Wow… less than 12 years to go.
When the US raised the retirement age in the early 80s they didn’t raise it on anyone over 45, or put another way, anyone within 20 years of the current, younger, retirement age.
UK obviously did not see any sort of precedent in that.
Well, “reports say”.
They’ve not changed it yet.
They will be raising the age to 68 as its the only real way to kick the can down the road and buy more time.
For the UK;
Because of the triple lock which guarantees that State Pension will increase by the lowest of [Average Earnings, CPI, 2.5%] every year, we are facing a material budgetary hole as the population ages (average age of UK is now 40-44 bracket).
We have a large amount of over 65s (will be 25% in the 2040s), who get their pension benefits uprated faster than economic growth in any given year.
This creates economic problems and a huge inter-generational imbalance as spending on the over 65s (Pension and Healthcare) is crowding out spending on education, childcare, and capital investments. This has made the over 65 cohort the wealthiest out of all the demographic brackets, leading to the current problems that the UK faces.
Brexit made all of this worse because it was young EU immigrants who were paying enough taxes to still make the pension math somewhat viable over a 20 year time horizon. But many have left back to the EU (creating a labour shortage), with others being off sick (long covid and unable to access NHS care. Waiting list for procedures is 7 million procedures long and growing) leading to material funding shortfalls over the next 20 years.
So the choice is to either raise taxes (not possible now because working folks are too heavily taxed as is and we have a serious cost of living crisis going on), or buy time by raising the age to 68 faster for the State Pension.
The financial situation in the UK really is quite dreadful.
I remember a long time ago on the AO that we were discussing healthcare and the likely need to have to ration it if you had a universal system. Thats were the UK is right now.
This modelling paper explores how much in National Insurance Contributions (NICs) has been paid in by various age groups (20, 40, 60) over their working lifetimes in 2022 vs how much State Pension benefits they will be paid over their retired years. This paper is part of the review for moving the State Pension to 68.
Modelling points to the folks aged 60 (2022) having paid in far less NICs over their working lifetimes vs the State Pension benefits that will be paid out to them. This is due to NICs having been lower for that age group in the past.
The link between NI payments and Pension benefits is better aligned at earlier age (being 40 in 2022) due higher NICs payments.
The older folks may have paid less direct taxes but they probably created more indirect taxes by having more children.
In aggregate having fewer kids essentially amounts to a decision to pay higher entitlement taxes. (In any country.)
Those children will themselves be entitled to government benefits. You’re double counting to attribute the taxes paid by children to their parents.
Ok, count 50% of the taxes you pay and 25% of the taxes each of your children pays then.
The taxes each individual pays are credited 50% to themselves, 25% to their mothers and 25% to their fathers. If we’re doing this in aggregate then how you count adoptions would be mostly irrelevant since the adoptive parents are pretty close to the same generation (on average probably older) as the birth parents.
In the UK the tax base is much smaller vs the US
We have a tax free amount of £12,500/year (the largest amount out of any OECD country)
State Pension is £11,000/year
About 50% of people pay £0 income tax.
So if you look at the math, you have:
[shrinking tax base] paying for [increasing pensions]
Only immigration was kind of holding back the long term funding problems.
And now with long covid and NHS problems we are facing an even more serious crunch as the tax base is made even smaller. Thats why you cannot tax your way out of this problem via the working + income tax paying population. They are being squeezed from all sides at this point. Raising the age to 68 is the best solution.
anyone w a subscription that can share the WSJ article on declining birthrates?
Plus 1.
Wanting to know where now, since this thread has noted China, South Korea, Japan already. India, perhaps?
And the USA has been on decline (well, not getting back up to Boomer rates) since the mid 60’s.
Theres only so much I can do
I assume you mean this piece:
https://www.wsj.com/world/birthrates-global-decline-cause-ddaf8be2?mod=Searchresults_pos4&page=1
Let me grab the graphs for now, bc I’m going to get the text in a different way
I pulled the text from an easier source, so it may not exactly match:
By Greg Ip
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and Janet Adamy
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May 13, 2024 12:01 am ET
The world is at a startling demographic milestone. Sometime soon, the global fertility rate will drop below the point needed to keep population constant. It may have already happened.
Fertility is falling almost everywhere, for women across all levels of income, education and labor-force participation. Some estimates now put the number of babies each woman has over her lifetime below the global replacement rate of about 2.2. The falling birthrates come with huge implications for the way people live, how economies grow and the standings of the world’s superpowers.
The baby bust is happening so quickly and so widely that it’s taken many by surprise. In high-income nations, fertility fell below replacement in the 1970s, and took a leg down during the pandemic. It’s dropping in developing countries, too. India surpassed China as the most populous country last year, yet its fertility is now below replacement.
“The demographic winter is coming,” said Jesus Fernandez-Villaverde, an economist specializing in demographics at the University of Pennsylvania.
Many government leaders see this as a matter of national urgency. They worry about shrinking workforces, slowing economic growth and underfunded pensions; and the vitality of a society with ever-fewer children. Smaller populations come with diminished global clout, raising questions in the U.S., China and Russia about their long-term standings as superpowers.
Donald Trump, this year’s presumptive Republican presidential nominee, has called collapsing fertility a bigger threat to Western civilization than Russia. A year ago Japanese Prime Minister Fumio Kishida declared that the collapse of the country’s birthrate left it “standing on the verge of whether we can continue to function as a society.” Italian Prime Minister Giorgia Meloni has prioritized raising the country’s “demographic GDP.”
In 2017, when the global fertility rate – a snapshot of how many babies a woman is expected to have over her lifetime – was 2.5, the United Nations thought it would slip to 2.4 in the late 2020s. Yet by 2021, the U.N. concluded, it was already down to 2.3 – close to what demographers consider the global replacement rate of about 2.2. The replacement rate, which keeps population stable over time, is 2.1 in rich countries, and slightly higher in developing countries, where fewer girls than boys are born and more mothers die during their childbearing years.
While the U.N. has yet to publish estimated fertility rates for 2022 and 2023, Fernandez-Villaverde has produced his own estimate by supplementing U.N. projections with actual data for those years covering roughly half the world’s population. He has found that national birth registries are typically reporting births 10% to 20% below what the U.N. projected.
China reported 9 million births last year, 16% less than projected in the U.N.'s central scenario. In the U.S., 3.59 million babies were born last year, 4% less than the U.N. projected.
Fernandez-Villaverde estimates global fertility fell to between 2.1 and 2.2 last year, which he said would be below global replacement for the first time in human history. Dean Spears, a population economist at the University of Texas at Austin, said while the data isn’t good enough to know precisely when or if fertility has fallen below replacement, “we have enough evidence to be quite confident about . . . the crossing point not being far off.”
In 2017 the U.N. projected world population, then 7.6 billion, would keep climbing to 11.2 billion in 2100. By 2022 it had lowered and brought forward the peak to 10.4 billion in the 2080s. That, too, is likely out of date. The Institute for Health Metrics and Evaluation at the University of Washington now thinks it will peak around 9.5 billion in 2061 then start declining.
In the U.S., a short-lived pandemic baby boomlet has reversed. The total fertility rate fell to 1.62 last year, according to provisional government figures, the lowest on record.
In 2017, when the fertility rate was 1.8, the Census Bureau projected it would converge over the long run to 2.0. It has since revised that down to 1.5. “It has snuck up on us,” said Melissa Kearney, an economist at the University of Maryland specializing in demographics.
Historians refer to the decline in fertility that began in the 18th century in industrializing countries as the demographic transition. As lifespans lengthened and more children survived to adulthood, the impetus for bearing more children declined. As women became better educated and joined the workforce, they delayed marriage and childbirth, resulting in fewer children.
Now, said Spears, “the big-picture fact is that birthrates are low or are falling in many diverse societies and economies.”
Some demographers see this as part of a “second demographic transition,” a societywide reorientation toward individualism that puts less emphasis on marriage and parenthood, and makes fewer or no children more acceptable.
In the U.S., some thought at first that women were simply delaying childbirth because of lingering economic uncertainty from the 2008 financial crisis.
In research published in 2021, the University of Maryland’s Kearney and two co-authors looked for possible explanations for the continued drop. They found that state-level differences in parental abortion notification laws, unemployment, Medicaid availability, housing costs, contraceptive usage, religiosity, child-care costs and student debt could explain almost none of the decline. “We suspect that this shift reflects broad societal changes that are hard to measure or quantify,” they conclude.
Kearney said while raising children is no more expensive than before, parents’ preferences and perceived constraints have changed: “If people have a preference for spending time building a career, on leisure, relationships outside the home, that’s more likely to come in conflict with childbearing.” Meanwhile, time-use data show that mothers and fathers, especially those that are highly educated, spend more time with their children than in the past. “The intensity of parenting is a constraint,” Kearney said.
Erica Pittman, a 45-year-old business banker in Raleigh, N.C., said she and her husband opted to have only one child because of demands on their time, including caring for her mother, who died last year after a long battle with multiple sclerosis. Their 8-year-old son is able to participate in theater workshops, soccer and summer camps because the couple, with a combined income of about $225,000 a year, has more time and money.
“I feel like a better mom,” Pittman said. “I feel like I can go to work – because I have a fairly demanding job – but I can also make time to volunteer at his school, be the chaperone for the field trip and do those kinds of things, because I only have one to coordinate with my schedule.”
Fertility is below replacement in India even though the country is still poor and many women don’t work – factors that usually sustain fertility.
Urbanization and the internet have given even women in traditional male-dominated villages a glimpse of societies where fewer children and a higher quality of life are the norm. “People are plugged into the global culture,” said Richard Jackson, president of the Global Aging Institute, a nonprofit research and education group.
Mae Mariyam Thomas, 38, who lives in Mumbai and runs an audio production company, said she’s opted against having children because she never felt the tug of motherhood. She sees peers struggling to meet the right person, getting married later and, in some instances, divorcing before they have kids. At least three of her friends have frozen their eggs, she said. “I think now we live in a really different world, so I think for anyone in the world it’s tough to find a partner,” she said.
Sub-Saharan Africa once appeared resistant to the global slide in fertility, but that too is changing. The share of all women of reproductive age using modern contraception grew from 17% in 2012 to 23% in 2022, according to Family Planning 2030, an international organization.
Jose Rimon, a professor of public health at Johns Hopkins University, credits that to a push by national leaders in Africa which, he predicted, would drive fertility down faster than the U.N. projects.
Once a low fertility cycle kicks in, it effectively resets a society’s norms and is hard to break, said Jackson. “The fewer children you see your colleagues and peers and neighbors having, it changes the whole social climate,” he said.
Governments have tried to reverse the fall in fertility with pronatalist policies.
Perhaps no country has been trying longer than Japan. After fertility fell to 1.5 in the early 1990s, the government rolled out a succession of plans that included parental leave and subsidized child care. Fertility kept falling.
In 2005, Kuniko Inoguchi was appointed the country’s first minister responsible for gender equality and birthrate. The main obstacle, she declared, was money: People couldn’t afford to get married or have children. Japan made hospital maternity care free and introduced a stipend paid upon birth of the child.
Japan’s fertility rate climbed from 1.26 in 2005 to 1.45 in 2015. But then it started declining again, and in 2022 was back to 1.26.
This year, Prime Minister Kishida rolled out yet another program to increase births that extends monthly allowances to all children under 18 regardless of income, free college for families with three children, and fully paid parental leave.
Inoguchi, now a member of parliament’s upper house, said the constraint on would-be parents is no longer money, but time. She has pressed the government and businesses to adopt a four-day workweek. She said, “If you’re a government official or manager of a big corporation, you should not worry over questions of salary now, but that in 20 years time you will have no customers, no clients, no applicants to the Self-Defense Forces.”
Hungarian Prime Minister Viktor Orban has pushed one of Europe’s most ambitious natality agendas. Last year he expanded tax benefits for mothers so that women under the age of 30 who have a child are exempt from paying personal income tax for life. That’s on top of housing and child-care subsidies as well as generous maternity leaves.
Hungary’s fertility rate, though still well below replacement, has risen since 2010. But the Vienna Institute of Demography attributed this primarily to women delaying childbirth because of a debt crisis that hit around 2010. Adjusted for that, fertility has risen only slightly, it concluded.
In the U.S., while state and federal legislators have pushed to expand child-care subsidies and parental leave, they have generally not set a higher birthrate as an explicit goal. Some Republicans are leaning in that direction. Last year, Trump said he backed paying out “baby bonuses” to prop up U.S. births.
Republican Sen. J.D. Vance of Ohio said falling fertility matters beyond the economic pressures of a smaller labor force and unfunded Social Security. “Do you live in communities where there are smiling happy children, or where people are just aging?” he said. Lack of siblings and cousins, he said, contributes to children’s social isolation.
With no reversal in birthrates in sight, the attendant economic pressures are intensifying. Since the pandemic, labor shortages have become endemic throughout developed countries. That will only worsen in coming years as the postcrisis fall in birthrates yields an ever-shrinking inflow of young workers, placing more strain on healthcare and retirement systems.
As birthrates fall, more regions and communities experience depopulation, with consequences ranging from closed schools to stagnant property values. Less selective colleges will soon struggle to fill classrooms because of the plunge in birthrates that began in 2007, said Fernandez-Villaverde.
An economy with fewer children will struggle to finance pensions and healthcare for growing ranks of elderly. South Korea’s national pension fund, one of the world’s largest, is on track to be depleted by 2055. A special legislative committee recently presented several possible pension reforms, but there’s only a short window to act before the next presidential election campaign heats up.
There’s been little public pressure to act, said Sok Chul Hong, an economist at Seoul National University. “The elderly are not very interested in pension reform, and the youth are apathetic towards politics,” he said. “It is truly an ironic situation.”
I think it is quite informative. And I want to know more about Nigeria and Ethiopia, but I’m guessing they are male-overlording countries which have placed extreme restrictions on birth control, cuz religion and shit.
Its mostly that child mortality is high, so they compensate for this by having more children. Children are then “insurance” for the survival of the family as they can work and contribute.
Its really no different than Europe in the middle ages.
