Monday, May 19, 2014
The Economist ran a story on April 26, 2014 with that title: A Billion Shades of Grey, with the subtitle An Ageing Economy Will be a Slower and More Unequal One--Unless Policy Starts Changing Now. Discussing the wealth of the classes is not a new topic, but looking at it from an age-based angle is. The article notes that those with great educations are working longer than those with fewer skills: "[s]ome 65% of American men aged 62-74 with a professional degree are in the workforce, compared with 32% of men with only a high-school certificate. In the European Union the pattern is similar." This trend is not just limited to the older members of society, but instead is universally occurring across all age groups.
The article focuses on a "new trend", that is the skilled workers vs. the unskilled workers:
"[e]mployment rates are falling among younger unskilled people, whereas older skilled folk are working longer. The divide is most extreme in America, where well-educated baby-boomers are putting off retirement while many less-skilled younger people have dropped out of the workforce."
What accounts for this change? According to the article, changes in policies that gave incentive to early retirement, longer life expectancy, and "the changing nature of work." This all sounds pretty good for the older worker, but the article does note there are some downsides, particularly to the economy, with less demand and more savings as older workers accumulate wealth. The article speculates whether "welfare queens... may be replaced by deadbeat grandads collecting taxpayer handouts while their hard-working contemporaries strive on."
The article proposes the abandonment of age as the determinant for the end of a career, with the abolishment of mandatory retirement and pension rules that give people disincentives to keep working. The article concludes " [p]oliticians need to convince less-skilled older voters that it is in their interests to go on working. Doing so will not be easy. But the alternative—economic stagnation and even greater inequality—is worse."
Thanks to my colleague and friend, Professor Mark Bauer, for sending me this article.