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Degrowth with an aging population


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Degrowth with an aging population

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