nep-age New Economics Papers
on Economics of Ageing
Issue of 2012‒04‒10
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. How Can Employers Encourage Young Workers to Save for Retirement? By Nicole Votolato Montgomery; Lisa R. Szykman; Julie R. Agnew
  2. Children, support in old age and social insurance in rural China By Zhang, Chuanchuan
  3. Does a Bad Start Lead to a Bad Finish in Japan? By Takayama, Noriyuki; Shiraishi, Kousuke
  4. Is There “Too Much” Inequality in Health Spending Across Income Groups? By Laurence Ales; Roozbeh Hosseini; Larry E. Jones
  5. The Rise of Financial Fraud By Kimberly Blanton
  6. Low-wage Workers Are Older and Better Educated than Ever By John Schmitt; Janelle Jones
  7. Intergenerational Transfers and Asset Inequality in Japan: Empirical Evidence from New Survey Data By Hamaaki, Junya; Hori, Masahiro; Murata, Keiko

  1. By: Nicole Votolato Montgomery; Lisa R. Szykman; Julie R. Agnew
    Abstract: Workers under age 35 have the lowest 401(k) participation of any age group. Failing to save for retirement at a young age means missing out on compounded investment earnings that can substantially ease the burden of building a nest egg. The reasons young workers save less for retirement range from college loan repayments and low starting salaries to a desire to save for a house. Another reason is deeply rooted in psychology: when an event such as retirement is far from the future, people tend to distance themselves from it and think about it abstractly. In visual terms, it is more difficult to see the details of a photograph when one is far away - just as it is difficult for young adults to perceive old age. It will become more concrete only as they move closer. For young workers, then, retirement security lacks the urgency older workers feel. This brief reflects preliminary results from research positing that young adults' distance to retirement may discourage them from saving, and it tests what types of communication tactics might be most effective in promoting saving.
    Date: 2012–03
  2. By: Zhang, Chuanchuan
    Abstract: Most people in rural China have no plans for retirement other than the ingrained Chinese tradition that children care for old parents. Actually there are also no sources of social support such as social old-age insurance to rely on in rural people’ old age for a long time in China. In 1992, a social old-age insurance program, rural pension program, was initiated by the Chinese government to firstly establish a social security system in China’s rural area. The rural pension program experienced rapid development in the beginning years but grounded to halt after 1998. Since either children or pension program provides support for elderly, we expected that these two can be viewed as substitutes to some extent. Using data from China’s 2005 mini-census, we find that rural people who have at least one son are less likely to participate in pension program and each additional son and daughter both decreases their participation rate. Moreover, the effect of an additional son is much larger than that of an additional daughter. In addition, both evidence from mini-census and China Health and Retirement Longitudinal Study show that peasants accessing to pension are less likely to rely on their children for support in old age. These findings suggest that demand for children, especially for sons are partly driven by concerns relating to care in old age; children and formal social old-age insurance are substitutes for support in old age. We then expect that implementation of social old-age insurance may mitigate rural people’ demand for children, especially sons and thus correct China’s severe sex ratio bias to some extent. We test this hypothesis using the difference-in-differences strategy, and find that increase of sex ratio at the region level slowed down after the implementation of the rural pension program. Overall, our empirical analysis in this paper implies that sex ratio bias is partly due to demanding for sons for support in old age and carrying out social old-age insurance in rural China are helpful in mitigating demand for children and correcting sex ratio bias.
    Keywords: children; rural pension; sex ratio
    JEL: I12 J38 I38
    Date: 2011
  3. By: Takayama, Noriyuki; Shiraishi, Kousuke
    Abstract: There has been a growing concern about “Bad Start, Bad Finish (BS/BF)” issues in European countries for the last decade. Many young persons make a bad start to their working career and remain as atypical workers for long periods, being anticipated to reach retirement age with inadequate social security pension benefits. What about the case of Japan? In this paper, we discuss whether the BS/BF problem is as serious in Japan. The data set used is the 2011 Longitudinal Survey on Employment and Fertility (LOSEF): An Internet Version. The survey represents a sample of 3893 individuals aged 30-49 (born between November 1961 and October 1981). It contains long-term retrospective panel data of around 160,000 observations transcribed from the special Social Security Statements (the Japanese version of “Orange Letter”) issued by the Social Insurance Agency in fiscal 2009. Our provisional findings in this paper confirm that the BS/BF issue is currently as serious in Japan as in European countries. For young workers of the current generation, the proportions of BS have been increasing up to around 40% (females) and 32% (males) respectively, and the BF risk for current young BS persons will be around 90% (females) and a little more than 50% (males) respectively. Their incidence of poverty after retirement is likely to become quite problematic.
    Date: 2012–03
  4. By: Laurence Ales; Roozbeh Hosseini; Larry E. Jones
    Abstract: In this paper we study the efficient allocation of health resources across individuals. We focus on the relation between health resources and income (taken as a proxy for productivity). In particular we determine the efficient level of the health care social safety net for the indigent. We assume that individuals have different life cycle profiles of productivity. Health care increases survival probability. We adopt the classical approach of welfare economics by considering how a central planner with an egalitarian (ex-ante) perspective would allocate resources. We show that, under the efficient allocation, health care spending increases with labor productivity, but only during the working years. Post retirement, everyone would get the same health care. Quantitatively, we find that the amount of inequality across the income distribution in the data is larger that what would be justified solely on the basis of production efficiency, but not drastically so. As a rough summary, in U.S. data top to bottom spending ratios are about 1.5 for most of the life cycle. Efficiency implies a decline from about 2 (at age 25) to 1 at retirement. We find larger inefficiencies in the lower part of the income distribution and in post retirement ages.
    JEL: H4 H51 I18 I38
    Date: 2012–03
  5. By: Kimberly Blanton
    Abstract: Individuals save for decades to ensure that they will have financial security in retirement. That security can be threatened or eliminated virtually overnight if an individual who is in or near retirement becomes the victim of a financial fraud, such as a Ponzi scheme or sham investment in high-yield securities. Fueled by the Internet, the incidence of financial fraud is on the rise. Law enforcement officials and fraud experts expect the trend to continue or accelerate as aging baby boomers increasingly become targets. According to the Federal Trade Commission (FTC), Americans in 2010 submitted more than 1 million complaints about financial and other fraud – up 35 percent in just three years. But these data do not fully represent fraud’s pervasiveness, because researchers say that it often goes unreported to the authorities...
    Date: 2012–02
  6. By: John Schmitt; Janelle Jones
    Abstract: Relative to any of the most common benchmarks – the cost of living, the wages of the average worker, or average productivity levels – the current federal minimum wage of $7.25 per hour is well below its historical value. These usual reference points, however, understate the true erosion in the minimum wage in recent decades because the average low-wage worker today is both older and much better educated than the average low-wage worker was in the past.
    Keywords: minimum wage, low-wage, education, age
    JEL: J J3 J31 J1 J11
    Date: 2012–04
  7. By: Hamaaki, Junya; Hori, Masahiro; Murata, Keiko
    Abstract: This paper tries to quantitatively examine the impact of intergenerational transfers on asset inequality among Japanese households. For that purpose, we estimate an intergenerational asset transfer function with various control variables, using a unique micro dataset taken from the “Household Survey on Family Relationships, Employment, Retirement Payments, and Intergenerational Transfers of Assets and Education,” conducted by the Economic and Social Research Institute, Cabinet Office, Government of Japan. Employing three different models - a Tobit model, an interval regression model, and an ordered probit model - to ensure that our results are independent of the specific econometric approach used, we examine whether asset transfers received are correlated with households’ financial strength. We find that higher income households are likely to receive larger asset transfers. However, the contribution of intergenerational transfers to asset inequality appears to be quantitatively limited when measuring financial strength in terms of households’ life cycle wealth.
    Keywords: Intergenerational transfers, Asset inequality, Japan
    JEL: D12 D91 E21
    Date: 2012–03

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