Some good points being made in here. I’ll summarise my thoughts (though I could rant on this all day so it’s quite long).
The world faces a population crisis in our lifetime and it’s not the one people thought would happen. Everybody assumed global population would keep growing, outstripping resource availability. This will not happen on a macro level, we will hit peak population before 2100, latest estimates suggest 10.5B but it’s already slowing. The financial system is predicated on generating a social safety net which gradually improves over time through the availability of an increasing number of workers.
Japan is probably the first country to hit this problem. Its ageing population means that its pool of workers is only twice the size of its retirees. Europe is 3.4x according to this:
IMF.
There are things you can do to ameliorate the situation:
> increase immigrant labour
> increase retirement age
> facilitate an increase in the number of adults available to work
> improve people’s ability to save privately
> make retirement benefits less generous
It’s safe to say our government is relying heavily on the first two.
I think this is very much a slapdash bandage that creates as many problems as it solves. Firstly, we’re not the only country in this situation and eventually cheap migrant labour is going to become harder to acquire. This also doesn’t even speak to the ethics of bringing in foreigners so you can pay them less.
I’m of the opinion we need to focus on three, four and five. Because there’s a world where the impacts of these initiatives on society offset each other. What do I mean by that?
While technology has made lives easier, stymieing people from complaining as much as they naturally would - purchasing power for the average wage in this country is worse than it’s been for a very long time. It’s no longer feasible to run a household on one income, nor get on the housing ladder with one income. This is by design as it brings more women into the workforce thus theoretically creating more workers. The problem I think with that is that it’s disregarding human psychology, people don’t just stop working because they can. The vast majority (including women) want to work and do something fulfilling. So all they’ve achieved is bringing in fractionally more workers over time that might have come in anyway but the offset is that more people are reliant on welfare even when working and they all have a lower purchasing power, very little discretionary saving and in many cases a lower quality of life.
Then there’s the problem that somebody stated above, people who could work but frankly don’t see the point because they don’t see the kinds of benefits that a working man might have garnered 40 years ago. Like being able to rent or buy a place, own a car or even start a family. I think these people are fewer in number than we’re led to believe but they definitely exist.
So what do we do? I think frankly, we’re never going to, in the short term, totally relinquish the need for imported labour. But this shouldn’t be the only card we’re playing because that’s foolish and short-sighted. Businesses need to pay people more, is the bottom line. I’d like to see hikes in minimum wage of course but another thing I’d like to see more of is profit-sharing initiatives where employees have as much skin in the game as shareholders. The government badly needs to make the idea of working worthwhile again because this will increasingly become a problem.
Now businesses won’t like this idea obviously, which is why there would be a huge amount of political opposition to such an initiative. They would cite the need to cut staff. I’d call their bluff on this as it has been said before and never conclusively happened. Improving the purchasing power of every individual in the country should lead to increasing business and consumption.
Then there’s other things you can do to bulk the public purse to allow for things like better retirement benefits and training and education. In the “golden age” that many older folks harken back to - the 50s and 60s - the highest rate of tax was 90%. That seems to have just been removed from the public conscious. I’m not suggesting we go back to 90% but it can definitely be increased. People will say if you bring this back then high net worth individuals will move money overseas. And yes that is true, some would, which brings me to my final point. We need to have a coordinated global effort on tax to eradicate this argument. This is already happening in small waves through the OECD. Taxes should be paid in the country where the income was generated. This is slightly over simplistic of course but this should be the principle we strive for.
If you improve the public purse and strengthen people’s purchasing power then you get more discretionary savings, you can stop increasing the retirement age, and you should also bring new people into the workforce (including the retired who might see it as worthwhile to keep working longer). The downside is you may need to make public pensions worse, maybe by making them means tested in some way or disposing of the triple lock which I think is a totally unsustainable policy. But if enough people have private savings this is less of an issue.
To sum all that up. I think we are in the middle of a train crash happening in slow motion and it is going to require radical new long-term ways of doing things to prevent it from happening. Importing cheap labour is frankly not it but it’s what we rely on because we have a dearth of political leadership at the moment capable of actually solving these issues.