The future of investment

Submitted by David on Mon, 2008-01-28 22:53

There are a couple of interesting articles out there exploring the habits of the single male and the implications of an increased percentage of women staying single out there. The latter article mentions some of the impacts of this that I think a lot of people forget:

True, fertility decline often spurs a temporary economic boost, as more women enter the workforce and increase income and spending, as was the case in 1980s Japan. In time, though, those women—and their male peers—will get old and need pensions and more health care.

And who will pay for that? With fewer children, the labor force shrinks, and so do tax receipts. Europe today has 35 pensioners for every 100 workers, Longman points out. By 2050, those 100 will be responsible for 75 pensioners; in Spain and Italy, the ratio of workers to pensioners will be a disastrous one-to-one. Adding to the economic threat, seniors with few or no children are more likely to look to the state for support than are elderly people with more children. The final irony is that the ambitious, hardworking SYF will have created a world where her children, should she have them, will need to work even harder in order to support her in her golden years.

Aging populations present other problems. For one thing, innovation and technological breakthroughs tend to be a young person’s game—think of the young Turks of the information technology revolution. Fewer young workers and higher tax burdens don’t make a good recipe for innovation and growth. Also, having fewer people leads to declining markets, and thus less business investment and formation. Where would you want to expand your cosmetics business: Ireland, where the population continues to renew itself, or Japan, where it is imploding?

Of course I say all of this while falling into the single male category - putting me in the "part of the problem" category rather than being part of the solution.

(HT: Boundless Line)

Comments

dmodderman

Wed, 2008-01-30 13:35

This article does not seem to consider immigration, which fills the gap of the shrinking population and in Canada, leads to a net population growth. The challenge in this case is less and less people born in Canada every year. I have heard that 1 in every 2 people in Toronto are not born there, which is likely not far off.

David

Wed, 2008-01-30 14:40

There is a net population growth at the moment because of immigration. However, as the population ages and the working population decreases as a fraction of the population as a whole, the tax burden would seem to go up - perhaps significantly. Thus, it becomes less likely that people will want to immigrate.

(I'm also wondering whether or not will have a destabilizing effect on democracies. What happens if a retired group becomes close a majority of the voting population and could thus impose their will upon the working population as far as taxes go. A lot of the public pension programs seem to be on the verge of collapse.)

dmodderman

Mon, 2008-02-04 17:22

OK, the issue makes more sense now. Though I wonder with many problems in other countries such as war, famine, corruption, etc if immigration to Canada will ever be less attractive to much of the world. It may be less affordable, but I would guess there will always be wealthy people who will want to get out of poor situations somewhere in other parts of the world. Unless war, famine and corruption here was as bad as elsewhere.