Europe Faces Pension Pinch
This article in the WSJ highlights a serious issue in Europe and the U.S. Too few workers contribute to the state pension systems, and nations set little cash aside for benefits they promise. Some are calling this the “pension time bomb”…because the demographic trends are such that fewer and fewer workers are available to pay for the benefits that were promised. That can’t end well!
—Krystyna Trzcińska, 68 years old, has farmed a strip of land in this corner of eastern Poland for more than four decades. Retired now, she grows clover between neat rows of raspberry bushes to feed her rabbits. The rabbits she eats, the berries she sells.
The berries bring in the equivalent of about $1,300 a year. To survive, she and her husband depend on pensions
provided by Poland’s government.
State-funded pensions are at the heart of Europe’s social-welfare model, insulating people from extreme poverty in old age. Most European countries have set aside almost nothing to pay these benefits, simply funding them each year out of tax revenue. Now, European countries face a demographic tsunami, in the form of a growing mismatch between low birthrates and high longevity, for which few are prepared.
Europe’s population of pensioners, already the largest in the world, continues to grow. Looking at Europeans 65 or older who aren’t working, there are 42 for every 100 workers, and this will rise to 65 per 100 by 2060, the European Union’s data agency says. By comparison, the U.S. has 24 nonworking people 65 or over for every 100 workers, says the Bureau of Labor Statistics, which doesn’t have a projection for 2060.
While the problem has long been building, it is gaining urgency as European countries’ debt troubles, growing out of the 2008 crisis, push governments to reassess their priorities. Greece, the worst off, has had to reduce the generosity of its pensionsystem repeatedly. Though its situation is unusually dire, Greece isn’t the only European government being forced to acknowledge it has made pension promises it can ill afford….
BY JULIET SAMUEL
See the full article here.