Climate Change Conferences Wraps Up in South Africa

For the past two weeks, representatives from virtually all countries have been meeting in Durban, South Africa, at a UN-sponsored conference on climate change, as I had previously mentioned. The Associated Press reports that it appears tonight that a last-minute agreement has been reached:

The 194-party conference agreed to start negotiations on a new accord that would put all countries under the same legal regime to enforce their commitments to control greenhouse gases. It would take effect by 2020 at the latest.
Currently, only industrial countries have legally binding emissions targets under the 1997 Kyoto Protocol. Those commitments expire next year, but they will be extended for another five years under the accord adopted Sunday.

Now, to be sure, agreeing to "start negotiations" may not sound like much progress, but it is better than the nothing that at one point appeared to be forthcoming. In particular, it seems that the US was less obstructionist in the end than had been expected.

After weeks of being accused of obstructionism and delay, U.S. climate envoy Todd Stern voiced surprisingly strong support for the deal.
"This is a very significant package. None of us likes everything in it. Believe me, there is plenty the United States is not thrilled about," Stern said. But the package captured important advances that would be undone if it is rejected.

New Twists on Income Inequality by Race in America

The Census Bureau has been releasing data from the American Community Survey and one of the recent analyses points to the impact of higher income blacks leaving inner cities for the suburbs, including those in southern states. The Associate Press reports that:

Affluent black Americans who are leaving industrial cities for the suburbs and the South are shifting traditional lines between rich and poor, according to new census data. Their migration is widening the income gap between whites and the inner-city blacks who remain behind, while making blacks less monolithic as a group and subject to greater income disparities.
"Reverse migration is changing the South and its race relations," said Roderick Harrison, a Howard University sociologist and former chief of racial statistics at the Census Bureau.

The less well-educated are being left behind in the inner city, creating greater disparities there, at the same time that income inequality in general in the United States has been widening.

The typical white person last year earned income roughly 1.7 times higher than that of blacks, the widest ratio since the 1990s. Census figures released Thursday show that cities such as Detroit, Chicago, Philadelphia, Cleveland and Milwaukee in particular saw increases in inequality, hurt by an exodus of middle-class minorities while lower-skilled blacks stayed in the cities.
Low-income blacks also slipped further behind. The share of black households ranking among the poorest poor — those earning less than $15,000 — climbed from 20 percent to 26 percent over the past decade; other race and ethnic groups posted smaller increases. At the same time, African-Americans making $200,000 or more a year were unchanged from 2000 at about 1.1 percent, even after a deep recession.

William H. Frey, a Brookings Institution demographer who did a broad analysis of the race and income data, said the latest numbers reflect a longer-term trend of increased racial integration between blacks and whites. He said the changes could pose challenges in the coming months in political redistricting as well as courting the traditional black vote.

This is yet another example of the idea that the future is a foreign country--change is afoot in many ways.

China's Fertility Levels May Be Lower Than Previously Reported

Two Chinese demographers have just completed an analysis of the 2010 Census data in China and have concluded that fertility has been lower than either the Chinese government or the United Nations (which tends to rely on government estimates) has been reporting. Zhongwei Zhao (of Australian National University) and Wei Chen (of People's University in China) published their findings in the online journal Demographic Research.

China’s recent fertility levels are likely to have been significantly lower than those claimed by the government, and those estimated by the UN Population Division for the periods 1995-2000, 2000- 2005, and 2005-2010, published in World Population Prospects, the 2010 Revision. Therefore the population projection results reported by either the Chinese government or the UN Population Division may not accurately represent China’s actual demographic situation, and thus might not provide a reliable basis for developing long- term socio-economic plans for the country.

In particular, if the census data are accurate, the young population in China is smaller than previously estimated and this will have the effect of aging the population even more quickly than previously anticipated.

According to our projection the Chinese population will reach 1.36 billion in 2025, approximately 1.34 billion in 2033, and 1.24 billion in 2050. The working-age population will be about 985 million in 2016 and 742 million in 2050. The proportion of people aged 65 and over will be more than 12% in 2020 and reach 27% in 2050. Our projected old-age dependency ratios are also higher than those projected by the UN Population Division.

As the authors note, this smaller working age population and more rapid increase in the fraction of the population that is older will have significant impacts on planning for the future. Furthermore, the UN projections assume that fertility will eventually return to replacement level, but the authors note that throughout East Asia the below-replacement level of fertility seems to have settled in as the social norm. Overall, then, the demography of China seems to be changing more quickly and dramatically than most people thought.

Demographic Winter in Greece

[Guest posting by Philip Elder of San Diego State University]:

The consequences of Greece’s current debt situation best be framed in a simple demographic analysis. Greece currently contains a population of about 11 million, 20% of which is over 65 (well above retirement age). Early retirement is set at age 50 for women and 55 for men--this is reserved for “hazardous” job holders. This adjective is applied to 580 job categories, ranging from those characterized by real hazards (mining, SWAT team) to those that are… somewhat less dangerous (hairdressers, wind instrument musicians, TV and radio broadcasters). On top of that, workers in the public sector--25% of the working population--can retire after 35 years of service with 80% salary, which in some cases means around the age of 55. Therefore, the average age of retirement in Greece is 61, and the average employee enjoys around a 96% pension which, given an average PPP-framed salary of $32,000, results in roughly $30,700 in pensions, per retiree, per year.

Because of a combination of high life expectancy (79 years average) and low birth rates of the region, partly caused by urbanization and partly by bizarre governmental incentives not to marry (if a woman marries, she loses her family’s pension) the population pyramid of Greece is projected to turn upside-down by 2050. Currently, 20% of the population is of retirement age and there are 1.7 workers per pensioner. If the trend continues unaltered, by 2050 as much as 40% of the entire population will be eligible for retirement, meaning that every employed Greek will be responsible for taking care of himself, his family and as many as two retired citizens.

All of this leads to one word: debt. With a capital D. Greece’s debt is currently 125% of its GDP, placing it at the head of the PIGS (Portugal, Italy/Ireland, Greece, Spain), or the aptly-named bloated economies that serve as the leading cause of migraines and heart failure for German and French political leaders.  To recover from this mess, the EU is installing austerity packages--cutting salaries (33% of the entire public wage bill), retirement funds and social benefits that have ballooned out of control by a century of favor-buying on a national scale. However, these packages have already led to 200,000 lost jobs, with another estimated 150,000 to be cut by 2015. Greece could suffer from as much as a 20% unemployment rate, with few natural resources and an unstable shell of a service economy.  When coupled with its incoming demographic winter, a very, very grim picture is painted of the future of the fount of Democracy.

The Demographics of Cutting (or Not) the Payroll Tax

Congress is currently debating an extension of a payroll tax "holiday" which, during the past year, had lowered the contributions that US workers have paid into Social Security. This was an idea put forward by President Obama's Deficit Reduction Commission, which issued its report a year ago. It was, unfortunately, one of the few items from that report that the Obama administration embraced. I'm in favor of lower taxes on me, but, as the Deficit Reduction Commission noted, we are in troubled times:

Over the long run, as the baby boomers retire and health care costs continue to grow, the situation will become far worse. By 2025 revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity – from national defense and homeland security to transportation and energy – will have to be paid for with borrowed money. Debt held by the public will outstrip the entire American economy, growing to as much as 185 percent of GDP by 2035. Interest on the debt could rise to nearly $1 trillion by 2020. These mandatory payments – which buy absolutely no goods or services – will squeeze out funding for all other priorities.

The Census Bureau emphasized the demographics of this problem a few days ago, as they reported on the latest news about aging in America--as I discussed here. So, the truth is that we are less in need of a "holiday" than we are in need of a dose of reality. For the next decade or so, we are all going to have to bail ourselves out with more tax revenue at the same time that we figure out ways to save money. We have to do both. The Deficit Reduction Commission actually came up with a whole program of good, but painful ideas. Since we cannot roll back the demographics--and keep in mind that the US demographics are not as bad as in Europe and East Asia--we need to come to grips with reality and feel each other's pain.