Thursday, February 02, 2017

We are 'under-prepared' for the rise in older people. So says Bloomberg. It is much worse than they think

Bloomberg has calculated an index of the actual dependency ratio based on each country’s statutory pensionable age, not the arbitrary figure of 65 that is normally used. This is the number of workers who are paying tax and supporting each retired person.

So for instance, Nigeria, with a statutory pensionable age of 50, has only 4.8 workers supporting each senior, compared with 19.4 as indicated by conventional measures. Russia has 2.4 instead of 5.1, and Colombia has 4.5 instead of 9.4.

Asia could be facing the toughest choices in allocating resources. The Asia Pacific Risk Center estimates the region’s elderly population will rise 71 percent by 2030, compared with 55 percent in North America and 31 percent in Europe.

This index is an improvement on using the arbitrary number of 65 but it is still giving an over optimistic picture. The two big factors it doesn't take into account are:

The downward pressure on wages, and hence the tax that is paid bv the remaining 'workers'
That many older people are ejected from the workplace well in advance of the statutory retirement age.

It would be relatively easy to model these two factors into the Bloomberg index. I dare to think what the result will show. Dick Stroud

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