Why Today's Young People Will Never Retire

mcdonalds worker

Today’s youth have a problem that stems far from the stereotypes of their being lazy, apathetic, and civically challenged. Today’s youth see the deterioration of their working futures; the deterioration of their families; and the destruction of culture. Young people are blamed for being apathetic of their politicians and government.

“Perhaps this is why teachers and schools have been telling young people for years [that] to ‘follow your dreams’ ..”

Is it any wonder they do not vote as much as old people, and is it any wonder that many do not see a point in attending college for jobs promised but never materialize or are sent to another country? No, today’s youth are aware of their predicament, and are aware they probably will never be able to retire. The youth of today’s parents were one of the last great generations we’ll see in a long time.

Where It All Started: The Baby Boomers

Just after the Second World War, from 1945 to 1960, there were about 28 births on average per 1000 people in Canada to what became known as “the baby boomer generation.” The problem is that these baby boomers have not had many children of their own, and they are not numerous in grandchildren, either. In 1970 the birth rate in Canada dropped to 17 births per 1,000 inhabitants. Since 2000 it has fluctuated around 11 births per 1,000 Canadians.

This extraordinary 360 degree turn in the birth rate explains a number of important phenomena in our lives over the last 50 years. These facts will now have a decisive influence on economic and social developments that we witness over the coming decades, and certainly between now and 2020.

The remarkable phenomenon of the years 1960 to 1980 has been an influx of baby boomers in the workplace. The number of workers who earn wages and pay taxes grew at a astronomical pace and the welfare state expanded rapidly. Among the programs implemented were hospital insurance, health insurance, low cost colleges and universities, social services, public pensions, pensions more generous old and Benefits, among others. Remember that from a financial perspective, the baby boomers had it easy. Money was no problem. The economy was advancing relatively well with a high manufacturing and productive capacity, and times were relatively good. We had a relatively low debt per capita burden, and were exporting more than we were importing — a key sign of a healthy economy.

In coming years we will experience the other side. The baby boomers born between 1945 and 1960 are now between 45 and 60. In 2020, they will be 60 to 75 years. Most of them will have began their retirements. As they entered the job market en masse between 1960 and 1980, they will leave in large numbers by 2025. To add more complexity to the mess, our manufacturing and productive capacity as a nation (in Canada and the Unites States) has been relatively eviscerated, and has left a largely debt-laden economy. Indeed, the total external debt by 2015 to 2020 should be around at least 1 trillion dollar 1 trillion in 2015, making Canada’s net debt to GDP ratio about 65%. It’s a long way from Canada at 90% hit in the late 1990s, but stats show, Canada’s total debt is on an upward curve, especially with more “stimulus packages” in the works.

End Of Mandatory Retirement

The Liberal government of Ontario announced it will end mandatory retirement and begin a process to implement this change on December 12, 2006. The government claims that Ontarians are older want to continue gainful employment and that recent immigrants and women workers should work longer because many of them are unable to achieve financial security by the age of 65 years . Support for banning mandatory retirement is also from those who are already financially secure and work in non-strenuous jobs. In what seems like a good decision, the government is giving people “the choice … about when to retire.”the joy of not working

The reality is that the end of mandatory retirement does not give workers real freedom to choose to work longer. Indeed, allowing workers to work longer because it’s the only way they can survive does nothing to expand the options of workers when it comes to retirement. Instead, by eliminating mandatory retirement means workers without adequate coverage (and this is significantly many women and immigrants) will never be able to retire because when others are choose to retire later or never at all, it lowers the standard bar. Eliminating mandatory retirement and increasing the retirement age will mean less job opportunities for today’s workers, unemployed youth. There will be significantly less pressure on governments and employers to train and recruit young workers. Employer-paid training is already largely a thing of the past.

Robert T. Thompson, regional vice chairman of the US Chamber of Commerce, said back in 1982 that “lifting the age 70 cap represents a broad leap into the unknown with little, if any, study of the implications to the economy, the impact on older workers and human resources planning of companies.” Also, as far back as 1977, a Sears, Roebuck study for the US government concluded that one-third of the 2.04 million people scheduled to retire at 65 in the next five years might wish to work. If one third worked past 65 at Sears alone, 20,000 job changes wouldn’t take place and the company’s hiring rate would decline by 7 per cent — even more for minorities and women.

Government Retirement Programs & Ponzi Schemes

The popular business media today is constantly clamouring with talk about investment scammers such as Bernard Madoff – where he was convicted of scamming investors of more than 50 billion US dollars – as one of the world’s largest financial fraudsters, and may be the most important piece of financial news this decade. The way it worked was that Madoff had been paying off investors with future investors’ investments for at least a decade. Again, the media hypes it up as if it were the largest scam in history, but what they do not mention is that he’s probably the second-biggest scammer. The first is the government’s “social security” ponzi scheme.

Government Programs Group to provide retirement benefits for potential losses of larger size may be ten times the size of Madoff’s scams, per year. In the U.S. alone, Social Security pays benefits to a tune of nearly 500 billion dollars per year and growing at a rapid pace. In Canada, the Pension Plan of Canada, the supply of social security of Canadian government, currently pays about $ 500 per month to those who have contributed to their maximum during the five years preceding retirement. The Canadian system of social security is much more interesting than its American counterpart. Social Security in the United States – implemented by President Franklin D. Roosevelt during the New Deal – following a number of complicated procedures for determining what to pay per retiree. How it works is that it effectively pays out a portion of a contributors “contributions” during the period each year, paid for by current contributors contributions. In Canada, a similar system is used, however, rather than maintain no contribution, some contributions are set aside in a reserve fund, managed by the federal government with the lofty target of beating the market yield on average.

When creating the Pension Plan of Canada in 1964, the mandatory contribution rate was a minimum of 1.8 per cent, with a clause allowing it to vary with the amount of funds for retirees of a particular period. As baby boomers and other demographics enter into retirement, the demographic composition of contributors-to-receivers changes, but not for the better. In the early 1990s, the government discovered a problem that sometime around the year 2015, the entire pension system would be at risk for insolvency and collapse as an increasingly higher contribution rate date drew nearer which would have required even more individual contributions to the system that would further halter economic growth. So, as a temporary solution to this problem, the government introduced a series of changes that replaced and complimented this gigantic ponzi scheme. Under the old system, the maximum annual employee contribution would have increased from $945 in 1997 to a forecast $2295 in 2030. The new arrangement will see the maximum employee contribution rise from $969 in 1997 to $1730 in 2030.

The CPP used to be funded on a “pay-as-you-go” basis, in which contributions were set at a level that would pay for current pension payouts and provide a contingency fund of 2 years of benefits. The surplus was lent to the provinces, invested in non-marketable securities of provincial governments. By accelerating the increase in the contribution rate, the 1997 reforms will move the CPP to a “partially funded” basis, accumulating a larger fund (equal to about 5 years of benefits) that will be invested more broadly in a diversified portfolio of securities to achieve a better rate of return (Canadian Uncyclopedia)

So it is a system that depends on infinite growth and infinite growth in the amount of compounding really sustainable? Governments say yes. The facts, however, show that many Canadians who have spent their working life putting money aside for their old age have suddenly and will discover that it was a wasted effort. The odds on a private sector employee having a decent pension are about one in five. That’s the percentage of Canadians who can boast of a defined benefit plan, the kind that pays a set amount based on salary level and years of service.

One should make a mental note of the key word of “unemployment” because what has been happening to the Canadian and United States economies in the past 30 years has been nothing short than an economic whirlpool, or “Giant sucking sound,” as Ross Perot called it in 1992, of middle and upper-class money generating industries and jobs to slave labor countries like China, Mexico, Bangladesh, and other so-called “BRIC” countries. The so-called “free trade” implementation in the past 20 years has been anything but free of government regulation. Indeed, the world trade organization was implemented with regulating global trade between some 200 countries in the past 15 years with disastrous results for economies around the world, especially being exacerbated by the “global financial crisis” that has been recognized by mainstream media and politicians since 2007, but has been known to most knowledgeable people for quite some time.

Mainstream economists, think-tanks, and governments have been busy for a very long time in conditioning the population of Western countries that the productivity capacity of their society, the manufacturing sector, was the “old economy” and that the “new economy” (or post-industrial economy) was one filled with service sector jobs and that the former jobs would be sent to places like China or Mexico where the “old, dirty work” would be done and the first-world or “developed economies” of Canada, USA, and Europe would be freed to work in offices and pursue creative work. As award-winning economist Paul Craig Roberts notes, “free market economists” covered up the damage done to the US economy by preaching a New Economy based on services and innovation. But it wasn’t long before corporations discovered that the high speed Internet let them offshore a wide range of professional service jobs. In America, the hardest hit have been software engineers and information technology (IT) workers.

Some Solutions, Please?

Governments can implement two main types of policies to cope with the demographic shock: a policy of economic growth and political solidarity between generations. They can accelerate economic growth in the usual ways: fight against unemployment and poverty, support employment of older workers, accelerate the integration of immigrant workers and foster education, entrepreneurship, savings, investment, innovation and productivity. Stronger economic growth will reduce the effects of overall economic decline and tax revenue losses due to the disappearance of baby boomers.

Perhaps this is why teachers and schools have been telling young people for years that to “follow your dreams” is the best route for life happiness, because perhaps they are aware that children will not have “golden years” as their parents did as they approach and enter retirement to fulfill their dreams they had as children. Maybe knowledgeable adults are cognizant of the impending financial reorganization of the world economy that will leave many people in low-paying service jobs. Can you say “would you like fries with that?”