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  • if the population is getting older, that means that the young dependents are gettign scarce, which means that the total dependency ratio may not change that much (focusing only on the old dependents gives a wrong picture - you can transfer funding from schools to pensions); DoDo provided some numbers on that earlier;

  • the fact that the employment rate of the 55-64 is low suggests that a very simple solution will be to increase that rate somewhat and presto, problem solved;

  • but again, is it really a problem? Pension payments grew from basically nil to 10% of GDP in 40 years without obviously bankrupting any country today. Why wouldn't we succeed in climbing to 15% of GDP in 20-30 years, in a slow process which simply reflects the shifting priorities of our societies;

  • as to the non-integration of the immigrants, commentary from the US is mostly hogwash. It's either viewed through the prism of the clash of civilisation with Islam ("Eurabia" and the like, France "forced to compromise itself not to alienate its restless and powerful muslims") or through the (wrong) idea that France is a failed economy.

If you look at your GDP growth graph, you'll see that most of the big economies are between 2 and 2.5% growth per year. If you put that in terms of GDP per capita growth, the differences will be even smaller.

So sure, we have problems, but talking about the bankruptcy of European economies right in the middle of the biggest debt binge in the history of the world, fully centerd in the US, is kind of ironic, don't you think?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Apr 4th, 2006 at 04:00:39 AM EST
All good points, particularly point #2 which can be done through incentives, rather than with authority (like Raffarin tried). For example e-work like tutoring/teaching can be encouraged for 60+ people who are tired of going to work every morning but who still enjoy sharing their experiences and knowledge ...
by Alex in Toulouse on Tue Apr 4th, 2006 at 04:11:13 AM EST
[ Parent ]
Thanks for pre-empting the explosion of my head. (No, it's not personal, but seeing these Not So New Consensus things again from the sources wchurchill quotes.)

I will add that in my opinion, there is a problem (a problem all across the West currently), but that problem is one of job creation, not demographics.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Apr 4th, 2006 at 04:47:34 AM EST
[ Parent ]
DoDo provided some numbers on that earlier;

To recap, percentage of the entire (not just working-age or adult) population working, Q4/2006:

  • thriving Anglo-Saxon economy USA: 48.2%
  • chronically ill Old European economy Germany: 47.2%
  • roaring New European economy Hungary: 39.0%

Jerome won't like this - for France, I couldn't yet find the employment quartal numbers (or even monthly numbers) on the INSEE website (maybe Alex can help out?), but the from 2005 yearly labour data [pdf!] released in March (24,921,000 employed) and the 2005 yearly population data [pdf!] (62,702,400 in the middle of the year), I get 39.7%.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Apr 4th, 2006 at 05:19:46 AM EST
[ Parent ]
Look at it the right way: we can still make a lot of progress!

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Apr 4th, 2006 at 06:14:34 AM EST
[ Parent ]
See below.

ALso, I am not sure I found the right numbers. There is also the metropolitan France/all France distinction, I assumed the jobs data in that pdf was the latter but can't be sure. (Can someone find me an INSEE link to employment raw data?)

Do you have some nice statistics on part-time and full-time work as percentage of employment in various countries, BTW?

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Apr 4th, 2006 at 06:26:03 AM EST
[ Parent ]
Another idea just appeared to me: could it be that farm jobs are not entirely covered, especially small single-family farms?

That could be a big factor. It is in Polish employment statistics.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Apr 4th, 2006 at 06:30:42 AM EST
[ Parent ]
Of course, it's worth to point out that the French employment trend (at least during Jospin's time) was upward in the last decade or so, reversing an earlier strong downward trend.

I'll add the UK data: Q4/2005 employment [Excel table!] was 28,803,000 (apparently seasonally adjusted, and from the population projection [pdf!] I estimate 60,315,000 in the middle of Q4/2005, gives 47.8%.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Apr 4th, 2006 at 06:22:29 AM EST
[ Parent ]
Your points are good, and I'm going to try to respond to them with individual and focused comments:
the fact that the employment rate of the 55-64 is low suggests that a very simple solution will be to increase that rate somewhat and presto, problem solved;
Good government, and good business, IMO, should have a regular process of forecasting the future to identify problems and opportunities.  One can act in advance, often with minor modifications of policy, to capture potential benefits, or avoid possible pitfalls.  It seems to me your suggestion is a great one to address what the future shows us--in business it's sometime called "long hanging fruit", because it should provide significant financial improvement and be reasonably easy to implement.  But, it won't happen by itself, it will require a policy change.  And since it will require a group in society to change from the normal pattern, the government will have to outline the issue for the broad population, so they can understand the problem, understand the need for change, and buy into the solutions.

This is the type of dialogue I had hoped this diary would generate.

by wchurchill on Tue Apr 4th, 2006 at 02:25:49 PM EST
[ Parent ]
Agreed.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Apr 4th, 2006 at 06:24:26 PM EST
[ Parent ]
I'm often taken aback at the view sometimes expressed at ET that there is some nefarious intent by those with more liberal economic views, especially if they live in the west, when they comment on socialized economies.  For example,
So sure, we have problems, but talking about the bankruptcy of European economies right in the middle of the biggest debt binge in the history of the world, fully centerd in the US, is kind of ironic, don't you think?
and from Dodo
The one that is worth to counter here is about jobless numbers - because the underlying truth is an inverted version of the trickery played by some in the West, say in the USA or the UK..
Just taking this as an example, this demographic problem is a problem of most Western societies, as noted in the comment I pulled from Samuelson:
The dilemma of advanced democracies, including the United States, is that they've made more promises than they can keep. Their political commitments outstrip the economy's capacity to deliver.
This is a problem that has received significant attention from more liberal economists in the US, but almost no action to address the problem.  I have commented more than once on this site about my own frustration that specifically with social security, both Clinton and Bush have presented plans to address the issue, both would have made a significant contribution to fixing the problem (I happen to prefer Clinton's approach), but the political will in the US congress has been lacking,,,,,our spineless representatives as usual wanting to "kick the can down the road" and leave it for future congresses to solve when it is much worse.  The earlier you address these issues, the easier they are to resolve.

My point is that these analytical techniques I've presented here are not designed to make France or socialized European economies look bad in relationship to "Anglo Saxon" westernised economies.  Au contraire, they are the exact techniques used to analyze and criticise, and call for change, in the US.  So to Jerome, I actually don't find it ironic at all that I would comment on this issue in France, the EU, or in the US.

I'm only defending myself here--I won't take on the case that there are not those in the Western press, the UK and US government, who do have such motivations.  I'm not saying they do, or they don't--I'm just not defending them.  I defend only my own motivations and my own comments.

by wchurchill on Tue Apr 4th, 2006 at 02:59:19 PM EST
[ Parent ]
My point is that the pensions problem is, maybe, maybe, a long term problem, whereas the current debt binge is at best a medium term problem with very immediate consequences. So one should focus first on the larger and more urgent problem.

That does not mean ignoring the long term problem, but its puts it in perspective. and, as far as I am concerned, it is not really a problem.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Apr 4th, 2006 at 06:27:04 PM EST
[ Parent ]
but again, is it really a problem? Pension payments grew from basically nil to 10% of GDP in 40 years without obviously bankrupting any country today. Why wouldn't we succeed in climbing to 15% of GDP in 20-30 years, in a slow process which simply reflects the shifting priorities of our societies;
Let me address this in a personal, and perhaps roundabout, way.  I was drawn to write this diary because of my familiarity with the demographic issue in the US.  The bulge of "baby boomers" in the US has had unbelievable impact on the US economy and society since 1946.  For example, when the baby boomers hit the school systems,,,,it was an explosive impact.  Where I lived as a youth, the high school system was totally unprepared for the mass of baby boomers coming into the system.  Class size exploded because there were not enough teachers; schools were overcrowded and the district reacted belatedly to create new physical buildings, etc., etc.  (I saw it more than most because the area I lived in was the fasted growing in the US,,,in addition to having the baby boom explosion).  But the impact has been dramatic on every age group as the boomers come to that group.  If one is aware of this, one can benefit--so for example when the baby boomers reached the stage of where a part of the age group starts buying 2nd homes,,,,guess what happened?,,,,yes, of course, an explosion in the market for 2nd homes.  These are just two examples,,,,there are thousands of them.

So this issue of what happens when the boomers retire has received a lot of attention in the US (not enough action, but a lot of analysis and attention).  And there is general agreement that we have a problem, particularly with pensions and healthcare costs as the boomers retire.

I have not looked at this as an issue outside the US, though I have read that other countries, particularly Japan, has even bigger issues with this demographic bulge (note Japan in the demographic chart).  But I was particularly surprised to see that France, according to that chart, has a larger demographic issue than the US.  And we had recently discussed the higher retirement rates of the French economy, which led me to look at this issue.

So, voila, we in the US are heading to a problem.  You in France seem to have a larger demographic issue, complicated by an earlier retirement pattern.  But Jerome, you say

but again, is it really a problem?
and evidently France has not seen these demographic issues I have described for the baby boomers in the US.  So maybe you are right,,,,and there is no problem.  I just can't see why it's not a problem, when a use the same analytical prism to look at France, that I do when I look at the US--a prism by the way that has no nefarious motivation to make France look bad, just a fact based analytical technique,,,,,,one that has worked on the boomer impact for decades in the US,,,,,but maybe I'm missing something, and I'll find it based on your comments and others in this dialogue.
by wchurchill on Tue Apr 4th, 2006 at 03:37:32 PM EST
[ Parent ]
We do have a very real babyboom bulge, but again, it creates problems which are no unsurmountable. It is not a hard transition to focus spending on the people that need it most (especially if they are the biggest voting block) - and if that changes some big macroeconomic numbers, so be it. It is a choice of society, and society can well afford it.

What makes you think that we won't be able to afford to pay for a larger number of pensioners? Why wouldn't all our productivity growth oriented towards preserving the income of the pensioners rather than the revenues of the workers? It's a distribution choice, i.e. a social/political issue, not an economic problem. And for individual workers, little will actually change.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Apr 4th, 2006 at 06:30:49 PM EST
[ Parent ]
What makes you think that we won't be able to afford to pay for a larger number of pensioners?
I have been through the impact in the US of the baby boomer "bulge" on the social security system and on Medicare/Medicaid.  It is a problem for the US to handle this upcoming impact, and one that we should make some adjustments now, so the impact is lessened in the future.

As I look at the OECD numbers, they say that many countries have a bigger "baby boom bulge" than the US does.  So I conclude that, for example France, may have an even bigger problem than the US does.

Now, the US "can afford to pay for a larger number of pensioners".  It's just that if the problem is not addressed earlier, the impacts on the future US economy are pretty harsh.

So, I can only conclude that I am missing something about US pension/healthcare programs, that causes us to have a more significant problem than France, or other countries; or, France is more willing to pay the price later and live with the adverse consequences; or France has not looked at the impact of this in detail.  My hunch is that the first is the answer, "I am missing something about US pension/healthcare programs, that causes us to have a more significant problem than France", but I just don't know what I'm missing yet,,,,,and being curious about things, would like to find out.

Frankly I'm a little disappointed in this dialogue on my diary (not with you Jerome as I think you have taken time to thoughtfully respond).  But what I have previously normally found as ET's more thoughtful approach to problems, seems to have broken down here.  For some 80%ish of the poll takers to respond that there is not a problem, or there is no answer among the alternatives, leads me to the conclusion that people are not looking at the issue,,,,,or are taking the easy way out and attacking the message, or messanger, as someone who is a "neocon", and just wants to defend the "anglosaxon model" and attack the "socialized European systems"--whatever any of those things in quotes means.  That is certainly not my goal.  I'm here to debate and learn from the debate,,,,and my learning on this the debatge in this diary is very low.

by wchurchill on Wed Apr 5th, 2006 at 03:04:43 AM EST
[ Parent ]
I think we're tired: I am. I'm tired of fighting the assumptions underlying the stories underlying this diary. Let's focus for a moment  on the options you provided in your poll:

.    The analysis is flawed, no change is required, and everything will be fine.     17%


This is slightly silly: clearly some change will be required, it always is. And the analysis is flawed.


.    Politicians will articulate the problem, and present a combination of programs involving benefit cuts, higher taxes, later retirement, and more debt. This will work well, with little disruption.     5%

This is both funny - politicians doing their job right! - and includes the assumption that the solutions presented form a basis for a solution.


.    Strikes will prevent adequate change, a fiscal crisis will develop as debt soars, the economy will falter. Change will be in a crisis mode, with extreme disruption.     11%

This encodes the lazy-reform-resisting-frogs-are-preventing-necessary-change assumption. The resistance is to piecemeal change imposed in accordance with dogma and underwritten by misrepresentations.


.    The above disruption scenario will occur, with similar episodes in other EU countries. The EU will disolve, as a result.     0%

Make that lazy-reform-resisting Europeans.


.    None of the above.     64%

The only one most of us can vote for.

You've even failed to clearly show that there is a real problem - the "problem" with US pensions and healthcare is arguably simple underfunding by ideologues who disapprove of welfare and taxation in any form though I'll leave it to the dKos people to go into the detail of that - I think boondad did a series on this that makes it clear that the problem is actually nowhere near as serious as presented by some people. As did Brad de Long if I recall properly.

by Colman (colman at eurotrib.com) on Wed Apr 5th, 2006 at 03:52:07 AM EST
[ Parent ]
For some 80%ish of the poll takers to respond that there is not a problem, or there is no answer among the alternatives, leads me to the conclusion that people are not looking at the issue

wc, you put up a provocative title and invited people to take a poll. Now you complain people didn't answer the way you say they should if they were serious and "thoughtful", and were facing the issues. So next time, either don't do a poll, or make an effort to do a less transparently loaded one. (See Colman's analysis).

Also, the quality of "debate" seems to you "disappointing". So, next time, don't do a diary based on yet another tiresome rubbish column from an American pundit who trots out the usual stereotypes on France-which-is-not-facing-up-to-facts etc. Don't make this disingenuous attempt to invite "debate" when your aim is so clearly prescriptive (ie these are the problems; if you say "No, they're not," you're not facing up to the problems).

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Apr 5th, 2006 at 04:41:17 AM EST
[ Parent ]
Also, the quality of "debate" seems to you "disappointing". So, next time, don't do a diary based on yet another tiresome rubbish column from an American pundit who trots out the usual stereotypes on France-which-is-not-facing-up-to-facts etc. Don't make this disingenuous attempt to invite "debate" when your aim is so clearly prescriptive
You nailed it, also on the Gnomemoot.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 5th, 2006 at 05:44:55 AM EST
[ Parent ]
I think the large part of the problem is that Europeans, especially the French, are sick and tired of being treated like the world's economic idiots by the press -- something I understand well after reading the articles that Jerome and others have debunked -- just as many Americans (myself included in some cases) are sick and tired of being looked at as a bunch of warmongering assholes simply for being citizens of a country in which Bush is the president, as though we were all members of the right wing.  (My mother's long-time friend was shocked when she and her husband visited Paris and people began spitting at them -- yes, spitting -- and insulting them for being Americans.  They've been a Democrats throughout their entire lives and were very much opposed to the Iraq War.)

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Apr 5th, 2006 at 03:21:31 PM EST
[ Parent ]
Spitting at them? What the fuck? How'd they manage that?
by Colman (colman at eurotrib.com) on Wed Apr 5th, 2006 at 03:25:31 PM EST
[ Parent ]
if the population is getting older, that means that the young dependents are gettign scarce, which means that the total dependency ratio may not change that much (focusing only on the old dependents gives a wrong picture - you can transfer funding from schools to pensions); DoDo provided some numbers on that earlier.
First, I agree that this is also a useful way to look at the issue.  The challenge after all, is that the working population needs to support all of the dependents.  I would think the following questions, accepting your framework, would be helpful to better understand this.
  1.  What is the relative cost of different types of dependents, and let's focus on children versus the 65+.  Studies on healthcare in the US have shown that the majority of healthcare spend occurs in the last few years of life,,,,,and my guess is on a per capital basis, child versus senior, this would be heavily weighted to the senior.  Second, how would government spending on children for education compare to a government pension, on a per capita basis?  I don't know the answer to this, but intuitively I would guess that the pension is far more costly.  What other areas of government spending are influenced by these two dependency groups?
  2.  How is this ratio forecasted to change?  We know the percentage of seniors is going to climb.  We know that the children become the youth, but do new births effectively replenish the children?, so that the end result of the calculation is that more working people support more overall dependents?
I don't have data to answer either of these questions at this point.

To recap, percentage of the entire (not just working-age or adult) population working, Q4/2006:
thriving Anglo-Saxon economy USA: 48.2%
chronically ill Old European economy Germany: 47.2%
roaring New European economy Hungary: 39.0%
Jerome you referred me to some of Dodo's comments which were useful.  However they are addressed at different issues than I'm addressing.  I am more focused on the effect of demographic changes on the economic structure of an individual country.  So the most important issue is to address how statistics, for France for example, have changed in the past and are forecasted to change in the future.  This is the data that will tell us what lies ahead for France (as an example, or the US, or Japan).  
IMO, the main usefulness for comparing to other countries, is to see if there might be areas of opportunity for an individual country to change, if they need to, or so choose.  It's not a "mine is bigger than yours" kind of thing.  So IMHO it's useful to know that the participation rate in France is significantly lower than in the US.  It shows, as you suggested earlier, that there may be an opportunity here to address a negative trend in demographics.  But that doesn't mean the US is in someway better than France.  France has chosen to allow earlier retirement, and potentially a higher quality lifestyle for its citizens.  As I've read on this site many times before, many Europeans think the Americans spend too much of their lives working, and focused on wealth.  Each society makes its own choices--what's wrong with that?

Apologies for the bolding, but I wanted it emphasized.

by wchurchill on Tue Apr 4th, 2006 at 04:31:56 PM EST
[ Parent ]
Agreed.

I'm pretty sure that kids are more expensive than pensioners to society (fully dependent, plus schooling costs, no contribution to associations and the like)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Apr 4th, 2006 at 06:32:34 PM EST
[ Parent ]
Our own kid cost us about £100 a week, all things considered. When I think that, by GDP per capita, he should be bringing in £20k a year...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Apr 4th, 2006 at 06:45:05 PM EST
[ Parent ]
but I'm focusing on the cost out of the government coffers for children.  If you know, how much is the government paying for your child, which I would guess would be mainly education and health care.

And how would that compare to the average pensioner?  and I guess his costs would be the pension itself, and then the average spent on healthcare for he/she?

My guess is that the pensioner is much more expensive, particularly because the average pensioner's use of healthcare is, I think, far higher than the average child.  At least that is what all the studies I have seen show.

by wchurchill on Tue Apr 4th, 2006 at 07:02:30 PM EST
[ Parent ]
The pensioner has also paid taxes all his life, hasn't he?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Apr 4th, 2006 at 07:03:47 PM EST
[ Parent ]
yes, but it's a timing thing from the government's perspective.  they didn't take the pensioner's money and invest it in stocks/bonds so they had it available to pay to him when he retired.  his taxes partially went toward paying the pensions of pensioners when he was working.  his pension is coming out of current taxes.  it's a pay as you go system.
by wchurchill on Tue Apr 4th, 2006 at 07:31:46 PM EST
[ Parent ]
as to the non-integration of the immigrants, commentary from the US is mostly hogwash. It's either viewed through the prism of the clash of civilisation with Islam ("Eurabia" and the like, France "forced to compromise itself not to alienate its restless and powerful muslims") or through the (wrong) idea that France is a failed economy.
I didn't personally comment on this at all.  There were comments from Samuelson, where I was attempting to emphasize another point he was making, and thought it would change the context to delete the "immigrant" point, or maybe I just didn't think enough about sensitivities here and should have deleted it.  It's not an issue I'm attempting to address in this diary.
by wchurchill on Tue Apr 4th, 2006 at 04:39:17 PM EST
[ Parent ]
If you look at your GDP growth graph, you'll see that most of the big economies are between 2 and 2.5% growth per year. If you put that in terms of GDP per capita growth, the differences will be even smaller.
This one I think you are underestimating, in the sense of GDP growth in comparison to increase in debt.  Samuelson points out that GDP growth in France has averaged 1.6% over the past several years.  In that same period, France has exceeded the 3% debt ceiling (as compared to GDP) in many of those years.  In fact in 1995, even when they achieved that number, hitting 2.9%, since the GDP growth was only 1.4%, France lost ground in the main evaluation of its overall debt position--total debt compared to GDP.  If this is an issue for the US with its overspending, and it is, why is it not an issue for France?
by wchurchill on Tue Apr 4th, 2006 at 04:45:51 PM EST
[ Parent ]
Us debt and deficits are a problem in that the absolute amounts are huge and require funding to be available in the same huge amount from the rest of the world.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Apr 4th, 2006 at 06:33:46 PM EST
[ Parent ]
we've both commented on this before, and we just look at this from two different economic perspectives.  You tend to focus on the absolute size of the US debt, and the fact that it is high because the country is so big.  And I acknowledge that is factually accurate.

I tend to focus on lender's evaluation of the debtors ability to repay the loan.  One of the key aspects of that decision is how the debt relates to the debtor's ability to pay.  I would argue that is based upon 1)some evaluation of debt related to income or net worth--so I look at total debt divided by annual GNP, and 2)and some evaluation of the future strength of the countries economy, so growth in GNP, evaluation of productivity, evaluation of the countries dominance in key industry sectors, etc.

Thus you think it's more important than I do.

by wchurchill on Tue Apr 4th, 2006 at 07:09:55 PM EST
[ Parent ]
I don't doubt America's ability to pay. I doubt the rest of the world's ability to lend enough money. Thus my focus on absolute amounts - on the LENDING side it's a problem.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Apr 6th, 2006 at 09:22:50 AM EST
[ Parent ]

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