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It is a truism that Western economies face a demographic problem: more older people and fewer working-age people will mean a higher dependency ratio. This future problem, we are told, requires action now, Now, NOW! We must prepare for the future by raising the retirement age and reducing superannuation payments.

Except that the future is already here, and no one has pushed the panic button.

Brad DeLong gives us the US statistics:

The employment-to-population ratio has fallen in the US. Therefore, the number of people being supported by each employed person has increased. While this is not an increase in the dependency ratio (which is defined by age cohorts), it has the same effect: fewer workers supporting more people. And yet, I’m not hearing the same urgency, the same concern to move heaven and earth to solve the actually existing problem.

I had a look at the NZ statistics, to see how we compare (courtesy of StatsNZ’s Infoshare). I can’t swear to have this exactly right, but this is what I found:

I calculated the proportion of adults employed as (all employed, seasonally adjusted) divided by (people aged 15+), and labour force participation as (all employed + registered job seekers) divided by (people aged 15+). The proportion of adults employed has, indeed fallen by 2 percentage points since 2008. Meanwhile, labour force participation has actually increased. That is, we have people ready and willing to go to work, but we aren’t using them.

Having fewer people employed to support our population is a concern for the future. However, it is also a problem now.


The Government’s new energy policy was released, apparently by accident. Groups and businesses involved in the energy sector have already started commenting on it.

As a general picture of New Zealand’s energy future, the summary on pages 6 and 7 is pretty good. There is a solid economic framework underneath. For example, it includes both supply and demand factors. On the supply side, nearly every source of energy gets a mention (nuclear energy is absent). On the demand side, the policy mentions new technologies to help consumers manage their energy costs. The idea of assessing marginal impacts almost makes it, such as in this passage: ‘Oil is used efficiently and where it is most highly valued.’ Technological growth is given its due, too, with a nod to ‘continuous improvements in energy efficiency’.

Reading just these two pages, you get a sense that there is a lot to think about. Our modern economy is based on cheap energy. An illuminating example is Nordhaus’s research on the historical price of lighting. The amount of lighting one could obtain with 5 hours of labour in 1800, had become nearly too cheap to measure in 1992. If the energy era truly is ending, what does that mean for our economy?

On the other hand, the report also shies away from fully facing up to the potential conflicts. Early the report, we are told that ‘the government is interested in pursuing energy initiatives that have both an economic benefit and a positive overall effect on the environment’. This is a clear statement of non-satiation: we would like to have more of everything. But economics tells us that we also need to consider our budget constraint. It’s when we have to give up some of one good to have more of another that things get interesting.