SUPPORT OF SENIORS IS FAILING
I heard a stressful report about the aging of the Japanese population. The commentator confirmed that Japan was the “oldest country” meaning that the ratio of senior citizens to the other generations is the highest among developed nations. Without a remedy, by 2020 the nation will not be able to sustain the pension and medical care for its unbalanced population of seniors being supported by workers.
The U.S. and other developed nations are also looking down that dark tunnel without a suitable light at the end. Japan may have the most underfunded old-age benefit system in the world.
I have been to Japan twice. The first time shortly after the end of World War II as a guest of the U.S. Army when the country was soundly defeated and in a state of destruction. The second visit was 38 years later when Japan had made a remarkable recovery with substantial international support and was challenging the Western nations for economic domination in the 1980’s.
That is my background in order to discuss the current Japanese economic dilemma. How can a country that has been in a deflationary downward spiral for 25 years possibly cope with an aging population that can’t be supported by a younger working class?
The United States might take note with predictions that Social Security will be bust by 2030.
The commentator addressing the Japanese aging population proposed that the main problem is mandatory retirement at age 60 followed by generous pension and healthcare support for all senior citizens. A major overhaul of the retirement system is required to allow senior citizens to work longer and defer their pension subsidies a few more years. Not mentioned in this report was the fact that young Japanese women are not bearing enough children to replace the loss of the workforce that contributes into required retirement.
An interesting aspect of the unusual ratio of aging citizens was the extremely high death toll of Japanese military and civilians during the 1930’s campaign in China and later in the South Pacific and destruction of the homeland during World War II. With the devastation of an entire generation of men, there were fewer children born in the postwar years until the economy took off. Yet the demographics for the Japanese population generates an aging generation.
The same situation regarding birthrates is also an economic problem for many of the European countries and other Asian nations, especially China. With life expectancy extending with each generation, retirement in the mid-to-late 60’s year cannot be supported by most developed nations.
A report in Time magazine last year addressed the lack of pension benefits for many U.S. small- business employees. The startling study showed that 52% of U.S. households ages 55 and up have no retirement savings in defined retirement plans. Another 22% of households ages 55 to 64 have no retirement savings but own a home that is paid off.
The problem is that many small business owners fear the cost and complexity of new regulations, the report continued. Only about one-half of U.S private-sector workers subscribe to a 401(k) or other employer sponsored plan. Then there is the uncertainty of the fate of the Affordable Care Act under the Republican Congress that could deprivtHEIn The problem is thatsome areas public agency workers are pulling out of pension plans. An example is in Dallas. Firefighters and policemen are queuing up like a bank run to withdraw their pension equity. The pension fund assets are $2.8 billion but only 46% funded predicting a bust when retired city employees live longer. As with a bank run, it is rational to take your funds now if you worry they won’t be there upon retirement.
On the local government scene the San Diego City pension plan is unfunded by $2.5 billion; the county is unfunded by $3, 3 billion; the state has in excess of $100 billion pension deficit to meet the actuarial payments to retirees.
That means public pensions continue to be a massive burden for taxpayers. Increased funding takes tax dollars away from education, infrastructure and welfare. Every time you hit a pot hole on San Diego’s disgraceful streets, think of those public employees living longer and taking tax dollars away from infrastructure maintenance.