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JAR

The question of how nationalized healthcare fits the system is interesting. Canada has many of the same old-line firms as the US, yet has seen a real benefit in recent years by large manufacturers moving to Canada to take advantage of the subsidy of a national health care system (to which firms contribute through payroll taxes). But most large firms also provide third-party private health nsurance plans to their employees, which takes care of the "extras" like dental, eyecare etc.
I'm not sure what Jane Galt means by "Canada/North Korea style "no one may have more generous health care than what the government provides" plans only?"" as generosity is not usually the issue, while access is. But I am pleased to say this is the first time I have ever seen the phrase "Canada/North Korea style" in print!

stefano

1-Celtic Tiger: the dependency ratio could be a good explanation for growth IF the pension system in Ireland is as like as the pension mechanism in US. If every worker pays his own pension, DR is no more a good explanatory variable;
2-when you talk about dependency ratio, if you think it's a good indicator you have at least correct it by the productivity factor: in the article you stress a lot the fact of reducing working force, but the point is that you have also to consider the increase in productivity. So you can have a dependency ratio 1:1 or 2 old to 1 worker without changing the possibility of paying pensions to the old just because of increasing in productivity;
3-You say "Wilson's promise, in other words, was actually a gamble. Is it any wonder that the prospect of private pensions made people like Walter Reuther so nervous?"
You propose "But you can do that with companies within an economy. If the retiree obligations of Bethlehem Steel had been pooled with those of the much younger industries that supplanted steel---aluminum, say, or plastic---Bethlehem Steel might have made it. If you combined the obligations of G.M., with its four hundred and fifty-three thousand retirees, and the American manufacturing operations of Toyota, with a mere two hundred and fifty-eight retirees, Toyota could help G.M. shoulder its burden, and thirty or forty years from now---when those G.M. retirees are dead and Toyota's now youthful workforce has turned gray---G.M. could return the favor."
I say: But if a sector is obsolete today why it must be competitive in 20 years? Where is the incentive for Toyota for helping GM? Toyota behavior is based on expectation "I do this today because I think that tomorrow someone else will do this for me". I think also this strategy can be considered as gamble. This mechanism in order to work needs to trigger strategies with punishing as so on.....
I propose: An alternative solution could be that each generation pays for himself. In a framework of overlapping generations, with in each period a group of old and a group of young, in this way you are minimizing the social cost: when you decide to switch, young have to pay for themself and for the old. But this is price to pay in order to pass to a better system.
Any way congratulation for your blog and your books

AT

Let's just remember that many time intellectuals and authors, college professors & professional research individuals can have insanely idealistic & hugely flawed theories b/c they don’t operate in the world of what is real, of common sense, of an actual bottom line. I appreciate Gladdy for having a higher IQ than I do and for painting his irrationally off base social theories in wonderful language that includes al manner of big words but sadly his idea about pension problems (and the majority of his books blink and tipping point) are ridiculously wrong. Check out a good counter-point below.

Math made simple
by Yvette Kantrow Posted 09:12 EST, 30, Aug 2006

Remember the adage that age is only a state of mind? Well, it doesn't seem to apply anymore, and we don't mean that in a youth-obsessed, let's-all-inject-our-face-with-botulism kind of way. Instead, age, or more specifically generation, is now being offered up by the media as a handy-dandy explanation for many of the ills that ail us. Didn't get that promotion? Your pension fund has been bled dry? Don't blame yourself or even your employer: Blame the baby boomers.
That, at least, is the impression we came away with after reading two wildly different yet weirdly similar pieces that recently crossed our desk. The first is Malcolm Gladwell's simplistically complex and much-blogged about look at the nation's pension problems and the "demographic logic" behind them in The New Yorker; the second is a Fortune story on the "Gray Ceiling," a term the magazine has coined for baby boomers who refuse to retire, thereby standing in the way of Gen X'ers manifest destiny. Both appear to be an outgrowth of the media's obsession with aging boomers — how many more insert-famous-person's-name-here-is-turning-60 stories must we endure? — which insists on treating 77 million people as a single demographic, with little regard for differences in race, class, education, income, geography, etc. And both are notable for their total acceptance of numbers, mathematics and demographics as controlling forces of the universe.

In his piece, Gladwell sets forth the "dependency ratio" — the relationship between the number of people who aren't of working age to the number of people who are — as the key to understanding pensions. To illuminate this, he whips out a study by two Harvard economists that suggests that Ireland's economic miracle is largely the result of the lifting of the country's limits on contraception in 1979, which caused its dependency ratio to plummet, freeing it of the enormous cost of supporting a large dependent population, namely, kids. Of course, that could become a problem when the current working population retires, and there are fewer workers to take their place. But as Gladwell sees it, "Getting to a 1-to-2.5 ratio doesn't make economic success inevitable. But, given a reasonably functional economic and political infrastrucutre, it certainly makes it a lot easier."

Gladwell then looks at companies like General Motors Corp. and Bethlehem Steel in the same demographic terms, which he says should change the way we view their pension problems. As technology increased their productivity in the post-war period, he argues, they didn't need to hire workers to replace the thousands who were retiring. That sent their dependency ratios — and therefore, their pension costs — soaring, as a small pool of current workers had to support a large pool of retirees.

"Looking at General Motors and the old-line steel companies in demographic terms substantially changes the way we understand their problems," Gladwell writes. "It is a commonplace assumption, for instance, that they were undone by overly generous union contracts. But, when dependency ratios start getting up into the 3-to-1 to 7-to-1 range, the issue is not so much what you are paying each dependent as how many dependents you are paying." The issue is also for how long you are paying them, but weirdly enough, the fact that people are living longer — a demographic development that clearly contributes to pension woes — never makes it into Gladwell's demographic-driven discussion.

Robert Strickland

Malcolm,

You said in other section that you are frustrated when people type so fast they forget to think. That is precisely what you did in response to McGurky's comments. And as a result, you completely missed his point, which had absolutely nothing to do with flying pigs. The reason you missed it, I suspect, is because you have precious little to no training in business finance and accounting. My earlier comments I believe were on the same line as McGurkey's. I wasn't arguing, and I don't think he was, as to whether the dependency ratio is useful re: macroeconomic models. I, like you, was convinced by the scholarly research. However, it was YOUR idea - as far as I can see - to APPLY that theory to private company pensions. THAT, Malcolm, is where you went awry. Just open your mind a bit to the fact that you don't have the necessary background to make that application and assume that it holds. It was definitely an interesting idea....just doesn't work. A number of specific converstations with CFOs on what you were thinking and considering would have, I suspect, revealed this flaw.

Sangeeta

Interesting concept but maybe you are giving too much importance to dependency ratio.

Beth Sirr

Thank you for your wonderful article, and other work.
I was wondering if you had any ideas about how dependency ratios might be applied to Medicare and Medicaid programs from the perspective of taxpayers? Insurance corporations have refined their ability to confine their "risk pool" to those who cost the least, "cherry picking and pit spitting"-with taxpayers footing the bill for the oldest and sickest, without access to the "reserves" laid away in premiums paid those folks when they were younger/healthier.
Seems our government has neglected its fiduciary responsibility to the American people by forfeiting the health care "demographic dividend" to the insurance industry.
Has anything been written on this?

Alexandre P. Gomes Pereira

I have just read Blink and I would lik e to give my compliments to Mr. Gladwell...

I will pass it on...
All the best,
Alexandre

Ally Bennett

I first borrowed Blink from our library (which is now operated by LSSL, a corp.) I was intriqued and then read Tipping Point. I have purchased both books and use them as reference. I have passed on the information/research from these books. Case studies are interesting to me. The information is stated in a precise, intelligent and easy to read format.

Thank you for your hard work and honesty. I recommend and quote from your books often. It makes for lively conversation and encourages people to "think".
Ally

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