Spain is Doomed; Youth Unemployment Hits 51%

[Tamas]

The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

game, set, match.

[Barrister]

The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

game, set, match.

Not really.

[Martinus]

The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

I disagree - I think the reasons RH quoted - i.e. aging population and increasing life expectancy - are precisely behind the crisis of the current model of the national pension system (I am avoiding using the expression "welfare state" as it is politically charged and usually those who use it cannot really say what it means exactly).

[Martinus]

The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

game, set, match.

Not really.

Tamas, like many Eastern Europeans, come from a perspective of the state being viewed as either a failed or an oppressive project. The result is a sort of primitive form of libertarianism - when the (Eastern European) state is trying to do something (such as take a portion of people's income and set up a pension system), the popular perception is that it is either going to squander that money or steal it.

In a sort of "self-fulfilling prophecy" way this moral malaise causes such systems to fail in the Eastern Europe - because these "primitive libertarians" try to cheat or game it, because they see no benefit in participating on honest terms.

[Maximus]

No. It will take care of itself. Social engineering is bollocks.

I'd rather deal with social engineering than social pressure. Social engineering may be controlled by bureaucrats, but social pressure is controlled by zombies.

[Tamas]

Ok that's rich. To attribute the failed eastern euro states to rampant quasi-libertarianism among the populace.

Dude 

[Iormlund]

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

I am already making plans to take in my mother-in-law eventually.

Pillow?



Back on the topic of pensions, the problem with the state completely getting out of the business is that the financial institutions have proven themselves less than reliable on that front.

[Valmy]

Pillow?

No I plan on using her for childcare

[Malthus]

The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

[Tamas]

Again, necessity will have us go back to the family being a more "real" financial unit. Or something.

[ulmont]

The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

Maybe we could simply execute the elderly after they reach the age of, say, 21 or 30?

[Valmy]

Again, necessity will have us go back to the family being a more "real" financial unit. Or something.

Well to be fair that is why it ever was in the first place

[Richard Hakluyt]

Sustainability depends on how generous the benefits are and the demographics of the state concerned. The burden of state pensions in the UK is not expected to rise in the next 40 years. But then we have relatively favourable demographics and a relatively mean state pension.

http://www.pensionspolicyinstitute.org.uk/uploadeddocuments/BNs/PPI_Briefing_Note_3.pdf

[Monoriu]

The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

If that is the problem, is mandatory individual savings accounts the solution?

[Valmy]

If that is the problem, is mandatory individual savings accounts the solution?

Well that is what Social Security pretends to be.  Not sure how that would work in practice.

Unfortunately though savings accounts return about 0.0005% interest in these days of tiny interest rates.