The Aging Baby Boomer Generation Problem and the Economics of Poverty
Non-Renewable Resources, Population Growth, and the Economics of Poverty
Many governments are considering population growth as a solution to the aging baby boomer problem (higher social support system and healthcare costs...). Does the economics of such policies really add up?
Or, would population growth be a huge mistake, making us poorer in addition to accelerating the depletion of non-renewable resources and precipitating an economic crisis?
The Aging Baby Boomer Generation Problem and the Economics of Poverty (Book Excerpts)
Many governments have expressed concerns about the cost of
supporting higher numbers of retirees as baby boomers age. The
current strategy in Canada and some other countries is population
growth. This is obviously madness within the current state of
Increasing a country's population size would spread the costs of
supporting the aging baby boomer generation but would also
reduce incomes. As explained earlier, monetary expansion is what
increases economic growth. It is not human bodies. As such, a
country with a larger population would still have the same total
GDP. The question is, would the gains made by spreading costs
more thinly be greater than the income loss incurred by sharing a
country's GDP among more people? Let us take a closer look at
the issue and the financial implications of a population growth
Suppose that the costs of supporting retirees are currently 5% of
a person's revenue (paid to governments in the form of income tax)
and that they go up to 15% as a result of the aging of the baby
boomer generation. Average incomes after tax would then
decrease by 10%. If a country decides to boost its number of
people by 10% in order to spread those costs more thinly, the 10%
loss in revenue would then be shared by 110% of a country's popu -
lation, resulting in a slightly smaller decrease in income of 9.1%
(10% of costs divided by 110% of population) instead of 10%.
However, since the total amount of money in the economy has
not increased, 110% of workers would now have to share 100% of
a country's GDP, which would mean an additional loss in income
of 9.1% (1 minus, 100% of GDP divided by 110% of population),
for a net revenue of 81.8% and a grand total income loss of 18.2%.
What would happen if a country chose to depopulate by 10%
instead? Firstly, many people who are unemployed or on social
assistance would be able to find jobs, which in itself would benefit
both society and individuals and decrease the cost of social support
programs for taxpayers.
Secondly, 100% of the GDP would now be shared by 90% of
the population, resulting in an increase of per capita income of
11.1% (100% of GDP divided by 90% of population, minus 1).
However, the costs of addressing the aging baby boomer problem
would go up but only to 11.1% per person (10% of costs divided
by 90% of population), leaving workers to break even, or with no
change in income. Compare this with the 18.2% net loss above.
Interestingly enough, a stronger depopulation target of 20%
would yield a rise in per capita income of 25% against a cost of
addressing the aging baby boomer problem of 12.5% per person,
for a net gain of 12.5% in revenue.