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  • Retirement Across the Globe

    Color a lot of us skeptical about retirement. That is, with the Great Recession wreaking havoc on savings and retirement accounts, it seems a lot of people are delaying that dream day when we can trade the commute for a leisurely walk, and the alarm clock for breakfast in bed. But to be clear, people are retiring. Mercer's MThink has a new infographic that helps us better understand when they are retiring. And it is interesting to note how much retirement behavior changes from country to country. See the full size graphic here .
  • Whether By Choice or Circumstance, Americans Working Longer After Great Recession

    With the population of Americans 65 or older rising as a percentage of the overall population, we were expecting to see a massive increase in the number of retired Americans. But the total number or retirees each year may not be quite as high currently, thanks in part to the Great Recession. A new survey from The Associate Press-NORC Center for Public Affairs Research shows that "the Great Recession has had a marked impact on retirement plans," as more Americans are working longer or expect to work longer than five years ago. Looking at the time periods before and after the start of the Great Recession (December 2007) shows an increase in the average age at retirement, continuing a trend toward working longer that started in the early nineties. Among those who report retiring before the Great Recession, the average reported retirement age is 57, while the average for those who retired afterwards is 62. Looking only at the five year period leading up to the Great Recession, the average retirement age was 59. More than three-quarters of those who retired before the Great Recession started did so before age 65 (77 percent), with 16 percent retiring between 65 and 69 and 7 percent retiring at age 70 or older. Of those who retired after the recession started, 64 percent retired before age 65, 27 percent retired between age 65 and 69, and 9 percent retired at age 70 or older. This trend of later retirement ages also means that increasing numbers of Americans have been working later in life than they expected to. Twenty-eight percent of those who retired before the Great Recession say that they retired at a later age than they expected they would at age 40. This is true for 34 percent of those who retired afterwards. The average number of additional years worked for both groups is approximately four and a half years. Read the full report here .
  • Baby Boomers and Their Encore Careers

    It is getting to be about that time. Right about now a lot of boomers were supposed to be gracefully saying their goodbyes and stepping out of the workforce and into retirement. But with people living longer lives, and many boomers having smaller retirement accounts than they expected (thanks to the Great Recession), older workers are choosing what Marci Albohofer calls second or third acts. And many of those people are choosing to tackle more meaningful work for their second or third acts. Albohofer is author of The Encore Career Handbook and vice-president at, and she spoke about encore careers with Stewart Friedman , director of the Wharton Work/Life Integration Project .
  • Laura Tyson on the Need to Boost Retirement Savings

    The Boomers have begun to retire. That may be good news for young workers looking to move up the ranks. But Laura Tyson argues it is a problem for the economy. More than half of American workers lack the funds they need to retire without changing their living standards considerably. From Project Syndicate : Nearly 60% of all employed private-sector workers aged 25-64 are not covered by employer retirement plans, and coverage rates vary by income: 73% of all workers in the top earnings quartile are covered by such plans, compared to only 38% in the bottom quartile. Plan participation also varies by income, with low-income workers much less likely to participate than high-income workers. The lack of universal coverage also means that workers move in and out of plans as they change jobs; more than one-third of all households end up with no employer-based pension coverage. By contrast, in several other countries, mandatory employer and employee participation in national employer-based plans means nearly universal coverage. Personal retirement savings, another pillar of the US retirement system, are woefully inadequate for most households, partly because the decades-long stagnation in median wages has made it difficult to save. According to a recent study, one-third of Americans aged 45-54 have nothing saved specifically for retirement. Meanwhile, three-quarters of near-retirees – those aged 50-64 – have annual incomes below $52,201 and average total retirement savings of less than $27,000. The United States relies on generous tax incentives to encourage personal retirement savings, but these incentives are poorly targeted and yield limited returns. More than 80% of the value of these incentives goes to the top 20% of taxpayers, who earn more than $100,000 a year. Moreover, while the incentives cost the US Treasury nearly $100 billion annually, they induce little new saving; instead, they cause high-income taxpayers to shift their savings to tax-advantaged assets – a major reason why President Barack Obama proposes capping the tax deduction for retirement saving. A more radical proposal would convert the tax deduction into a means-tested and refundable matching government contribution – deposited directly into a taxpayer’s individual retirement account (IRA). Taxpayers are more responsive to matching incentives than they are to tax incentives, because the former are easier to understand and more transparent. Read America's Rehearsals for Retirement here .
  • Millenials Start Spending and Flexing Their Economic Might

    Barron's Jacqueline Doherty reveals a certain lack of cultural literacy when she calls the late Kurt Cobain a patron saint for Millenials. Gen Y took no time stealing all the attention from Gen X, but they can't steal their icons. Still, Doherty's cover story on the consumer power of Millenials is worth a read. The new power generation is larger than the Boomers, and now are rapidly becoming the driving force across a lot of marketplaces. The Millennials already account for an annual $1.3 trillion of consumer spending, or 21% of the total, says Christine Barton, a partner at the Boston Consulting Group, which defines this cohort as ages 18 to 34. As the economy pulls out of an extended period of sluggish growth, helped in part by this rising generation, annual growth in consumer spending is likely to revert to its long-term average of 3.5% to 4% from about 2% now. Likewise, consumer spending on durable goods could rise sharply. The Millennial generation has already made a big mark on one industry: education. The number of students enrolled in college in the U.S. climbed by 30% from 2000 to 2011, helping to fuel a building boom on campuses across the country. But that's something many schools could regret in coming years, given the past decade's sharply declining birth rate. Owing in part to the Millennials' surge, apartment demand is strong around the country. Housing could be the next major industry to benefit from their size and maturation, but Wall Street could reap the biggest rewards. The MY ratio, which compares the size of the middle-aged population of 35-to-49-year-olds with that of the young-adult population, ages 20 to 34, explains why. Middle-aged folks have higher incomes than younger people, and a greater urgency to save for retirement. They invest their savings, which drives up stock prices. When the MY ratio is rising, meaning the older cohort outnumbers the younger, the stock market typically does well. The ratio has been falling since 2000, which has exerted a drag on stock prices. Read On the Rise here .
  • Consumer Loyalty and Apple's Success

    Forbes contributor Robert Passikoff says Apple has become The Most Valuable Company in the World thanks in large part to chart-topping customer loyalty. "So it’s axiomatic: more consumers behave well toward a brand, a brand sells more, a brand makes more money, its stock goes up," Passikoff writes. And in Apple's case, the stock goes up past $500 a share. So how does Apple do it? Bain & Company 's Fred Reichfeld says it all about loyalty. And, Reichfeld explains in this Harvard Business Review video, other companies would do well to follow Apple's example. It probably won't lead to the same stock valuation, but it might be a path toward sustainable growth:
  • The Dangers of Hiring an Outsider

    The Economist 's Schumpeter blogger expects Nokia to replace its CEO soon. And reports are that Nokia is seeking an outsider to take over for CEO Olli-Pekka Kallasvuo , who has been in charge for the Finnish giant's steady decline in stock value since 2006. Is that a bad idea? From the Schumpeter blog: One of the few things that management theorists agree on is that recruiting bosses from outside is something that you should avoid if you can. Listen to über-guru Jim Collins: in “Good to Great”, he observed that more than 90% of the CEOs of his sample of highly successful companies were recruited internally. Or consult Rakesh Khurana of Harvard Business School: in “Searching for a Corporate Saviour”, he described how companies that invest their hopes in a charismatic outsider are usually disappointed. Or read the painstaking studies that come out of the Academy of Management: they show that even companies that are having a hard time are better off sticking with an insider. The curse of the alien boss is particularly potent in the high-tech sector: think of John Sculley’s disastrous reign at Apple or Carly Fiorina at Hewlett-Packard. Nokia is especially likely to prove allergic to a foreign CEO. For a start, the firm is headquartered in a country that is dark for half the year. That will surely limit its ability to attract the best and brightest. (The rumour mill suggests that one prominent American has already rejected the job because he or she does not want to live in Finland.) To make matters trickier, Finns deem Nokia a national treasure: it accounts for about a fifth of the value of their stock exchange and a huge share of their exports. A foreign CEO would be under intense scrutiny from day one. Read The curse of the alien boss here .
  • Warren Buffett on Mistaking Market Value for Cost

    The latest letter from Warren Buffett to Berkshire Hathaway investors reveals once again Buffet's distaste for the behavior of investment bankers as advisers during acquisitions. He is particularly annoyed at the way these advisers deal with purchases made with stock. Buffet writes that the bankers are always game to talk about the value of what is being acquired, but never about the real value of what you are "giving." When a deal involved the issuance of the acquirer’s stock, they simply used market value to measure the cost. They did this even though they would have argued that the acquirer’s stock price was woefully inadequate – absolutely no indicator of its real value – had a takeover bid for the acquirer instead been the subject up for discussion. And then he shares this story: I can’t resist telling you a true story from long ago. We owned stock in a large well-run bank that for decades had been statutorily prevented from acquisitions. Eventually, the law was changed and our bank immediately began looking for possible purchases. Its managers – fine people and able bankers – not unexpectedly began to behave like teenage boys who had just discovered girls. They soon focused on a much smaller bank, also well-run and having similar financial characteristics in such areas as return on equity, interest margin, loan quality, etc. Our bank sold at a modest price (that’s why we had bought into it), hovering near book value and possessing a very low price/earnings ratio. Alongside, though, the small-bank owner was being wooed by other large banks in the state and was holding out for a price close to three times book value. Moreover, he wanted stock, not cash. Naturally, our fellows caved in and agreed to this value-destroying deal. “We need to show that we are in the hunt. Besides, it’s only a small deal,” they said, as if only major harm to shareholders would have been a legitimate reason for holding back. Charlie’s reaction at the time: “Are we supposed to applaud because the dog that fouls our lawn is a Chihuahua rather than a Saint Bernard?” The seller of the smaller bank – no fool – then delivered one final demand in his negotiations. “After the merger,” he in effect said, perhaps using words that were phrased more diplomatically than these, “I’m going to be a large shareholder of your bank, and it will represent a huge portion of my net worth. You have to promise me, therefore, that you’ll never again do a deal this dumb.” Yes, the merger went through. The owner of the small bank became richer, we became poorer, and the managers of the big bank – newly bigger – lived happily ever after. Of course, there is much more in the investor's letter than this telling anecdote. You can read it online here .