Bewuste domme vraag over pensioenen

Onze overheid grossiert in verdoken belastingen, dat weten we, maar wat men nu heeft verzonnen tart toch alle verbeelding. We moeten studiejaren afkopen om een volwaardig pensioen te genieten. Het wordt voorgesteld als een 'koopje': ca. 1500 EUR voor elk studiejaar, met ongeveer een fiscale aftrek van 50%. Om te beginnen is dit zéér asociaal, want je moet natuurlijk eerst een voldoende hoog inkomen hebben voor je de uitgave van je belastingen kan aftrekken: arme hoogopgeleiden betalen dus het gelag. Veel tijd krijgen we ook niet, de solden lopen maar tot 2020. Om niet te veel tijd te verliezen met denken en opzoekwerk dus deze bewuste domme vraag: worden wij hier bestolen?

De wettelijke pensioenleeftijd wordt in 2025 verhoogd tot 66 jaar en in 2030 tot 67 jaar. Mits voldoende gewerkte jaren kan dat eerder. Om de studiejaren te laten meetellen als voldoende gewerkt, moeten we dus het losgeld betalen. Dat is sterk! Op het moment dat ik ging studeren was de pensioensleeftijd 65 zonder dat losgeld. M.a.w. studeren kostte wat het kostte, niet 1500 EUR méér, wat een disincentive zou zijn. Om nu een volwaardig pensioen te genieten moet die meerkost betaald worden. Men stelt het alsof na drie jaar (250 EUR per jaar versus losgeld van 750 EUR) die kost is terugverdiend. Dat is vals: de 750 EUR ben je nog steeds kwijt, want die werd eerst afgetrokken van het volwaardig pensioen bepaald bij aanvang van de carrière. Men eist nu immers 67-18 = 49 in plaats van 67 - 22 = 45 gewerkte jaren. Een ongelofelijke belasting van hoger opgeleiden. Men kan denken: net goed, die hebben toch de hoogste lonen - gemiddeld is dat zo, maar het zal je maar overkomen hoogopgeleid en werkloos te zijn, of werknemer bij ING. Bovendien maakte dit helemaal geen deel uit van de studiekeuze. Wie vandaag nog moet kiezen, wordt aangemoedigd de lageloonoptie te nemen, want dan krijgt je op een normale manier je pensioen na voldoende gewerkte jaren of op de leeftijd van 67. Wil men van België Bangladesh maken?

Dit gaat niet over het principe van langer werken - daar heb ik mijn eigen ideeën en voorstellen voor. Wat van fundamenteel belang is, is het vertrouwen. Een onbegrijpelijk en fundamenteel ongelijk systeem kan dat niet realiseren. Men heeft van het pensioenstelsel een spelletje gemaakt. Het oude systeem was eenvoudig: men betaalt belastingen, waarvan een deel virtueel op je rekening komt die ergens plafonneert, maar dat in werkelijkheid uitgekeerd wordt aan de gepensioneerden op dat moment. Zo'n repartitiesysteem heeft het nadeel dat men door demografische en economische schommelingen soms de beloftes niet kan waarmaken, maar via een relatief systeem met punten kan daaraan tegemoet gekomen worden en blijft er een incentive om komende generaties een erfenis van hoge productiviteit te geven - immers, dit garandeert uw eigen pensioen.

Omdat de markt zo haar verlangens heeft raakte het kapitalisatiesysteem in de jaren 1990 in trek: via de werkgever (tweede pijler) of op eigen houtje (derde pijler) spaar je op een door de overheid gegarandeerde spaarrekening. Het sparen zelf wordt fiscaal aangemoedigd. Dit is een plundering van de staatskas vandaag en roofbouw op de productiviteit morgen. Bovendien blijken die fondsen niet altijd robuust. In Hongarije heeft men de bevolking quasi gedwongen het spaargeld op te geven in ruil voor de zekerheid een deel te krijgen van wat te verdelen valt via repartitie. Daar komt nog bij dat het een huzarenstukje wordt om carrières te gaan reconstrueren om het bedrag uit de tweede pijler binnen te halen, en dat je bank die derde pijler hopelijk nooit richting restbank zwiert. Eerst wordt de werknemer op dit gammel schavot geplaatst, en nu ook nog gechanteerd tot een niet onaanzienlijke belasting (bvb. voor mij minstens 5*1500 = 7500 EUR voor belastingen) waarvan de return zeer onzeker is. Kunnen wij dit pikken? Neemt men ons voor gek?

Origin of debt

A few interesting observations:

• State debt in Belgium is high, but much lower than 20 years ago. Also in Holland, we see a small decrease of state debt. In France, Germany, and the UK it increased.
• Importantly, most state debt in Belgium is in hands of local banks holding state bonds using the deposits of the citizens. In a way, the Belgian population ows itself 100% of its national product. This makes debt sustainable. Moreover, as interest rate are very low - both for bonds as, as a consequence, on deposits - historic debt has been refinanced, and current debt is not growing.
• The increase of debt between 2008 and 2009 is found in all countries, but most remarkably in the UK. This is surprising, as the fundamentals before the crisis were weak, but it still had its independent national bank, unlike Eurozone countries. It did not benefit from this to shield the British economy from the global demand shock.
• The two-year increase in Belgium in 2008 and 2009 was larger than the next six years - the government aid to the three largest banks must be behind this (Dexia, Fortis, KBC), mainly because in 2008 the rest of the economy was doing very well.
• The crisis was more costly to the Netherlands, both in absolute and relative terms.
• Germany, during the years of flexibilization, witnessed an increase of state debt - probably because of the integration of East-Germany, which was not an unambiguous success story. Since 2010, in the age of austerity, the state debt has decreased. As shown elsewhere, output caught on again as well. However, more people are now in poverty. It appears that growth - debt - inequality is an impossible trilemma.

The gov. debt as a percentage of GDP only expresses the extent to which the country is able to pay back the debt. As it has GDP in the denominator, it is sensitive to business cycle swings. Let's look at the picture when expressed in euros (below). The first thing we notice is that we cannot compare levels, as countries are of unequal size, something the GDP accounts for in the above statistic. However, we can now judge whether governments have made the choice to either pay back debt, or reduce taxes. Typically, Ricardian economists would say both are equivalent, but clearly in practice there is a great deal of debate on either, so it may not be neutral in the short run. For instance: foreign companies may be attracted by the low taxes, but not by lower state debt. For political parties, the promise of low taxation may yield more voters, who are blind to the state debt that will eventually have to be repaid. So as a second observation, we see that in Belgium and the Netherlands, state debt was never repaid - mind that this would cost around 30 billion EUR in Belgium for any 10% decrease in the ratio with GDP if GDP is stable.

Of course, besides the size of the economy and productivity, GDP also accounts for inflation, so surely if one counts on inflation debt will evaporate. Unluckily, there was no inflation since the crisis, and we flirted with deflation for a while. I believe austerity measures in Europe, while trying to sanitize budgets in order to increase the confidence in states, have had a reverse effect by decreasing demand, lowering inflation, and hence increasing the debt ratio.

Remarkably, in this chart we see that in the UK, France, and Germany (the latter until 2010), gov. expenditure and debt skyrocketed in the last two decades. So the increase of the debt ratio is not only a demand shock, it is real debt growth. In relative terms, the state could afford the debt growth because GDP was growing. In that sense, the Netherlands and Belgium resisted the temptation.

To conclude: Belgium chose for lowering taxes, as an alternative to paying back debt in times of economic growth. Because growth and inflation slacked all across Europe after 2008, the debt ratio did not improve as much as maybe expected, likely because the strategy of lowering taxes resulted not in higher wages, but in higher profits which are relatively untaxed, so no increases in consumer expenditure nor of government expenditure, and hence a slowdown of the economy, as it was seen all accross the EU. Maybe Ricardian equivalence is correct in theory, but wrong in practice in the short run.

Execute R code in Stata / Read SPSS data files

On 64-bit Windows OS and on Mac, the -usespss- command does not work. If you want to use SPSS data (or SAS), without quitting Stata, do something like this:

rsource, terminator(END_OF_R) rpath(R_pathname)
library(foreign);
rprecar<-read.spss("precar.sav", convert.f=TRUE);
rprecar
attributes(rprecar);
write.csv(rprecar,"rprecar.csv", na = ".");

q();

END_OF_R

It may be tricky to find your R_pathname. I didn't bother looking up what it is for now - probably the path to the executable (which sucks, because on every computer it will be different). In the example the conversion goes to csv, and there's the missing values ("na") option. The foreign package actually also allows old Stata 9 files, which is just fine and will preserve most labels, variable names, and missing values.

Here's the info for -foreign-:
https://cran.r-project.org/web/packages/foreign/foreign.pdf

Taxing robots or lowering minimum wages?

There's some errors in the logic, don't believe this.

There is a lot of talk nowadays in Belgium on either taxing robots or lowering the minimum wages. Remarkably, typically right-wing parties oppose the first and opt for the second, while typically left-wing parties propose the first and object to the latter. Personaly, and consistently, I am not in favour of any of the two measures, because indeed... they are the same.

Basically, by taxing robots, capital is made more expensive, which causes a shift to labour as an input factor. Similarly, the relative price of labour may go down by lowering the minimum wage, causing the exact same shift between the two input factors, all else being equal.

As I explained in another post in Dutch, one may argue whether to tax capital in general (profits, wealth, etc.) or wages. There could be an equivalence between all tax options. The main worry is that taxes cannot be avoided, which is why it is generally preferable to tax in tiny bits everywhere (capital, consumption, income, transfers, real estate, inheritance, etc.) - this is my theory of chaos economics. However, for now it is clear that labour is easily traceable, and hence an easy target for taxes. The only condition is that wages are sufficiently high, so what matters is not the tax rate - which you should calculate over all sources - but the wage share, which should be around 75% for a steadily growing economy, if the second half of the 20th century is to be taken as an example.

So please, do not tax robots - increase wages!

Time stamp

Making a time stamp is not very straightforward. The first two local do not deliver a nice year-month-day prefix, so we need to use a trick:

local mydate c(current_date)
local mydate=date(c(current_date),"DMY")

local mydate: di %tdCYND date(c(current_date),"DMY")
global date = `mydate'
di $date

The elephant in the room: the economic, political, and social impact of changes in the global income distribution

This post may have a wonderful title, but I intend to keep it short nevertheless. I am sure my summary can be hooked up to many story on income inequality that circulate and go into much more detail.

There are actually two (types of) charts I want to combine. The first is Branko Milanovic's now famous elephant chart from a 2002 World Bank Discussion Paper. It looks like this:

What is says is that from the global income distribution, the world's lower middle class has been growing, while at the same time the world's upper class saw its wealth increase, but not the poorest of the world nor the upper middle class globally. Also quite interesting is that this growth seems non-zero sum, as capitalist thinkers like to emphasize. Nearly nobody is worse off, and many are better off. Hence, following Rawls, there would be little to worry about.

Yet there is another graph, that shows the decline of the middle class (defined as 2/3 of median income to twice median income) over time between 1971 and 2015 as drawn up PEW Research together with the Financial Times. It is reported in the apocalyptically sounding article "America’s Middle-class Meltdown: Core shrinks to half of US homes. Society splinters as bedrock of postwar economy is ‘hollowed out’". Let's see what happened:

So while the bulk of the distribution of 1971 is fading by about 1/3 and now almost uniformly distributed, the upper half is growing and the top percentiles are more than quadrupled in their count. To quote the article:

"Since 2008, the number of adults in households in the upper two tiers has grown by 7.8m, outpacing the growth in the number of adults in households in the lower two tiers, where the number of people grew by 6.8m. The middle class grew by 3m over the same period."

The political impact

It is no coincidence that these graphs circulate now that Donald Trump is president elect. The decline of the middle class in the West is raising concerns amongst those who do not benefit from globalization. Why would they favour it then? I see it as a very simple prisoners' dilemma: any party chooses for control over self-interest, when coordination of mutual gains fails. The liberal establishment in the UK and the US has surfed on a wave of globalization, but apart from the Coasts in the US and the City in the UK, people have not seen the benefits of it. People don't care about average, they care about where they are relative to the average. Hence Trump, hence the opposition to CETA and TTIP, hence Brexit, and worse: hence hatred to anything and anybody that is not visibly contributing to one's self interest. People are not more xenophobic than ever, but they don't see the use of migrants, only the hassle. The ones that had always been racist now find legitimacy in this to misbehave. Yet the roots are still in the game theory: if the coordination would work - say, free trade levels up social rights and internalizes environmental costs - people might sacrifice some of their autonomy (power) and direct control, because they trust they will be better off.

The social impact

I have already hinted at the social impact above, referring to Rawls and referring to peoples relative wealth. Of course this is what matters. Absolute wealth is absolutely unimportant from a social point of view. Mind the adjective social: there is nothing social about comparing yourself with the stone age, that is historical. Nobody in this world would have any right to complain when put in historical perspective, as we are all better off. Even the poorest of the poor are not hunted by lions anymore, and in comparison, very weak people now have a fair chance to survive, whereas they would not have stand any chance some thousands of years before. Rawls argument that inequality is fair if anybody improves, is therefor blatantly flawed. For the sake of clarity, let me invert the reasoning above: if people are happy because they have more, they should be less happy if they have less. Hence Napoleon Bonaparte, who did not have an iPhone, should have been very unhappy to have to wait over 100 years before reaching the living standard of today. I believe this reductio ad absurdum shows that Rawls is wrong: deprivation is a relative concept in the minds of people. Imagine you are rich, but you bring your children to a school for the absolute elite of your country. Even if your kids may already be spoiled by you, they will feel dropped behind compared to the even richer kids, who may get a pony instead of a bicycle at ten years old. It is easy to see that this shapes the experience. Going from toys to trauma, it is now understandable that suicide is not the most individual, but actually the most social act, and occurs more frequently in more prosperous society, where the pie is larger and the distribution more unequal.

The economic impact

Finally, the unequal distribution of wealth also has an effect on the economy. Let us stick for now to the US graph above. Assuming that the middle class is the class who spends the share of added value earned. The upper class saves the money and the underclass may have be a cost factor. So the middle class is the motor of the economy, and its number is the fuel. Then we see the paradox that as countries develop, inequality grows, the society gets polarized, and growth slacks. Sadly, in the middle of the 20th century, it took World War 2 to restore the balance - temporarily. Workers in general, and women in particular, could no longer be left behind, as they had witnessed the worst consequences of war. Bloomberg calls for urgency, quoting an unusual system critic:

"When people like Deutsche Bank are starting to say, 'maybe capitalism needs a form of reinvention,' maybe that's the time to start listening to that," he said during an interview on BloombergTV. "It's not Bernie Sanders; it's a global investment bank."

Digging a little bit deeper in the mechanics of this boom and bust scenario, there are two ways to explain it. The Stockhammer-Onaran story goes like this: national income may come from consumption or from exports, but if an economy is closed, as is the world's economy, but probably also the EU and the US, it needs to come from consumption. Only single regions can benefit from the export-led growth. As a rule, most economies however are wage led. The second story, mine, does not contradict the first, but draws attention to the following logical fallacy: when wages are under pressure and profits increase, these profits go to savings and investments. This brings about an perpetual series of mergers and acquisitions, for cheap. However, these acquisitions only appear cheap because they are statically misvalued. They are worth much less, as there is less demand (purchasing power) for the goods. So the capitalist buys shared or takes over a company, but these share will lose real value soon. Growth comes from technology and investment, not from financial juggling. So as the profits increase we have a boom, for instance the dotcom bubble or the real estate bubbles, but soon after this leads to a bust. In the Financial Times article we do see the trend of increasing polarization taking a step back in 2011. Paul Krugman recently posted the US real GDP evolution on Twitter, arguing the Great Recession was not so unnatural after all and growth has caught up again. So the boom-and-bust scenario may economically lead to some Schumpeterian creative destruction, or maybe even give directions for policy, so that in the end growth continues, but there is no counterfactual: what growth would have been realized in a steady way, without the hassle?

Going back to the elephant graph, we need to extend the economic story. After all, it may be that the western middle class loses its purchasing power, but that the non-west former world underclass now creates demand. It may well be, and I don't know exactly what is behind the graph, but one flaw I anticipate is that the worlds upper class is not only western. Hence the unfair distribution of wealth is not a global redistribution, but it is in fact a global increase in inequality. In every market, those who earn least get less of the pie. Say an Indian worker earns 10 USD a week - I really have no clue - and witnesses an increase to 15 USD thanks to globalization. The Indian businessman, however, goes from 10 000 USD to 15 000 USD, increasing the absolute gap. In general, for the study of wages and remuneration, and because of the social aspect, I believe log wages are more reasonable as they represent relative differences, but for the economic aspect, this absolute difference may matter. The US worker, for instance, might have gone from 100 to 150 USD a week or more, but this gain went to the top class, bought out by cheaper labour outside the West.

Conclusion

There is an elephant in the room and many if not most political actors do not see it. However, the political, social, and economic story that are all linked to the growth of inequality should be clearly disentangled for practical purposes. In each field specific efforts are to be made: politically, the story of coordination needs to be made clear and demonstrated - there are non-zero sum gains to be made and distributed. Socially, more equality will increase the perception of fairness and self-belief, leading to seizing more opportunities like schooling and entrepreneurship, instead of social upheaval. Economically, a stable and optimal distribution of added value, i.e. a fixed wage share more than taxation and whatnot, ensures continued consumption, stable asset prices (!), and hence real, global growth. Failure to convince the relevant actors of what needs to be done on one of the three fields will necessarily also leads to a collapse in the other. We are well on our way to realize such a catastrophe and get trampled by the elephant we do not see.

België uit de crisis

De VS en Duitsland kwamen het snelst uit de crisis, maar ook de Belgische economie kwam in 2016 opnieuw op het niveau van 2008 (zie grafiek BBP per capita). Nederland haalt het piekniveau van 2008 nog niet terug, maar heeft samen met de VS een beduidend hogere productiviteit. Frankrijk en het Verenigd Koninkrijk presteren ondergemiddeld, België en Duitsland zijn naar elkaar toegegroeid en zitten in 2015 op hetzelfde niveau.