Category: Demographics

The Effect of Population Aging on Economic Growth, the Labor Force, and Productivity

Mary Pat Campbell

Link: https://www.aeaweb.org/articles/pdf/doi/10.1257/mac.20190196?etoc=1&PHPSESSID=e2d71946030ec8a8263aa740cdefc8bf&aeawebcookie=bKEAqeTUkYC2t76T69dF0Ci6fxe7YbxnmOV&_ga=GA1.1.1666777193.1680103456&_ga_96K6S9DJLT=GS1.1.1680103456.1.1.1680103555.0.0.0

Maestas, Nicole, Kathleen J. Mullen and David Powell. 2023. “The Effect of Population Aging on Economic Growth, the Labor Force, and Productivity.” American Economic Journal: Macroeconomics, 15 (2):306-32.

DOI: 10.1257/mac.20190196

Replication package link: https://www.openicpsr.org/openicpsr/project/173781/version/V1/view

Online appendix: https://assets.aeaweb.org/asset-server/files/18416.pdf

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Abstract:

Population aging is expected to slow US economic growth. We use variation in the predetermined component of population aging across states to estimate the impact of aging on growth in GDP per capita for 1980–2010. We find that each 10 percent increase in the fraction of the population age 60+ decreased per capita GDP by 5.5 percent. One-third of the reduction arose from slower employment growth; two-thirds due to slower labor productivity growth. Labor compensation and wages also declined in response. Our estimate implies population aging reduced the growth rate in GDP per capita by 0.3 percentage points per year during 1980–2010.

Author(s): Maestas, Nicole, Kathleen J. Mullen and David Powell

Publication Date: 2023

Publication Site: American Economic Journal: Macroeconomics, AEAweb

Can France Escape Its Pension Overhang?

Mary Pat Campbell

Link: https://www.city-journal.org/can-france-escape-its-pension-overhang

Excerpt:

In 2021, government spending accounted for 59 percent of GDP in France, compared with 45 percent in the United States. Spending on public pensions accounts for much of that gap: it’s 15 percent of GDP in France, but only 7 percent in the U.S. This greatly inflates associated payroll taxes, which alone took 28 percent of workers’ incomes in France, compared with just 11 percent in the U.S.

President Macron argues that the cost of financing pensions is dragging down the whole economy, and that reform is necessary to make France an attractive venue for investment and employment. Whereas workers’ incomes in 1975 were 46 percent higher than those of retirees, by 2016 they were 2 percent lower. Many economists see it as senseless to redistribute so much from the young to the elderly, who seldom have childrearing expenses and whose mortgages are often paid off.

Pension reform is seen as necessary by 61 percent of French voters, but only 32 percent support raising the retirement age. Macron argues that the only alternatives to his reforms would involve cutting benefit levels, hiking taxes, or cutting public spending on other items such as education, health care, or defense. France already has close to the highest taxes in the developed world.

Median incomes for French residents aged 65 and over ($20,116) are little different than those for Americans ($19,704). The main effects of France’s extra pension spending are to crowd out private savings for retirement (which amount to 12 percent of GDP versus 170 percent in the U.S), and to cause French citizens to retire much earlier (at an average age of 60.4, vs 64.9 in the states).

Author(s): Chris Pope

Publication Date: 28 Mar 2023

Publication Site: City Journal

BlackRock, Fidelity Lose Out in $1 Trillion China Pension Market

Mary Pat Campbell

Link: https://finance.yahoo.com/news/blackrock-t-compete-free-advil-000000028.html

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China launched private pension plans for the first time last year and Beijing has ensured that domestic banks and fund managers win the vast majority of the new business in a market that may eventually grow to $1.7 trillion. Global companies including BlackRock and Fidelity International Ltd have been off to a slow start.

Given their tiny asset bases in China, most foreign money managers have so far been excluded from pilot trials in 36 cities, allowing banks like Industrial & Commercial Bank of China Ltd. and China Merchants Bank Co. to grab all the inflows. To cement their lead, the banks are offering everything from cash incentives to free ibuprofen for each new account.

“The first bite at the cake here won’t be easy” for foreign companies, said Zhou Yiqin, president of GuanShao Information Consulting Center, a financial regulations specialist.

While it’s still early days for the new pension scheme, the head start for domestic companies illustrates the daunting challenges for global firms eyeing a piece of China’s $60 trillion financial services sector. From mergers advice to stock sales and trading, Wall Street is struggling in a market that combines endless potential with stiff local competition and regulatory roadblocks.

China’s fledging private pension system is loaded with promise, as Beijing desperately tries to entice retirement savings to support an aging population. The number of people over 60 is expected to jump more than 50% by 2040, according to the World Health Organization. China’s population shrank last year for the first time in six decades.

To address the problem, China has launched three pension pillars. The first two — a compulsory state-backed plan and a voluntary corporate matching option — don’t come close to meeting the future needs of most pensioners. Savings in the government-led program covering urban employees may run out by 2032 and face a shortfall of more than 7 trillion yuan by 2035, according to Citic Securities Co. estimates.

Author(s): Bloomberg News

Publication Date: 28 Mar 2023

Publication Site: Yahoo Finance

Mortality and the provision of retirement income

Mary Pat Campbell

Link: https://www.oecd.org/daf/fin/private-pensions/launch-publication-mortality-provision-retirement.htm

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Excerpt:

The report analyses the development of mortality assumptions to build mortality tables to better protect retirement income provision. It first provides an international overview of longevity trends and drivers over the last several decades, including the impact of the COVID-19 pandemic. It then explores considerations and traditional approaches for developing mortality tables, and details the standard mortality tables developed across OECD member countries. It concludes with guidelines to assist regulators and supervisors in assessing whether the mortality assumptions and tables used in the context of retirement income provision are appropriate.

The OECD will provide an overview of the publication, followed by a roundtable discussion with government and industry stakeholders. Topics discussed will include:

  • Recent mortality trends and drivers
  • How mortality trends/drivers can inform future expectations, and how to account for that in modelling
  • The challenge of accounting for COVID in setting mortality assumptions
  • Trade-offs for different modelling approaches
  • The usefulness of the guidelines included in the report in practice
  • How to better communicate around mortality assumptions to non-experts

Publication Date: 2 Feb 2023

Publication Site: OECD

You Might Live Longer Than You Think. Your Finances Might Not.

Mary Pat Campbell

Link: https://www.wsj.com/articles/death-finances-and-how-many-of-us-get-our-money-needs-wrong-51a660a2?st=latmuov31yafzz9&reflink=desktopwebshare_permalink

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Demographers and actuaries make the following distinction between life expectancy and longevity: Life expectancy refers to the average number of years someone will live from a given age, whereas longevity refers to how long he or she might live if everything goes well, typically expressed as the probability of living beyond a certain age such as 85, 90 or even 100.

A growing body of evidence shows that many people are ignorant of their so-called longevity risk—the probability of living a very long time—and the complications that presents. 

….

Drs. Hurwitz and Mitchell note that retirement calculators provide information about average life expectancy, but not longevity. They have found that about five times as many Census Bureau publications relate to life expectancy as longevity. Thus, people who have planned appropriately for their life expectancy might miss how likely they are to live longer. 

….

People can look up their longevity risk with an online Longevity Illustrator maintained by the American Academy of Actuaries and Society of Actuaries, based off the latest mortality data from the Social Security Administration. 

Author(s): Josh Zumbrun

Publication Date: 10 Feb 2023

Publication Site: WSJ

Years of life lost to COVID-19 in 81 countries

Mary Pat Campbell

Link: https://www.nature.com/articles/s41598-021-83040-3

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Understanding the mortality impact of COVID-19 requires not only counting the dead, but analyzing how premature the deaths are. We calculate years of life lost (YLL) across 81 countries due to COVID-19 attributable deaths, and also conduct an analysis based on estimated excess deaths. We find that over 20.5 million years of life have been lost to COVID-19 globally. As of January 6, 2021, YLL in heavily affected countries are 2–9 times the average seasonal influenza; three quarters of the YLL result from deaths in ages below 75 and almost a third from deaths below 55; and men have lost 45% more life years than women. The results confirm the large mortality impact of COVID-19 among the elderly. They also call for heightened awareness in devising policies that protect vulnerable demographics losing the largest number of life-years.

Author(s): Héctor Pifarré i Arolas, Enrique Acosta, Guillem López-Casasnovas, Adeline Lo, Catia Nicodemo, Tim Riffe & Mikko Myrskylä

Publication Date: 18 Feb 2021

Publication Site: nature scientific reports

Flash Update: Unemployment Rate in Every Metro (Feb 2023 Release)

Mary Pat Campbell

Link: https://civmetrics.com/uncategorized/flash-update-unemployment-rate-in-every-metro-feb-23-release/

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The new metro-level unemployment numbers were released last week, and we’ve organized all the data for all 380+ metros in one chart at the bottom of this page. First, some highlights:

NOTE: All numbers are seasonally adjusted.

Here are the 10 metro areas that saw the biggest month-over-month increase in unemployment:

Author(s): Ted Ballantine

Publication Date: 6 Feb 2023

Publication Site: CivMetrics

Employment of “People with a Disability” Spiked to Record in Hot Labor Market. Applications for Disability Benefits Fell to 20-Year Low

Mary Pat Campbell

Link: https://wolfstreet.com/2023/02/03/employment-of-people-with-a-disability-spiked-to-record-in-hot-labor-market-applications-for-disability-benefits-fell-to-20-year-low/

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The number of people with a disability who were employed in January spiked by 27% from January 2020, to 7.29 million in January — with December at 7.37 million having been the highest in the data from the BLS going back to 2008:

Author(s): Wolf Richter

Publication Date: 3 Feb 2023

Publication Site: Wolf Street

Data Challenges in Building a Facial Recognition Model and How to Mitigate Them

Mary Pat Campbell

Link: https://www.soa.org/resources/research-reports/2023/data-facial-rec/

PDF: https://www.soa.org/49022b/globalassets/assets/files/resources/research-report/2023/dei107-facial-recognition-challenges.pdf

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Excerpt:

This paper is an introduction to AI technology designed for actuaries to understand how the technology works, the potential risks it could introduce, and how to mitigate risks. The author focuses on data bias as it is one of the main concerns of facial recognition technology. This research project was jointly sponsored by the Diversity Equity and Inclusion Research and the Actuarial Innovation and Technology Strategic Research Programs

Author(s): Victoria Zhang, FSA, FCIA

Publication Date: Jan 2023

Publication Site: SOA Research Institute

France Won’t Accept Emmanuel Macron’s Attack on Pensions

Mary Pat Campbell

Link: https://jacobin.com/2023/02/france-emmanuel-macron-pension-reform-protest-strike-welfare

Excerpt:

According to police figures, Tuesday’s nationwide protests marked the largest single-day union-backed demonstration in France in thirty years. Some 1.272 million turned out to the streets. That’s more than the already-impressive January 19 turnout, it’s more than any of the single-day peaks of the 2010 and 2003 movements over retirement reforms — it even topped the height of the legendary 1995 protests.

And there’s more to come. The united union coalition has called for two further days of strikes and protest: Tuesday, February 7, and Saturday, February 11. “Until then,” the coalition has also called on the public to “multiply actions, initiatives, meetings, and general assemblies across the country, in workplaces [and] at places of study, including through strikes.”

After two successful national mobilizations, the movement seems to be entering a new phase. Public opinion is clearly on its side — and yet, the government isn’t budging on the proposed hike in the retirement eligibility age from sixty-two to sixty-four. Clearly, it’s going to take more for organized labor to win this battle.

….

Clearly, the strike calls over pension reform have resonated beyond organized labor’s traditional bastions of support in the public sector: namely, schools, health services, and transit networks (the national SNCF rail company and the Paris metro network). Workers in all these sectors have walked off the jobs, but so have others in the private sector. The General Confederation of Labour (CGT) has shared a list of strikes on January 31 that illustrates this point: five thousand strikers at Airbus; a walkout from 90 percent of the staff at a FNAC department store outside of Toulouse; a strike from 80 percent of the workers at a LU Mondelēz factory in Normandy, etc.

Author(s): Cole Stangler

Publication Date: 2 Feb 2023

Publication Site: Jacobin

Unemployment Rate Hits New Low of 3.4 Percent as Jobs and Employment Jump But…

Mary Pat Campbell

Link: https://mishtalk.com/economics/unemployment-rate-hits-new-low-of-3-4-percent-as-jobs-and-employment-jump-but

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If you work one hour, you are employed. If you don’t have a job and fail to look for one, you are not considered unemployed, rather, you drop out of the labor force.

Looking for job openings on Jooble or Monster or in the want ads does not count as “looking for a job”. You need an actual interview or send out a resume.

These distortions artificially lower the unemployment rate, artificially boost full-time employment, and artificially increase the payroll jobs report every month.

Q&A What’s Going On?

Q: Hey Mish, What’s Going On?
A: People are taking on second part time jobs to make ends meet. But full time employment is stagnant no matter how one slices and dices the revisions. 

Author(s): Mike Shedlock

Publication Date: 3 Feb 2023

Publication Site: Mish Talk

Why the French are protesting against pension reform

Mary Pat Campbell

Link: https://www.dw.com/en/france-pension-reform-plans-trigger-public-backlash/a-64513082

Excerpt:

A reform of France’s pension system is set to push up the minimum retirement age from 62 to 64. The government has said the measures are needed. But most French, and even a number of economists, disagree.

The demonstration on a recent Thursday afternoon could be a bad omen for President Emmanuel Macron. About 80,000 people gathered in Paris, and over 1 million across France — more than at any other French protest in over a decade. They were there to show their opposition to the government’s pension reform plans, which even some economists disapprove of.

Protesters in the street leading from Place de la Republique to Place de la Bastille in northeastern Paris were holding up placards saying things like “I love my pension” and “This [reform] is not inevitable, it does not create social justice.”

….

But the government has said the reforms are necessary to save France’s pay-as-you-go system, where workers pay for pensions through their levies. “The ratio of workers to pensioners is going down and that is threatening our system. With this project, we’ll guarantee the future of our retirement model,” Prime Minister Elisabeth Borne said before the Senate in mid-January.

As opposed to certain other European countries, France’s pension system does not include any capital-funded elements. It comprises general branches for private employees and public servants, and 27 so-called special pension schemes for, for example, ballet dancers or police officers that benefit from an earlier retirement.

The government now aims to increase the system’s overall minimum retirement age from 62 to 64 years by 2030. And from 2027 on, people will need to work for 43 years — instead of the current 42 — to receive a full-rate pension.

Macron’s plans would maintain an earlier retirement for people who started working at a young age and preserve certain special pension schemes. Others, such as the plans for metro drivers in Paris, are to be cut. The government also aims to increase the minimum pension by about €100 ($108) to €1,200 per month.

Money is, of course, Macron’s main argument. The reform is based on a report by a government-mandated expert committee that predicts pension payments will amount to up to 14.7% of GDP in 2032, instead of the current 13.8%.

Author(s): Lisa Louis

Publication Date: 30 Jan 2023

Publication Site: DW