Two notions seem to have received much attention in the media over the past few years:
- If baby boomers give up their jobs, it will make it very easy for the Gen Y to get those vacant jobs and help the economy
- When baby boomers retire in hordes over this decade and the next, it will cause insurmountable burden on the economy to pay for their retirement and health care costs (http://blogs.wsj.com/economics/2010/03/22/will-retiring-boomers-lead-to-too-many-open-jobs-by-2018/)
The inherent contradiction in these two notions should give you an idea that something is not quite right about this entire debate.
In fact, while people with no understanding of economic theory sway from one end of the pendulum to another, they forget the one cardinal truth of economy: jobs are to be created. They’re not a static quantity that can exist only in finite numbers and needs to be exchanged.
The only way for everyone to have jobs is to have an economic environment that fosters creation of new jobs. The only way new jobs can be created is if the market allows people to create new businesses that hire more people. The only way new businesses will be created is if wealthy people are encouraged to invest their surplus income in the market, so that it can go towards funding fledgling start ups. Rather than being blamed for taking too big a slice of the pie, they need to be left free to spend the money as they see fit.
Only someone naive or ignorant about basic economics would think of such a thing as “hoarding” wealth. If the rich are not spending their money, it is sitting in their assets such as stocks, bonds, savings accounts, etc. This means that this money is going back to the market. When they buy stocks, it gets invested in the company whose stocks they purchase. Similarly, banks use a part of the savings for investments of their own for greater returns.
Whenever investment is made towards productive activity across the country, people get benefits indirectly in the form of improving markets and increasing businesses, which increases the number of jobs that are available.
None of this knowledge requires wading through pages of research. It is basic economic logic.
On the other hand, there are a few situations when money doesn’t go towards productive use, such as this one: when government takes it away from people so it can “redistribute” that wealth.
Here’s an example of such redistribution: you have $10,000 you can give to the government so it can provide food for, say, 40 poor people for ten days. Or you can invest it in a business that will ultimately employ 40 people and help them pay for their own lives for the coming decades. That’s the difference between the way the government spends its money and the way the free market does.
In fact, when people are allowed to keep more of their income, it results in they spending more money helping their neighbours, because the productive use of money creates even more wealth — yes, wealth is created too, it is not some static “pie” in the sky from which some people take bigger slices than others — and leaves them with more money for charitable donations.
Here’s an excerpt from a report: Americans gave more than $290.89 billion to their favourite causes despite the economic conditions. Total giving, when adjusted for inflation, was up 3.8 percent in 2010. (http://www.nps.gov/partnerships/fundraising_individuals_statistics.htm)
In a country of approximately 300 million, $300 billion were donated. And in that same year, there were around 40 million poor people in the country (http://news.yahoo.com/revised-govt-formula-shows-poverty-high-49-1m-135427317.html). That means, just individual charity accounted for more than $7,500 donated per poor person in 2010. This was after the government took away more than 30% of people’s incomes in taxation. If even half of that money remained with people, it would not only leave more than adequate funds required to maintain the legitimate functions of the government, but also leave people with billions of dollars to create more jobs and donate to even more charitable causes.
Seeing those statistics, I’m amazed how people don’t see the irony of supporting socialistic principles for the “greater good” of humanity because they apparently can’t trust that very humanity to do enough good things without coercion.
Coming back to the point of jobs and wealth: once again, these are things to be created, not taken from one group to give to another.
From a moral perspective on the baby boomer debate, how can people stand the thought that they need to ask the older people to let go of their livelihood for the young people’s sake? Especially after the baby boomer generation has done the following already:
- Created nearly five decades of explosive economic growth
- Practically paid the entire cost of educating the Gen Y up to their high school years
- Paid for most of the health care cost of the Gen Y for 30 years
They’re probably tired now of pulling the weight of the entire country on their shoulders, and legitimately so. Perhaps it’s time we leave them alone and focus on some real issues that are preventing the growth of the economy. After all, governments in Canada and many other developed nations are encouraging immigration of highly skilled foreign labourers. If there really were no jobs, why would they ask more foreigners to come to their markets and work?
To wind things up, here is some more food for thought: at the root of every successful economy lie people who ventured into unknown lands with nothing to own but a strong desire to succeed. America was built on the labour of immigrants who travelled for months, arrived at an unknown land, learned a new language, and didn’t stop until they achieved the success they deserved. If someone isn’t willing to make even half of those efforts in search of a good career today, isn’t there something seriously wrong with some of the ideas they’ve been taught?