I read a very interesting article in the New Yorker several years back. The idea of the article was in betting which emerging economy was best positioned population-wise to grow significantly and optimally.Everyone reads this stuff a little differently and as with any well written article, stuff which isn’t apparent to you at the time wanders around in brains and comes back out in a more provocative form.
The gist of the article was that certain countries have a real advantage based on working population versus “supported” population. The verso side of the folio is that countries with a high number of pensioners in comparison have a really ugly set of circumstances.
An example was given about a major steel company who, in the 1950s was the big dog on the block. A couple things happened to it. Over time their workforce aged and instead of 10+ workers supporting the pension of 1 retiree, the ratio slowly closed. Not horrible but also not sustainable. You need a number of workers to support one pension and when it gets to 1:1, it is a catastrophe for profitability as every spare cent of cash goes to fund a system that gets more out of whack each day.
Compounding this was management’s realization that technology could add efficiency thus lowering product cost and also signaling a reduction in the work force (machines replacing jobs) – a double whammy. Summary: fewer workers supporting more retirees, and, more manufacturing efficiency to lower product costs results in the need for fewer workers…the problem compounds.
The steel company fairly bled money and went belly up. Then, an amazing thing happened. The company reformed into a highly automated workplace and when it hired again the ratio of wage earners/funders v. the retirees was again reduced to favorable numbers and the company was profitable.
The article’s point was that some countries have good ratios and a future not clouded by the pension issue. Countries with the reverse are in for some tough sledding.
Now out there sits a fairly sizeable pool of older folk facing a health care train wreck out there waiting for the tracks to clear. The simple truth is that there may not be enough payers to satisfy the needs of the non-earners.
This is a fine pickle. Ratios that are out of sync do not do well. Just letting you folks living on retirement lane that some stuff may be floating your way.
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