I quite enjoyed Katerina Lisenkova of RBS giving the talk to the Chamber of Commerce on “Looking to the Future: Economic Trends”.
However, I was disappointed that she was blinkered about one matter, and over simplistic about another. Here’s the first, and the second will follow next week.
The Demographic Time Bomb: A Holistic Approach
Katerina showed a nice chart showing net immigration, and the dependency ratio (of workers to those not working), which was undoubtedly done to show different rates of immigration (by different lines on the chart) and how more immigration lowered the dependency ratio from rising so much.
What she failed to address or even consider was the long term effect of this fix. It is now surely a commonplace that this kind of scheme is a population Ponzi scheme, depending as it does on increasing a population, which it turn grows old, and therefore needs even more immigration to keep the dependency rate down. Mathematically that is obvious, but the mathematics of unsustainable growth never seems to have appealed to economists. The only way you can really get a permanent effect out of immigration is if you have not just high immigration but exponentially increasing numbers of immigrants.
Joseph Chamie, a demographer, who spent 12 years of service as the director of the United Nations Population Division notes:
"Among its primary tactics, Ponzi demography exploits the fear of population decline and ageing. Without a young and growing population, we are forewarned of becoming a nation facing financial ruin and a loss of national power."
With a Population Ponzi scheme, the population can always grow – but it needs a greater flow of immigration as the numbers of elderly supported by the scheme grows and grows in turn. It is a vicious cycle of growth, which is fine if you have enough land, resources and infrastructure to accommodate it. But unfortunately, living on an Island, we don’t.
Eventually, of course, the whole enterprise is not sustainable, especially in a small island with finite resources. It is buying time in the present to make even greater problems for the future, which of course means not just a much larger ageing population, but also greater demands on infrastructure, housing, health, etc.
Elizabeth Bauer, writing in Forbes, suggests alternative ways of looking at these matters.
“Do we alter the ratio itself, by boosting fertility rates or increasing immigration (and, specifically, immigration of individuals at a mix of skill levels)?”
“Or do we alter the significance of the ratio? Oldsters will inevitably have higher medical costs than everyone else, but a healthier population will be able to continue working longer, and be less costly in terms of their impact on Medicare and Medicaid (e.g., long-term care) afterwards. “
There is also the fact that part of the issue relates to the ageing of the “baby boomer” generation, after which matters will slow down. This can be seen in the US census predictions, but applies equally
“Although births are projected to be nearly four times larger than the level of net international migration in coming decades, a rising number of deaths will increasingly offset how much births are able to contribute to population growth. Between 2020 and 2050, the number of deaths is projected to rise substantially as the population ages and a significant share of the population, the baby boomers, age into older adulthood.”
The phrase “baby boomer” relates to births roughly between 1945 and 1965. The phrase comes from the rocketing birth rate in the West in the years after World War Two.
And there is also another way to a solution, given by Warwick Smith:
“If we want to improve our capacity to support an ageing population, then our focus should be on full employment and productivity improvements so that those remaining workers can produce enough to maintain everybody’s quality of life. Productivity improvements come from three main sources: investment in education and training, investment in research and development, and investment in infrastructure. If we focus our spare capacity on making our workforce more productive as the population ages, then we can deal with the demographic time bomb.”
In conclusion, a focus on dependency ratios to the exclusion of other factors gives a misleading impression that by growing a population, we can grow our way out of the problems of an ageing demographic. We need a more holistic approach than that.
What is of equal concern is that the business people of Jersey attending yesterday's talk, got only a one sided and blinkered assessment of the situation presented as if it was the only option on the table.
However, I was disappointed that she was blinkered about one matter, and over simplistic about another. Here’s the first, and the second will follow next week.
The Demographic Time Bomb: A Holistic Approach
Katerina showed a nice chart showing net immigration, and the dependency ratio (of workers to those not working), which was undoubtedly done to show different rates of immigration (by different lines on the chart) and how more immigration lowered the dependency ratio from rising so much.
What she failed to address or even consider was the long term effect of this fix. It is now surely a commonplace that this kind of scheme is a population Ponzi scheme, depending as it does on increasing a population, which it turn grows old, and therefore needs even more immigration to keep the dependency rate down. Mathematically that is obvious, but the mathematics of unsustainable growth never seems to have appealed to economists. The only way you can really get a permanent effect out of immigration is if you have not just high immigration but exponentially increasing numbers of immigrants.
Joseph Chamie, a demographer, who spent 12 years of service as the director of the United Nations Population Division notes:
"Among its primary tactics, Ponzi demography exploits the fear of population decline and ageing. Without a young and growing population, we are forewarned of becoming a nation facing financial ruin and a loss of national power."
With a Population Ponzi scheme, the population can always grow – but it needs a greater flow of immigration as the numbers of elderly supported by the scheme grows and grows in turn. It is a vicious cycle of growth, which is fine if you have enough land, resources and infrastructure to accommodate it. But unfortunately, living on an Island, we don’t.
Eventually, of course, the whole enterprise is not sustainable, especially in a small island with finite resources. It is buying time in the present to make even greater problems for the future, which of course means not just a much larger ageing population, but also greater demands on infrastructure, housing, health, etc.
Elizabeth Bauer, writing in Forbes, suggests alternative ways of looking at these matters.
“Do we alter the ratio itself, by boosting fertility rates or increasing immigration (and, specifically, immigration of individuals at a mix of skill levels)?”
“Or do we alter the significance of the ratio? Oldsters will inevitably have higher medical costs than everyone else, but a healthier population will be able to continue working longer, and be less costly in terms of their impact on Medicare and Medicaid (e.g., long-term care) afterwards. “
There is also the fact that part of the issue relates to the ageing of the “baby boomer” generation, after which matters will slow down. This can be seen in the US census predictions, but applies equally
“Although births are projected to be nearly four times larger than the level of net international migration in coming decades, a rising number of deaths will increasingly offset how much births are able to contribute to population growth. Between 2020 and 2050, the number of deaths is projected to rise substantially as the population ages and a significant share of the population, the baby boomers, age into older adulthood.”
The phrase “baby boomer” relates to births roughly between 1945 and 1965. The phrase comes from the rocketing birth rate in the West in the years after World War Two.
And there is also another way to a solution, given by Warwick Smith:
“If we want to improve our capacity to support an ageing population, then our focus should be on full employment and productivity improvements so that those remaining workers can produce enough to maintain everybody’s quality of life. Productivity improvements come from three main sources: investment in education and training, investment in research and development, and investment in infrastructure. If we focus our spare capacity on making our workforce more productive as the population ages, then we can deal with the demographic time bomb.”
In conclusion, a focus on dependency ratios to the exclusion of other factors gives a misleading impression that by growing a population, we can grow our way out of the problems of an ageing demographic. We need a more holistic approach than that.
What is of equal concern is that the business people of Jersey attending yesterday's talk, got only a one sided and blinkered assessment of the situation presented as if it was the only option on the table.
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