Not your grandparent’s retirement

Here are projected population pyramids for Canada (2016 – 2036). (Source: Populationpyramid.net ). The triangles have been added by me to illustrate those of retirement age among the population projections.

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Notwithstanding the advances in medical science, we understand that people do not live forever –yet they do live longer so while the population itself is increasing, the proportion of the population that is technically retired (i.e. past the age of 65) is increasing as well; this proportion of retirees can be seen in a stylized fashion by the ever expanding triangles above.

Then there was this article in this morning’s Globe and Mail (click on link to go to the full article): Still working in retirement: Three people tell their stories

Working in retirement is the new reality for many. Some struggle financially and can’t afford to retire, while others simply don’t want to stop working. Often it’s a combination of factors that determine whether you can choose your retirement date.

We asked three people to share their experiences.

Linda Hawkins, 67, registered nurse, Toronto

Ms. Hawkins is a registered nurse in the cardiac catheterization lab at Toronto Western Hospital. She loves her job but she would have liked to retire last year and travel. The sudden loss of her partner of 10 years altered her situation financially and emotionally, however.

“When you have two incomes and you move to one, it’s difficult,” says Ms. Hawkins. “Two people can live in a house for the same cost as one person. The only difference is the cost of food, which isn’t a lot for people at our age.”

She says she’s still working because, first of all, she needs a reason to get out of bed in the morning. Also, despite making a statutory declaration of the common-law union with her partner, she hasn’t been able to provide sufficient documentation, such as a shared mortgage or joint bank account, to claim survivor benefits for his pensions. Although they shared expenses, each kept their own bank account and Ms. Hawkins had already paid for the house in her name.

Even though she has worked as a nurse for 45 years, Ms. Hawkins says she doesn’t have enough pension income to retire, even factoring in Canada Pension Plan (CPP) and Old Age Security (OAS) benefits. When her boys were growing up, she worked part-time and, back then, part-time workers weren’t eligible to contribute to a pension plan, although that’s changed now.

Another concern is that she might not be able to care for herself someday and would need to go into a nursing or seniors’ home. “That changes everything,” says Ms. Hawkins. It costs at least $3,500 to $4,000 a month just for a single person at a no-frills facility in Toronto. I don’t want to be a burden on my children.

(Italics and underlined text above added by me)

Comments

The nurse in the case above still has recourse to claim survivor benefits; while each case is unique –and perhaps the article doesn’t delve deeply into the minutiae of her particular case– there appears to be enough of reason to argue against the pension administrators original decision and fight further for funds that would make a material difference in this person’s standard of living.

It is also interesting that in using the words “she needs a reason to get out of bed in the morning” the nurse shows that the idea of retirement as a concept has changed and will continue to change — by necessity for most and by choice for some. From the point of view of dependency ratio, Statistics Canada shows that there will be fewer working age people compared to retirees going forward. (Source: Dependency ratio by Statistics Canada)

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I suspect that a future Federal Government will make the unpopular decision to raise Old Age Security (OAS) eligibility further (it will go from 65 to 67 in 2023). Lest we forget, retirement is a relatively new concept in modern societies and Canada is no different. Our concept of retirement came to fruition in the 1930s when the Prime Minister Mackenzie King introduced the Old Age Pensions Act in Canada in 1927. The starting age for benefit payments at that time was 70 and the pensionable age for government benefits remained 70 until 1953.

In addition to the challenges of  the dependency ratio, this past generation has seen a crumbling away of the social contract between employers and employees. The move to shift market risk onto employees and at the same time cut the cost of employee benefits has seen the shift of retirement pension plans from a defined benefit to a defined contribution template. People cannot invest well; most cannot fathom what market risk means and almost all who do not have the comfort of a gold plated pension, wholly misunderstand the need to match future cash flows with future liabilities in one’s so called golden years. It isn’t just a game of growing one’s assets. Everyone’s balance sheets and income statements are different with a unique set of constraints.
The paucity of long-term guaranteed income will drive many retirees back to the
workplace. It remains to be seen what effect technology will have on making current jobs redundant. For the moment, industries such as health care are facing the prospect of losing many of their workers to retirement in the coming decade. Will they come back and if they want to come back will there be a job waiting for them?

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What do we do with these people?

And what if one of “these people” is you or I?

My observation is that we are eliminating many jobs now and we won’t be able to train the workforce, and Ray’s argument is that it’s always been like this and we’ve figured it out before and we’ll figure it out again. Looking at the pace of change, starting with self-driving cars that can now do the jobs of Uber drivers, taxi drivers, and truck drivers, that’s millions of jobs lost over there. What do we do with these people? Many of them are not retrainable for the technology economy and we’re not going to be able to create new jobs for them within five years or so.

The more I look into it, the more I’m convinced that change is happening too fast, disruption is happening too fast, jobs are being wiped out too fast, and the fact that we’re still in denial about it and not acknowledging that this destruction is happening gets me worried. We should instead be talking about how can we minimize its impacts or come up with a safety net or retraining program and create as many new jobs as we can and spread the prosperity. We are not having these discussions. ~ Vivek Wadhwa

Bold emphasis added by me.

See the rest of the interview with Vivek Wadhwa and his thoughts on how human jobs will be replaced here: ‘RoboCop is coming’ 

Kahneman’s Failed Revolution Against Economic Orthodoxy by Zeljka Buturovic & Slavisa Tasic

To download the article by Buturovic and Tasic (from Critical Review) click on the link below.

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The original link to the article is here.

Excerpt:

It is clear that in making real-world decisions people rely on various authorities—family members, media reports, experts such as school counselors, therapists, and real-estate agents; that they succumb to peer pressure or conform to childbearing, lifestyle, and other norms of their immediate environment; and that they sometimes fail to anticipate changes in their situations and themselves as they age. In many cases, the mistakes one makes are essentially due to a failure of the imagination (creativity, divergent thinking): a failure to picture possible scenarios accurately enough or, alternatively, a tendency to weigh, however precisely, a too-limited set of options or to construct a restrictive and overly abstract set of outcomes. This could happen for various reasons, from lack of critical thinking to limited exposure to diverse possibilities to poor memory of various scenarios. Relying too much on statistical knowledge as a substitute for contextual understanding of future possibilities would exacerbate instead of ameliorating these tendencies; there is a reason why concern with creative thinking is a staple in business, clinical, and educational contexts, to the point where phrases like “thinking outside the box” have become clichés. It is in the discovery of options and possibilities where most of the challenge of decision making lies, not in precisely comparing predefined and given options.
Like orthodox neoclassical economics, behavioral economics does not tackle any of these important aspects of decision making; its findings, ultimately, tell us very little about how people think. Artificially induced quirks of human cognition are examined in excruciating detail while everyday decision making of great individual and social consequence are ignored.
Kahneman’s undue focus on cognitive blunders that are defined as departures from the rational-choice norm is symptomatic of his failure to liberate his decision theory from simple consequentialism. His book’s illustration of the “endowment effect” (292–93) is one of the most striking examples of the closure of his research agenda within the narrow neoclassical framework. “Professor R” (later known to be Richard Rosett at the University of Chicago) bought wine at auctions at a price not higher than $35. Professor R would, however, not sell the bottles he already bought unless he was offered more than $100, which Kahneman interprets as evidence of a bias towards overvaluing an object simply because one owns it. The endowment effect has been documented in other cases, of course, although its importance in economic contexts has been disputed (List 2003and 2004). Regardless of the existence of the effect itself, however, it is baffling that Kahneman would in the first place assume, for example, that Professor R is supposed to be a profit maximizer when it comes to his wine collection. The same is true of other behavioral economists; Richard Thaler (2015, 17) describes Rosett’s behavior as “not rational.” Yet the professor is obviously not a wine trader; he collects wine for pleasure. If we see an error in his actions, that is only because we implicitly treat him as a rational maximizer—and only in order to show that he is not a particularly good one.

Composition (HUM425)

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This photo of Joe McCarthy doppleganger Ted Cruz, among a series that were published then withdrawn by AP after complaints by several pundits, demonstrates emphatically that composition, the relationship between elements within the visual field, can signify powerfully. The photo was taken while Cruz, who wants to be your president, spoke at a “Celebrate the 2nd Amendment Shooting Range” in Johnston, Iowa on June 20.

credit: Charlie Niebergall credit: Charlie Niebergall

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Using ‘complexity thinking’ to manage an increasingly complex world – by Paul Cairney, Robert Geyer and Nicola Mathie

ElgarBlog from Edward Elgar Publishing

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Complex policy-making systems are ‘greater than the sum of their parts’.  To understand them we must examine not only the individuals involved but also the ways in which they interact with each other, to share information and combine to produce ‘systemic behaviour’.  Professor Paul Cairney,Professor Robert Geyer and Nicola Mathie consider what is involved in using ‘complexity thinking’ to inform policy decisions.

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Economics and the value of art

More than a “Veblen good” the recent record auction price for Picasso’s “Les femmes d’Alger (Version ‘O’)” signals that the extraordinarily wealthy have nothing better to do with all of the surplus value that they have captured.

occasional links & commentary

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Neoclassical economists don’t have a lot to say about the value of art. Basically, they start from the proposition that a work of art, such as Picasso’s “Les femmes d’Alger (Version ‘O’),” is often considered to have two different values: an aesthetic or cultural value (its cultural worth or significance) and a price or exchange-value (the amount of money a work of art fetches on the market). They then demonstrate that, within free markets, individual choices ensure that the price of art generally captures or represents all of the various dimensions of value attributable to the work of art, rendering the need for a separate concept of aesthetic or cultural value redundant. Therefore, on their view, Picasso’s painting is “worth” the record auction price of $179.37 million.*

But the Wall Street Journal (gated) observes that yesterday’s sale of other paintings—including Mark Rothko’s “Untitled (Yellow and Blue)”—reveals something else:

Some paintings act like object lessons in tracking the global…

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