The following article from this week' s
Economistg is relevant to FW and may be of
interest. Whether it has anything more than
theoretical interest for pensions in the next 30
years remains doubtful. I can't see how the
Western economies are ever going to pick up until
a Schumpeter-style disruptive technology comes
along and initiates a new production era.
Meanwhile, where is economic growth going to come
from? There'll always be plenty of (relatively
trivial) spending on clothes and their rapidly
changing fashions. But as for more new more
expensive status goods which have comprised close
on 70% of total GDP in the last 300 years? As for
pensions for ordinary folk in the next 30 or 40
years, well, funds are already paying pensions
out of capital. It will take many years of much
higher share prices before their black holes are
filled in again with positive assets. As for
state welfare and pensions, I think we can say
bye bye to that within a few years when all
advanced governments will have to default.
Keith
------------------------------------------------
Economist 21 December
THE RICH ARE DIFFERENT
Longevity and the pension age
LIVE longer, work longer. As the developed world
struggles with the cost of its greying
population, a standard response has been to
increase the state retirement age. In a decade or
two, retiring at 67 rather than 65 will be the norm.
But is such a change fair? Across the developed
world, better-off people in the higher social
classes tend to live longer than the poor. This
gap has tended to widen, rather than shrink, in
recent years. The result is that the poor get
much less time to enjoy their benefits than the better-off
This is not an easy problem to deal with. Since
the rich have always tended to live longer,
unfairness is built in to the very idea of a
universal pension age. And income levels are not
the only determinant of longevity. There is also
a gender gap: women tend to live longer than men.
They are not asked to retire later to redress the balance.
Historically, one factor behind the poorer life
expectancy of working-class men was the nature of
their jobs. A life down the mines or unloading
crates at the docks wore out the male body. Over
time, the switch from a manufacturing to a
services-based economy should reduce the importance of this.
So what else explains the gap between rich and
poor? One possibility is access to health care.
The better-off may benefit more from medical
advances. Studies* suggest that the longevity gap
between rich and poor has widened by about a year
in Britain since the early 1980s. In America the
gap may have risen by almost five years since the 1970s.
In Britain, thanks to the National Health
Service, there is little difference in treatment
rates by income level for heart disease or in the
receipt of stroke-prevention drugs. In America,
however, access to health care for the uninsured
is patchier. Studies show that low-income
residents in the north-east of the country have
both better access to health care and better
mortality statistics than comparable residents in the south-west.
Lifestyle is probably more important still. Over
the past 30 years one of the biggest factors in
reducing mortality rates among 65-74-year-olds is
related to a reduction in circulatory problems.
Part of that is the result of better treatment
but the decline in smoking has also been a huge
factor. An analysis of American counties found
that a 5.9% rise in the percentage of adult
smokers increased premature mortality rates by nearly 7%.
A probable reason for a narrowing in the gap
between male and female life-expectancy in recent
decades is the sharper fall in tobacco use among
men. In contrast, the lifestyle gap between rich
and poor has widened. Britons with no educational
qualifications are five times more likely than
those with higher education to smoke, drink
excessively, eat poorly and skimp on exercise.
The pattern varies between countries. In France
there is less of a gap between the smoking habits
of rich and poor. Nevertheless, a cross-European
study of 40-65-year-olds found that mortality
rates could be reduced by 23% in men and 16% in
women if those on low incomes behaved only as riskily as the better-off.
There is no consensus on why these lifestyle
differences persist. Some argue that the stress
of being poor leads people to smoke more and eat
unwisely. But it seems likely that there is a
strong cultural component. In America there are
marked differences in the health profiles of
Hispanics and blacks at the same income level. It
is probable that the decline in smoking among the
better-off has also had a cultural element to it:
the habit is no longer seen as socially acceptable in wealthier circles.
If the biggest reason for the longevity gap is
lifestyle, then it is better to tackle the health
issues directly than to delay changes to the
pension age. Some countries occupational-pension
schemes (for firemen, say, or the armed forces)
allow workers to retire early because of the
hazardous nature of their professions. But no one
would suggest that smokers or the obese should be
allowed to stop work ahead of everyone else.
However, there are implications for government
pension systems, like that in America, which do
not pay a flat-rate pension to all. The
better-off are not only living longer but getting
a higher income in the process. Currently only
85% of American government-pension payments are
taxable, a tax break that delivers the biggest
benefits to the well-off. Given the longevity gap
and the size of the deficit, that is one loophole that should be closed.
Sources
<http://www.ssa.gov/policy/docs/ssb/v67n3/v67n3p1.html>Trends
in Mortality Differentials and Life Expectancy
for Male Social Security-Covered Workers" by
Average Relative Earnings by Hilary Waldron, Social Security Administration
<https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CDcQFjAA&url=http%3A%2F%2Fwww.actuaries.org.uk%2Fsites%2Fall%2Ffiles%2Fdocuments%2Fpdf%2Fmortality-improvements-socio-economic-circumstances-england-1982-2006printversion.pdf&ei=aq3RUOHSKIaH0AXJyIGgDQ&usg=AFQjCNF6U09TE-9Tgll5M4ZFdIJgWm2Xug&sig2=BObjhYLJDSaIujvaJb1ioQ&bvm=bv.1355534169,d.d2k>Mortality
improvement by socio-economic circumstances in
England (1982 to 2006) by J L C Lu, W Wong and M Bajekal
<http://www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.1000248>The
Promise of Prevention: The Effects of four
preventable Risk Factors on National Life
Expectancy and Life Expectancy Disaprities by
Race and County in the United States by Goodarz
Danaei, Eric B Rimm, Shefali Oza, Sandeep C
Kulkarni, Christopher J L Murray and Majid Ezzati
<http://www.iadb.org/res/publications/pubfiles/pubWP-665.pdf>Rising
Mortality and Life Expectancy Differentials by
Lifetime Earnings in the United States by Julian
P Christa, Inter-American Development Bank
<http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0039013>Social
Inequalities and Mortality in EuropeResults from
a Large Multinational cohort by Valentina Gallo et al
Two-Dimensional Mortality Data: Patters and
Projections by S J Richards, J R Elliam, J
Hubbard, J L C Lu, S J Makin and K A Miller
<http://www.plosmedicine.org/article/info%3Adoi%2F10.1371%2Fjournal.pmed.1000419>Health
Behaviours, Socioeconomic status and Mortality:
Further analyses of the British Whitehall II and
the French Gazel Prospective Cohorts by Silvia
Stinghini, Aline Dugravot, Martin Shipley, Marcel
Goldberg, Marie Zins, Mika Kivimaki, Michael
Marmot, Severine Sabia and Archana Singh-Manoux
<https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CDcQFjAA&url=http%3A%2F%2Fwww.actuaries.org.uk%2Fsites%2Fall%2Ffiles%2Fdocuments%2Fpdf%2Flongevitybulletin04201211.pdf&ei=NK7RUNT-O8W40QXam4HYCg&usg=AFQjCNGAzO0b6A2LQFPE8S0so0zyVXXwWQ&sig2=oRIRFcKp3t0AywgMgaqwTQ&bvm=bv.1355534169,d.d2k>Longer
lifein better health? Longevity Bulletin,
November 2012, Institute and Faculty of Actuaries
<http://www.cdc.gov/pcd/issues/2012/11_0120.htm>Disparities
in Premature Mortality Between High and
Low-Income US counties by Erika Cheng and David
Kindig, Centers for Disease Control and Prevention
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