A big take-away for entrepreneurs in the developed world is the rapidly aging nature of our population - and the opportunities that may exist because of it.
The huge glut of baby-boomers retiring (while there are much fewer young people to support them/their institutions) is going to strain lots of existing systems (healthcare, retirement stuff, pensions, etc) - seems like a big opportunity for 'grey-power' software / tools.
Importantly, these upcoming retirees have at least a bit of fluency with software (compared to a generation ago), and at could least handle iPad-like tools (touch, big buttons, etc).
I mean, look at Canada's "pyramid" (http://populationpyramid.net/Canada/2010/) - a society with that kind of shifting demographic will need all kinds of new tools to help deal with the added strains.
Personally, I think the biggest change with technology and aging is that nursing homes and old age in general are going to get a lot less scary.
I haven't visited a nursing home in a couple of years, but the last time I was there it seemed like a depressing end of life inevitability. The world of the elderly slowly shrinks as they wait for death, as their children have less and less time and will to visit them, as their friends slowly become too infirm to visit them or eventually die, as they themselves become too weak to continue to lead their lives.
But for the younger generations, we have two worlds: "real life", and the internet. As our "real lives" slowly fade out, I think a significant fraction of us can subsist quite happily in our internet lives. Our last five or ten years in the nursing home might almost in their own way be the happiest of our lives. No commitments, no job, no school, just a room and a computer. Wake up when you feel like it, get on the internet. Chat with your friends and family who can't or won't visit you in the real world; make new friends who would never befriend a homebound 78-year-old in the real world. Argue endlessly on internet forums. Play through games you didn't have time for when you still worked and went outside. Maybe contribute to open source software, now that you finally have the time. Who knows -- maybe the 22nd century will run on Open Source Software (written in Java, Python, and other archaic 21st century programming languages) by a bunch of retirees with all the time in the world and 50 years of real programming experience. You may achieve more lasting fame and satisfaction after you retire than before.
Even without any new technology, medicine, or whatever, I think the increasing comfort with technology will already drastically improve the lives of the next generation to grow old.
I asssumed they'd be more scary. With a smaller labor pool, and a larger demand (as people live longer), the cost will go up, outstripping savings long before the need for care ends.
Eh, I'm not worried about demographics in my lifetime.
The birthrate declines in industrialized nations are only a problem if you're an optimistic xenophobe and imagine that borders are going to stay shut. The younger end of the workforce in industrialized nations will be taken over by immigrants from countries with exploding birthrates like Africa or India, and the dreaded population implosion won't happen.
Maybe another N decades later once countries with exploding birthrates sort their shit out we might be at risk of an upside-down pyramid, but I think it's just as likely that we'll gradually oscillate around the replacement birthrate until we reach a comfortable steady-state population.
Once we hit steady state population, I think we'll be fine. Assuming we don't back-slide on industrialization (say, if post-peak fossil fuels make everything prohibitively expensive), we're already massively over-supplied on labor. Despite its far-below-replacement birthrates and a hearty helping of xenophobia, Europe's suffering from a demand crisis, not a labor crisis. The US peaked at a 63% employment ratio, pre-crash. I don't have the slightest doubt that we could maintain a pretty nice civilization with an employment ratio of 40%. I wouldn't be surprised if a 25% employment ratio is doable with the right social infrastructure to allocate resources.
As long as there is enough labor, it's all just bizarre math. Say in 2050 the total personal income in the US is $27 trillion in 2012 dollars (2% yearly growth above inflation from today). The population of the US has grown to about 400 million (assuming a 0.9% growth rate, it'd be 437 million, but 400 million is nice and round). With a 25% employment ratio, that $27 trillion gets divided 100 million ways, so the average income in 2050 would be $270,000 in 2012 dollars. Right now the average income is about $70,000.
Now to tax it. Right now the total US government tax revenues are about $5 trillion. We're running a helluva deficit, so let's add another $1 trillion for a balanced budget. Apply the same 2%-above-inflation growth as we did for income, and the US tax revenues in 2050 should be about $12.7 trillion in 2012 dollars. There are also more people on the dole, so let's increase the budget by another 50%, to $19 trillion, and the average tax burden in 2050 is $190,000 / (working) person.
End result, the total tax rate in 2050 is about 70%, compared to a tax rate of about 38% in the US now. After-tax income in 2050 is $80,000 / person, after-tax income in 2012 is $43,000 / person. Productive workers have more after-tax income than they do today, and the unproductive elderly are still comfortably cared for by the government, individual savings or no.
> End result, the total tax rate in 2050 is about 70%, compared to a tax rate of about 38% in the US now.
The average tax rate, the number that matters, is much lower than 38% now.
The US govt has never collected 22% of GDP in taxes, regardless of rates, and that was for only a couple of years. We have managed to sustain 19-20% for significantly longer.
I'm using total government revenue over total personal income as a proxy for the tax rate. That includes some taxes on individuals which are not levied as income taxes, like sales tax, and some which do not fall on individuals directly, like corporate tax.
Regardless, this is a pretty good proxy. The federal numbers alone are $2.5 trillion of the $5.1 trillion dollar total. 2.5 / 13 is 19%, which is the more familiar number for the effective average federal tax rate.
If you live in Taxtopia, the story ends there, but on average if you're a US citizen you're paying another 19% in local, property, and sales taxes, for a total of 38%.
> I'm using total government revenue over total personal income as a proxy for the tax rate.
Which is absurd because about half of US govt income comes from "not personal income tax" sources.
> That includes some taxes ... like sales tax
hold that thought.
> If you live in Taxtopia, the story ends there, but on average if you're a US citizen you're paying another 19% in local, property, and sales taxes, for a total of 38%.
You're double-counting sales taxes....
And, your computation for 70% is missing those local, property, and sales taxes, which puts your number at closer to 90%. (Since those state and local taxes actually pay for a significant fraction of the income assistance that you're advocating, it's curious that you think that they'd go away.)
However, your 19% "other" is also high.
The highest sales tax is over 9% but most states are considerably less. However, sales tax only applies to post-tax income and doesn't apply to all purchases. For example, it typically excludes food and housing, which is 20-30% for most people. Higher income folks spend a smaller fraction of their income on food&housing, but they more than make up for that by spending their money on other things that aren't sales-taxed. As a result, sales tax as a fraction of income is at most 5%.
The highest state&local income tax marginal rates may be 15%, but typical is closer to 5%.
Do you really think that the average property tax burden is anywhere near 9%? (I'm very property-heavy and my property taxes are less than 5% of my income.)
Note that a significant fraction of the property taxes are paid from income that you excluded above, namely biz income.
I'm going to step back and try a different angle, because a certain fraction of my numbers are indefensible, as you pointed out above.
In the post above that started all this, I made two basic claims.
1. The inverted population pyramid (a mountain of elderly supported on a tiny point of young, productive workers) was unlikely to happen because of immigration.
2. Even if we did end up with an inverted population pyramid, it probably wouldn't matter.
To support #2, I relied upon the following assumption, which was hidden in my numbers:
2a. The US GDP will continue to grow, even with a reduced workforce.
#2a is really the taken-for-faith axiom at the heart of my argument. If the US GDP increases faster than population, then the per-capita income will always increase as well, even if the employment-population ratio plummets. If the per-capita income increases, then the standard of living increases for everyone, employed or unemployed. In the end, that is what separates a utopian future from a dystopian future. All the rest of my numbers were just me playing with the math to see how the redistribution might look. They don't do anything to prove #2a.
Now, since it's bad form to abandon an argument in progress, I'll try to defend my math a little, or at least extend it where it is lacking.
I am seeing three basic arguments in your post:
1. A claim that I am double-counting sales tax.
2. A rejection of the way I just lumped business taxes in with personal income taxes.
3. A claim that I am not counting non-federal taxes in the 2050 tax rate.
First, all of my numbers are coming from http://www.usgovernmentrevenue.com/, for 2012. I have two additional numbers to enter into record, $13 trillion (total US personal income) and $15 trillion (US GDP).
Regarding sales tax, I merely phrased things poorly. The first mention, I was using sales tax as an example of something which is not considered an income tax but most certainly comes out of person income. The second mention, I was using sales tax as an example of something not levied at a federal level. My $5.1 trillion number is someone else's total, so I at least did not double count anything going into it.
Regarding personal versus business taxes, this is a very legitimate criticism. The best argument I could make is that the burden of business taxes ultimately fall on individuals, either the customers or on the owners and employees. This isn't quite sufficient: while business taxes which fall upon customers are ultimately paid out of their already reported personal income, but the business taxes which fall upon owners and employees come out of money which is never reported as personal income. This would make the tax rate $5.1 trillion / ($13 trillion + $X), where $X is the subset of taxes which are paid by businesses.
I am going to make the claim that $13 trillion + $X is roughly $15 trillion, the US GDP. From one angle, it makes sense. The US GDP is $15 trillion, the US gov't takes $2 trillion off the top in corporate income taxes, property taxes paid by business, the employer contribution to payroll taxes, and other business taxes, and the other $13 trillion ends up as personal income. From another angle, eyeballing the breakdown of taxes (income, payroll, ad-valorem, fees, business) it looks like something like $1.5-$2.5 trillion are paid by business instead of individuals.
So taking the tax base to be the GDP instead of the total personal income, taxes right now are 33% (5.1 / 15) of the US GDP. Taxes paid by individuals are 23.8% (3.1 / 13). Average post-tax income is $53,000 (76% * $70,000).
In the future I described, the US GDP (2% growth) is $31.8 trillion. Total US tax revenue is still $19 trillion. Taxes are then 60% of the US GDP. Business taxes are $4.8 trillion (US GDP - payroll, 31.8 - 27), so personal taxes are $14.2 trillion dollars. Taxes paid by individuals in 2050 are 52.6%. Average post-tax income is $128,000 in 2050 (47.4% * $270,000).
So shifting taxes from individuals to businesses makes the future even brighter than previously described: personal post-tax income is now more than double 2012, instead of nearly double.
Regarding state and local taxes in 2050, they are included in the $19 trillion figure. I started with the $5.1 trillion 2012 figure and grew from there. Since the 2012 figure included state and local taxes, the 2050 figure does as well.
> If the US GDP increases faster than population, then the per-capita income will always increase as well, even if the employment-population ratio plummets.
Yes, but irrelevant because GDP is not produced by non-workers, it's produced by workers.
GDP is #workers * output per worker. If the former decreases more than the latter increases, GDP goes down. Even if GDP goes up, GDP per capita can go down.
Suppose we start with 100% workers and then double the population while keeping the number of workers constant AND making them 25% more productive. The result is 25% more GDP but less GDP per person because there are twice as many people.
> Regarding state and local taxes in 2050, they are included in the $19 trillion figure.
In other words, they're part of the 19%. Which means that the current average rate is no where near 38%.
You're claiming that nearly doubling the average tax burden will have no effect. I'm pointing out that you're actually proposing something closer to 3.5x.
Even if we assume that you're correct, why do you think that Americans will pay those taxes? Note that your "the numbers work for the economy as a whole" argument is irrelevant to what an individual does.
The Clinton welfare reforms as well as current experience with unemployment benefits shows that legal employment is sensitive to fairly small amounts of money. How likely is it that it's insensitive to large amounts of money?
Yes, an interesting fraction of folks will go off book. They'll contribute to GDP but they won't be paying taxes. So, you'll need even higher rates on the "taxed GDP" which will push more folks off the book.
Yes, I realize that you're claiming that the remaining workers will have more after-tax than they have today but that's not how people think. High tax rates make evasion more profitable and generous payments to non-workers make not working more attractive.
Speaking of tax rates, the economist claims that the median federal tax rate, including all payroll taxes, is 11%. Yes, median is not average, but the relevant question is how individuals respond to the proposed 70% tax rate.
Also, note that some jobs don't scale much regardless of technology. To significantly reduce employment, work that doesn't scale places huge reqts on work that does.
"Importantly, these upcoming retirees have at least a bit of fluency with software (compared to a generation ago), and at could least handle iPad-like tools (touch, big buttons,
etc)."
I think this is the most patronizing, biased, and ignorant statement I've ever read on Hacker News.
I think that his statements were matter of fact and mostly true. While the baby boomers do know how to use computers and can handle their own for the most part. I'd also say that the knowledge gained by growing up with those tools just isn't there. It doesn't seem as intuitive to them.
I think that a chart like this would show a similar trend if it was geared toward exposure to computers and aptitude.
Now this is just a hypothesis based on data that I've seen and I'd be open to a study that shows the opposite.
Also, big buttons are just a logical step, I know that my dad loves anything with big buttons because it doesn't strain his eyes or take as steady a hand. And some day I'm going to want the same thing.
Assuming that age doesn't affect our ability to see and interact with tools it just ridiculous. Hacker News is not a place for people to bury their heads in the sand.
Apologies, I didn't mean it to be patronizing (which I suppose just makes it that much more so).
My point is that most people I've come across in my grandparent's generation can barely use a computer without significant coaching/training. Maybe there are troves of people over the age of 70 out there with astounding computer literacy, but I don't think this is that controversial of a statement.
For my parent's generation, it seems that the majority of them have basic fluency (can browse the internet, use office applications, email, etc).
Tablets start looking like a great alternative as people age. They are portable, have simpler/more intuitive UI (both thanks to touch and because the apps are more constrained), easier to maintain (less to screw up), etc.
The huge glut of baby-boomers retiring (while there are much fewer young people to support them/their institutions) is going to strain lots of existing systems (healthcare, retirement stuff, pensions, etc) - seems like a big opportunity for 'grey-power' software / tools.
Importantly, these upcoming retirees have at least a bit of fluency with software (compared to a generation ago), and at could least handle iPad-like tools (touch, big buttons, etc).
I mean, look at Canada's "pyramid" (http://populationpyramid.net/Canada/2010/) - a society with that kind of shifting demographic will need all kinds of new tools to help deal with the added strains.