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Degrowth with an aging population
 

Degrowth with an aging population

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    Degrowth with an aging population Degrowth with an aging population Presentation Transcript

    • Degrowth with an aging population: increasing leisure for improving environment and happiness.Key issues to be resolved: Pensions
      GjaltHuppes & Ruben Huele
      CML – Department Industrial Ecology
      Presented at the Degrowth conference Barcelona, 26 – 29 March 2010
    • Story line
      Rich societies can/should use productivity growth for leisure, with reduced environmental stress. This is a complementary strategy to eco-efficient technology improvement.
      This strategy requires institutional adaptations
      On average reduced working hours: *Shorter workweeks & longer holidays*Earlier retirement
      Problems to be solved
      Public tasks financed: taxes (not this paper)
      Aging population and earlier retirement: transfer payments (Possibly on capital basis)
      Potential: Degrowing societies can reduce environmental stress by 2050:
      By 35% based on more leisure: more than any other single measure
      By 10-40% based on demograqphy: reduced working age population (population degrowth/cline)
      Overall reduction: 45 – 65%  ~50% in total production volume
      Extreme challenge to society: also so longevity and population degrowth ( < children)
      Dependency rate (pensioners as fraction working age people) increases from <20% to ~100%
      Transfer payment to pensioners go up to 40% of gross income, depending on pension level and productivity growth. Solidarity?
      Savings based pensions cannot work: over-saving with over-investments
      Tax basis smaller, not all outlays smaller: substantially rising taxes (not this paper)
      Conclusions
      Small yearly changes can have extreme effects already in 40 years
      Productivity growth used for leisure combined with declining/aging population: lower income per head? Maybe.
      Degrowth can significantly contribute to sustainability, more than any other “single” measure.
    • IPAT variant: definitions
      environmental pressure = technology x consumption
      what we consume ≡ what we produce 
      Y = GDP [GGP; no ex/imports]
      Y = C + G + I I = S (as for pensions)
      C + G : in constant prices
      Hence for technology development as reflected in labor productivity growth:
      environmental pressure =
      cEnv x labor productivity x working hours
      [cEnv reflects what can be done by eco-efficiency improvements]
    • Working less for happiness and environment
      With increasing labor productivity (assumed at 2% per year), don’t go for full growth but:
      Use 1% for leisure and 1% for wealth
      Implies: reducing environmental impact by 1/3 in 40 years, relative to full 2% growth development
      2% over 40 years: up 123%
      1% over 40 years: up 49%
      Reduction in 2050 relative to full growth: - 33%
      Increase in 2050 relative to now: +50%
    • The Volume of Work:Fewer hours per year; Fewer years  33% less production & consumption
      2010
      Minus 33%
      2050
      Fewer hours per year: minus 0.7%
      -25%
      from 1800hrs to 1350
      Earlier retirement: minus 0.3%
      -11%
      from 65 to 60
    • How to get their: challenges to resolve
      Working less = more leisure
      Starting later (more education)
      Working less per year (more holidays)
      Working less per week (shorter working hours; more part time)
      Working fewer years (retiring earlier)
      However, also:
      Getting older, longevity
      Zero/negative population growth, reduced cohort size
    • Getting Older & No Population Growth & More Leisure
      Getting older (life expectancy up):
      More pensioners relative to workers
      Declining population (fewer young per year):
      More pensioners relative to workers
      More leisure by earlier retirement:
      More pensioners relative to workers
    • Problems of declining working force as share in income receiving population
      Declining working force has lower earning power and lower tax paying power
      Government consumption bears more heavily on workers: higher taxes
      Aging population needs more public services: higher taxes
      More pensioners relative to workers: higher income transfer to pensioners
      Conclusion:
      With more leisure; older age; & population decline: fewer workers receive very substantially lower share of their gross income as net income
      Indicative result: now in rich social countries share of net income in gross income is around 50%; in 2040 around 25% net75% solidarity transfer
    • Basic quantifications
      • Age distribution changing, by population growth and ageing (longevity)
      • Pensioning age lowering
      • Volume of production decreasing per head of population
      • Income of pensioners as share of gross workers income decreasing (variable shares)
      • Share of pensioners in total consumption increasing
    • Pensioners Dependency Rate Persons:[yellow / red] (UN: middle estimate)
    • Working Population and Pensioners: retirement at 65 years
    • Working Population and Pensioners: retirement at 60 years
    • Dependency rate depending on pension level and retirement age: Western Europe
      2% prod
      growth
      70% pension
      level
      65 years
      retirement
      age
    • Dependency rate depending on pension level and retirement age: Japan
      2% prod
      growth
      70% pension
      level
      65 years
      retirement
      age
    • Combining Degrowth by Leisure with Aging & Declininging population
      Leisure: Degrowth of 33%
      Reduced working population cohorts: - 35% Japan - 15% Western Europe
      Overall effect on production volume, relative to “normal growth” roughly: - 55% Japan - 40% Western Europe
      Overall effect on transfer to pensioners:from 15% now to 50% in 2050. (+ increased taxes; + increased health care) Solidarity essential.
    • Conclusions
      More leisure gives a main contribution to sustainability; environmental stress down by 35%, with happiness up.
      But: Pensioners require transfer of around 50% of national income in 2050, for 70% of income relative to workers. This also for demographic reasons.
      Saving for pensions would ruin the world by overinvestment.
      But also: Taxes to rise substantially; health care cost rising strongly.
      Income per head roughly stable: 1% for leisure and 1% not for wealth, but for aging and declining population.