Real freedom for all turtles in Sugarscape? - Presses universitaires ...

G o o d i n – T h e b r e e d e r ' s w e l f a r e s t a t e 241Were birth rates exactly at replacement rate, that would pose no problem.The ratio of pensioners to earners would be constant across time. With abelow-replacement birth rate, however, the ratio of earners paying taxes toretirees drawing pensions will be ever-decreasing. Either earners will haveto be taxed at higher rates, or the level of the pension will have to bereduced, or proportion of people receiving it will, in order to make endsmeet. Those are the hard choices facing PAYG pension systems given belowreplacementbirth rates. 10Of course we do not have to confront that particular problem for a quartercentury or so after the birthrate first dips below replacement rate. It will bethat long before the below-replacement generation enters the paid labourforce and the previous generation goes onto the pension. Nonetheless, asdemographers like to say, 'Demography is destiny'. Everyone who is goingto be aged 25 in 25 years from now has already been born. Maybe there is alittle uncertainty about how many will die along the way, or where they willend up living. But basically demographic projections are just that:projections, not mere predictions.Still, the decline in the birth rate today will not become a problem for thePAYG pension system for another quarter century. And while there isnothing we can now do to change how many 25-year-olds there will be in 25years' time, all sorts of other things may still change in the meanwhile.Like what? Well, recall that the standard solution to the structural problemwith the financing of PAYG pension systems is to get pension obligationsfully funded. Then each person would live in retirement off funds she hadherself paid into her own personal pension fund during her working years.If each generation took out of the pension scheme only what it put into it,then no matter if generations differ in size. 11The trick lies in getting from here to there. The 'here' in question is thesituation in which the payments that a person makes into the pension fundduring her working years are immediately eaten up paying the pensions ofcurrent pensioners. 12 If we want to get from that to a situation in which the10Musgrave (1981) for example opts to hold the first and third constant and allow thepension level to vary. The problem is exacerbated if (as is also the case) people livelonger, thus further increasing the number of non-earners still alive and drawing thepension (World Bank 1994). While I focus here on the birth rates alone, the solutions Ioffer would apply equally well to both aspects.11To be sure, the size of the population might affect the rate of return on those pensionfundinvestments. But insofar as most of those effects on the portfolio of any given cohortwill be amassed during the working life of that cohort, the size of previous or futurecohorts will not matter much to that.12For the most noble of motives, I hasten to add: so that those who were already old andin need at the time the pension was first enacted could benefit from the policy, even