Newshub stirs anger toward "rich, old people" (and gets it wrong in the process)
It's time to hold our mainstream media to account. Hot on the heels of the NZ Herald running a series of misleading articles about trends in the crime rate, Newshub have been running the following bogus headline all week:
"Pension shouldn't go to rich, old people who didn't save for it. Debate Flares over Future of Super".
The line that the pensions system is being abused by "rich old people" comes from Newshub's favourite commentator, Shamubeel Eaqub. Remember him? He's the "leading economist" (in the words of Newshub) who slammed ACT Leader David Seymour's post-Budget comments, calling them "economically illiterate".
Since my job is teaching economics, let's check out Eaqub's "economic literacy". Well, he's wrong to say "rich, old people" didn't save for the pension - it reveals a misunderstanding of how our "Pay-As-You-Go" (PAYG) pension system works. The rich, old people to whom Eaqub refers paid taxes all of their lives (from when they were young & working up until they were 65 yrs old) to fund the pensions of the generation that came before them. Instead of those funds adding to their own savings, the funds instead went to support that earlier generation. Now that they have become elderly, the young of today are doing the same for them as they did for the generation before them. That's PAYG !
So to argue that "rich, old people" are getting a free-ride and never contributed to supporting our system by giving up their own savings is factually incorrect.
The problem today is our ageing population. That's not even the fault of "old, rich people" since most of them have quite a few children. It's the "fault", if you want to use that word, of the new young generation, who are barely having any children. In Italy, for example, the typical family is having just one child. In NZ, the number has fallen to an all-time low, below the "replacement rate" of two. That means there are fewer young people to support the elderly under the PAYG system than ever before. The elderly are also living longer.
Maybe Newshub (and Shamubeel) could explain the problem better before publicly insulting "rich, old people" who are not the ones to blame for our pension problems. If one wants to attribute blame, then it lies with Sir Robert Muldoon, the National Party PM, who cancelled Sir Roger Douglas' compulsory Superannuation Scheme in the 1970s. Had that scheme not been stopped, the folks coming up for retirement today would have 10 times the savings they currently have in their KiwiSaver accounts - and inequality would have plummeted since everyone was included in that scheme. (The 20% of low income Kiwis today typically don't have KiwiSaver accounts).