Green Capitalism - Waves of the Future

Climate Change, Non-Renewable Resources, Energy, Contaminants, Carbon Pricing...

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?

See also Book I of the Waves of the Future Series

Non-Renewable Resources:
Mineral Supplies & Reserve Statistics

Resource Depletion Model Simulations:
Mineral Shortages & Prospect of Economic Crisis

Economics of Poverty
The Aging Baby Boomer Generation Problem

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 resource depletion...

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 strategy.

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.

Waves of the Future ©2012

More information: USGS Conservation International Sierra Club UN Population Division