Spain is Doomed; Youth Unemployment Hits 51%

[DGuller]

I think I had about half a dozen rounds with Mono on this one, so I didn't bother repeating this one more time.

The problem with funding retirement from individual savings is that it forces you to be overly conservative.  On average, people have a predictable lifespan, but individually it's going to vary a lot.  If everyone covers their retirement on their own and wants to ensure that they don't run out of funds, then everyone has to assume that their lifespan will be far above average.  Obviously on average the lifespan can't be above average, so a lot of retirement savings would be left unspent.  That's very inefficient.

[Malthus]

Please expand on this ...

You can predict with reasonable certainity how old a population will get, thanks to statistics.
An individuals lifespan on the other hand is fairly random.

So the issue is that person X and person Y both attempt to save a "reasonable" amount for the "average" lifespan of 80, but person X keels over when the nude chick pops out of the cake at his retirement party leaving a windfall to his useless children, while person Y lives to be 102 (while the cash runs out when he's 80, so he spends the last 22 years eating cat food while living under an overpass)? 

[Sheilbh]

Pensions here are going down in real terms for years now and are predicted to do so for the next three decades at least, so it's not impossible. We even had cuts in nominal terms as our pensions are directly linked to nominal wage developments.

Pensions here are tied to inflation, wage increases or a nominal increase whichever is greater.  But the idea that we can't reform pensions systems and they'll only ever get more generous and expensive doesn't seem true.  More or less every developed country has had substantial pension reform in the past 20-25 years and most countries are going through another bout.  I think the Dutch are currently moving to a system where pension age is tied to life expectancy (as pension amount is tied to inflation) so it increases with the latest statistics.

One problem with that, though, is that life expectancy is very variable based on class and occupation.  The life expectancy of a blue collar worker is still a lot lower and so they'll be working longer so the middle class can enjoy more retirement.  The French  system is split into pensions for the management class and for the workers with varying brackets of payment, different retirement ages and pensionable income which is an interesting idea but I'm not sure how well it works. 

These systems are reformed and they are workable.  If that's not happening in your country I'd suggest there's something wrong with the political process that stops that not the principle of a welfare system.  As you point out the most comprehensive ones exist in countries that are fiscal saints and doing quite well economically.

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.

Exactly and I think it's likely that we'll have reforms throughout the next 40 years to keep it at a relative constant.  From what I've read the real fiscal problem with an ageing population is the increase in healthcare costs.

[Sheilbh]

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).

I didn't think welfare state was politically charged.  I use it just to include the general welfare system beyond pensions.

[The Brain]

"Welfare state" means that I work so that unemployed people can go to Thailand on holiday.

[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

See, the problem is that those kinds of projections are just that - projections. You can project demographics pretty accurately of course, but you cannot project the states ability to pay for some groups retirement accuratly, because you have no idea what the specifics of the economic situation will be at some point in 40 years.

And honestly, 40 years is just one generation - but the laws passed and setting up a viable welfare state must be done to last for longer than that, if you want something that is actually sustainable. Which is my point - the rules that define what the people retired NOW are getting are almost always something that was passed in the previous generation, and hence have no bearing on the current situation as far as ability to actuallly afford them.

There is one caveat to that - if things are really great right now, there is a pretty good chance that the currently retired/soon to retire will vote to increase their benefits under the assumption that the current financial reality is somehow permanent.

When things are bad, nobody will vote to decrease benefits however, because how can you be sucha  monster forcing grandma to eat cat food?

So this cannot work in the long run. There is a ratchet effect here, where benefits can only ever stay the same or go up, but never go down. While the ability to pay varies considerably.

"In the long run we are all dead" 

I think we are coming at this from different angles berkut. A state without old age pensions can be imagined but is not really relevant to the position we are actually in. Here in Britain the nasty Tories are taking the pragmatic view and adopting measures that will reduce the long-term cost of old age pensions. I think they are right to do so as the alternative is very grim indeed.

[Valmy]

Here in Britain the nasty Tories are taking the pragmatic view

The Tories are the lamest and least threatening party of evil in the world.

[Richard Hakluyt]

Here in Britain the nasty Tories are taking the pragmatic view

The Tories are the lamest and least threatening party of evil in the world.

Nonsense Valmy, their cuts are 7% greater than what Labour was planning, that makes them the spawn of Satan 



Er..............yes, they are a lame social-democratic party remarkably similar to Labour.............except when led by Mrs Thatcher of course.

[Sheilbh]

Here in Britain the nasty Tories are taking the pragmatic view

The Tories are the lamest and least threatening party of evil in the world.

They're generally backing gay marriage too.

The sad thing is they can't even be nasty competently any more

In fairness on state pension in general there's a lot of consensus on the subject in this country.  The parties all tend to agree to kick it over to an independent commission every few years and then agree with all of the essentials and fight over MINOR DETAILS.  The only difference in pension policy I can think of off the top of my head is that the parties disagree over how quickly the rise in pension age should be phased in.

[Sheilbh]

Nonsense Valmy, their cuts are 7% greater than what Labour was planning, that makes them the spawn of Satan 

I think it's even less than that by now.  Given the deterioration in the economy over the last year I think Osborne's plan is now basically the same as Darling's.

[Richard Hakluyt]

Here in Britain the nasty Tories are taking the pragmatic view

The Tories are the lamest and least threatening party of evil in the world.

They're generally backing gay marriage too.

The sad thing is they can't even be nasty competently any more

In fairness on state pension in general there's a lot of consensus on the subject in this country.  The parties all tend to agree to kick it over to an independent commission every few years and then agree with all of the essentials and fight over MINOR DETAILS.  The only difference in pension policy I can think of off the top of my head is that the parties disagree over how quickly the rise in pension age should be phased in.

The dearth of talent in the Commons is indeed far more worrying than the minute difference between your standard "nasty tory" and "champagne socialist".

The level of competence........surely it is at a new nadir? Or perhaps I'm just old and cynical.

[Sheilbh]

The dearth of talent in the Commons is indeed far more worrying than the minute difference between your standard "nasty tory" and "champagne socialist".

The level of competence........surely it is at a new nadir? Or perhaps I'm just old and cynical.

I disagree.

I think the Commons is the most assertive and is closer to doing it's job than any I can remember.  A lot of the credit should go to John Bercow who has got rid of the rules requiring new MPs to make a maiden speech before they can ask questions and who grants so many emergency questions and debates.  Also the elections of Select Committee Chairs have been a good step I think.  At the same time apparently this Commons has more MPs with lots of non-political experience than in the past few years.  It's also the most rebellious ever - in all parties, I think.  The sad thing is a lot of those people, who are being great MPs, want to stay as great MPs.  They want to stay as backbenchers and I don't think they can deal with the bullshit that goes into becoming a minister.

The real shallow pool is the leadership and the people who want to be leaders.  I don't even know that it's because they're all career politicians.  I wonder if part of it's just that they're all very young.  All the party leaders and much of the cabinet have been in Parliament for about 5 years, they're all in their late 30s-early 40s.  The best party leader in the UK right now is Alex Salmond who's been rolling round nationalist politics for the best part 30 years (though, in fairness he became leader very young) and that experience does seem to show.

[Tamas]

"Oh yeah, tax deferral, savings for retirement ... oooh look, shiny new cellphone that doubles as a sex toy! TV the size of our living room wall! Woo hoo!"

yeah. the problem is, our current economic model would be in serious jeopardy if they stopped doing so, however. On the short term anyway. And we rather QE ourselves to death than to see that happen!

[Valmy]

yeah. the problem is, our current economic model would be in serious jeopardy if they stopped doing so, however. On the short term anyway. And we rather QE ourselves to death than to see that happen!

I was going to post something like this: that if people actualy did start saving and doing what is in their best interests and quit blowing their money on garbage they do not need our entire economy would be in real danger

[Richard Hakluyt]

@Shielbh - yes I can agree with you there, the dearth of talent is on the front benches rather than the Commons - I mispoke 

I've been surprised by Bercow. He is easy to ridicule given that silly wife of his but I have been coming round and now think he is doing a pretty good job.

Interesting what you say about the leaders being so young, I ranted on about that in a self-parodying way to my wife a few days ago, but I do wonder about it..............they seem surprised when things go wrong or backfire