the coming retirement revolution

Carleton University economist Nick Rowe has initiated a very interesting discussion on what he calls “the retirement revolution”. Clicking on the link will take you to some ‘worthwhile reading’ at WCI.

The first big macro shock was the invention of agriculture. Productivity rose, then fell again for Malthusian reasons. The second big macro shock was the agricultural/industrial revolution. Productivity started growing so quickly it outran those Malthusian reasons.I think the third big macro shock will be the retirement revolution. Poor people, on the Malthusian margin, retire when they die (or die when they retire). Rich people retire before they die. The world population is ageing. But age per se has no macroeconomic implications. Retirement does have macroeconomic implications.  The fact that there will be a greater percentage of old people doesn’t matter. The fact that there will be a greater percentage of retired people does matter.

Nick Rowe, “Asset prices and the retirement revolution“, Worthwhile Canadian Initiative, 29 October 2013.

I posted a comment at WCI on Nick’s post. Briefly, my view is that an increasing percentage of retired people matters only if per capita income is low and/or falling. With high and rising per capita incomes, it is possible to provide decent pensions for the elderly, on a pay-as-you-go basis, with some left over for workers to also enjoy rising incomes. After all, ‘per capita’ refers to the entire population: children, wage workers, non-wage workers (including caregivers), the disabled and the unemployed (including retirees).

Tags: , ,

Comments are closed.