonable choices.

Typically people who retire earlier than planned either do it because of health issues, or they get laid off and can't find another job in their field.

How is this much different than the US? I know a lot of people who are screwed in retirement. All it really takes is one misstep such as divorce or bad financial decision in your 40's and your done for. SS is very difficult to live off of unless you can somehow relocate to dying ghost towns.

“Deficit financing with bonds”.

I dont understand the general disdain for government bonds. I lend the government money and they pay me interest. Whats the problem?

Japan has what must be the largest public debt vs GDP in the world, at something like 260%. This in particular constrains them to near-0% interest rates, as they wouldn't be able to afford the interest payments. Since 2022, most of the developed world hiked rates like crazy, in response to rising energy prices, but Japan kept theirs basically at 0.

So it's a bit of a double edged sword.

"It is difficult to predict, especially the future" - (I think) Niels Bohr.

The long-term future is hard to predict. If you are giving me money today, how much should I give you back 30 years from now? 4% annualized? 5% annualized? 1% annualized? or -1% annualized?

All of these are valid numbers based on reasonable assumptions that might be encountered over those 30 years or so. IMHO, "defined benefits" where certain benefits are guaranteed by a public or a private plan decades into the future are a bad idea.

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