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Aug. 31,2012 | The Clarion International Page 5 People of the western world begin to see broken promises By Henri Erti Contributor The older generation may have deserved their retirement under the palm trees, but the consequences of the current pension schemes for the next several generations are far more detrimental than previously believed. The main concern of the pension funds has been forgotten in the public press, while economists have been warning about the next bubble for years. Figuratively speak ing, the current generation, which is enter ing the workforce or has recently begun working, is walking on broken promises. This generation, alongside with many more in the future, will most likely wit ness a substantial delay in their retirement. Furthermore, the current and next working generations will contribute from their mea ger incomes to the existing pension funds to support the next and existing retiring age groups. In addition to such unsustainable invest ment schemes, which have been based on rhetorical promises rather than real quanti tative calculations, young people have little chance of accumulating similar wealth due to the lack of jobs and issues in the hous ing markets. Unfortunately, the burden will get even heavier. As the population of the Western world ages and consequently exits the labor force, the shrinking skilled workforce must support the expanding number of unpro ductive retirees. Pointing the blame on the retirees would be both foolish and unfair. Regardless, we must ask, are the Baby Boomers a lucky generation or just a selfish one? Drawing conclusions based on assumptions or bitter ness cause further tensions in the existing debates. However, it must be noted that the retiring generation is at least a care less one. Assuming that long economic growth makes future generations richer is a hasty generalization and such reasoning ulti mately has led to the diminishing contribu tions to the younger generations from the soon-to-retire generation. For example, the currently working generation, which is going to retire in soon, is not going to contribute to the future generations or open opportunities for them. All they will do is add to the deficits of the current system. Of course, the younger generations need to face their shortcomings as well. Gaining education, for example, in creative writing, (least likely to find a job upon graduation) until the age of 28 is utterly pernicious to the economy in the long- run, because the average time spent in the workforce ulti mately decreases as time spent in education and retirement increases. Below is a rather pessimistic, yet truth ful representation of the dependency ratio. which illustrates the current situation. During the 1950s, time spent in educa tion was lower than in 2004, which may propose an argument that longer education with longer life-expectancy can decrease the time spent in workforce. This pattern is also exhibited in the graph when time spent in labor has decreased during this period by close to 6 years. On top of this the time spend in retire ment has increased due to the improve ments in standard in living, hence people live longer and enjoy the benefits of pension funds. An increase of over 9 years spent in retirement, in addition to a 6 year decrease in labor is by every measurement an unsus tainable scheme, which is more of a ticking time bomb than a bubble. Furthermore, a popular mantra is domi nating among the younger generations, which states that as the Baby Boomers retire, more jobs will be available for the emerging workforce. Unfortunately, such a belief is a serious fallacy because there is not a constant stock of jobs. Simply by arguing that as retired people exit, the industries these jobs are located would automatically open, is a sim plistic explanation. Improvements in tech nology drive productivity, thus some jobs previously held are no longer needed. The issues regarding the pension funds are multidimensional. That being said, so are the possible solutions, which involve See 'Pension funds,' page 8 UK: Life Course, Meu Retiring iu 1950 aud 2004 (years spent in education, work, and retirement) 1950 2004 10 20 30 -0 50 €0 70 80
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