Arnold Kling  

Three P's of Growth

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Steven Kirchner points to a speech by Australian Secretary to the Treasury Ken Henry on the topic of the determinants of growth.

Henry decomposes output per capita into output per hour worked times hours worked per working-age person times the proportion of working-aged people in the population. He calls these factors the three P's: productivity, participation, and population.

One of his main points is that Australia is suffering from weak participation relative to Japan, with the difference offset and disguised by demographic shifts.


Australia's total participation rate is higher than Japan's. But if you look at the age-specific participation rates you can see that in every age cohort, the Japanese participation rate is higher than ours. And at ages 55 and over the gaps are very large.

I would caution that for some of the P's, particularly productivity, one can get somewhat different cross-country comparisons using just the latter half of the 1990's as the time period of analysis, rather than using the 1990's as a whole.

For Discussion. As populations age, will countries need to consider raising the retirement age in order to maintain growth in GDP per capita?


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COMMENTS (3 to date)
David Thomson writes:

I have consistently argued that governments will indeed have to continue raising the retirement age. After all, we live far longer today than was expected when these programs were originally conceived. Let us not forget that the average American man died at about 45 in 1900. We now have the bizarre situation where many folks will receive retirement benefits longer than they actually worked!

Alas, I must return to the awkward earlier point that this discussion primarily revolves around blue collars. Well educated professionals rarely, if ever, really retire. It is the factory worker with limited skills who ceases to contribute after they reach retirement age.

David Thomson writes:

The great Mideast scholar Bernard Lewis is currently about 87 years old. He formally “retired” in 1986 from Princeton University:

http://www.princeton.edu/~nes/profiles/Lewis.htm

Just a few months ago, this scholar released another book, “The Crisis of Islam: Holy War and Unholy Terror.” Lewis is the quintessential example of a white collar professional who did not simply retire and go off to pasture to die.

Mark Bahner writes:

"Let us not forget that the average American man died at about 45 in 1900. We now have the bizarre situation where many folks will receive retirement benefits longer than they actually worked!"

I don't think that's true. Or more accurately, I think that's true ONLY because so many boys died in infancy or childhood in 1900.

A typical person, aged 45 in 1901 could expect to live to 70 (from It's Getting Better All the Time, Simon and Moore).

But it's definitely true that people who retire at 65 now typically live much, much longer than just to 70. Today's number was also in the book by Simon and Moore, but I forget what it was.

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