Impacts on Economic Security Programs of Rapidly Shifting Demographics

Abstract

This paper analyzes in some detail potential impacts on economic security programs—government, employer, and individual—that the aging of the baby boom generation may create. It begins by defining what is meant by “population aging” and concludes that fertility shifts are more important than improving life expectancy. It also argues that calling the baby boom the “postwar baby boom” is inaccurate and will lead to missed targets for product development and marketing. Finally, this section of the paper notes that the most rapidly growing segment of the population will be the oldest old—those age 85 and over, who will also put the greatest stress on the provision of health care and retirement income security.

The paper then looks at other demographic shifts of importance, in particular female labor force participation rates. The impact of shifting demographics is reviewed for each sponsor of economic security programs: the government (health care and social security); the employer (pension plans and group benefits); and the individual. Points of concern and offsetting opportunities for the insurance industry are noted. Finally, the paper looks at whether we will be able to “afford” the sudden retirement of the baby boom. The conclusion is that this will be affordable if we can convince a portion of the labor force to stay active longer, and if we have healthy productivity growth rates. The problems of an aging population can all be viewed as opportunities for those who have the map.     

Negative Effects of the Canadian GIS Clawback and Possible Mitigating Alternatives

Abstract

In Canada there are three main sources of government-provided retirement income: the Canada/Quebec Pension Plans (C/QPP), which have benefits and contributions based on earnings up to the Yearly Maximum Pensionable Earnings; Old Age Security (OAS), which is a fixed amount for most but does include a “clawback” of benefits for high-income individuals; and the Guaranteed Income Supplement (GIS), which is designed to supplement those persons with extremely low income. The annual GIS benefit is reduced, or clawed back, by 50 cents for every dollar of annual income the person has in retirement, including C/QPP and income from Registered Retirement Savings Plans (RRSPs) and other savings. OAS benefits are not included in determining the GIS clawback.

The result of this is that low-income individuals who attempt to enhance their retirement replacement ratio actually see a decrease in government-provided support the more they save for retirement. Savings in an RRSP can effectively be taxed at more than 100% through corresponding reductions in the GIS, social housing, home care, GAINS (Ontario’s Guaranteed Annual Income Supplement), and other benefits that are based on one’s personal retirement income.

This paper explores alternatives to the 50% GIS clawback, including a basic GIS exemption, a GIS clawback rate lower than 50%, and a combination of the two. The goal is to improve the fairness of the GIS and reduce the disincentive to save for retirement, without increasing the overall cost of the program significantly.     

Implementing Technologies for Financial Service Innovations in Base of the Pyramid Markets

This study examines how information communications technologies (ICTs) can be implemented effectively to provide financial service innovations to the poor who live in developing countries, a market collectively known as the “Base of the Pyramid” or BOP. The BOP needs—but commonly lacks—basic financial services, a situation that perpetuates poverty. With a dearth of formal banks especially in rural areas of developing countries, the BOP has almost no access to savings accounts, credit lines, and other necessary services. However, ICTs have the potential to overcome cost, infrastructure, and other barriers to service delivery, and are being used to offer new financial services such as mobile phone banking to the BOP. The purpose of this study is to determine ways of successfully implementing these technology‐enabled service innovations. The study draws on the Socio‐Technical View for theoretical girding, and uses case method to examine multiple ICT implementation projects in five sub‐Saharan African countries (Ghana, Kenya, Malawi, Mozambique, and Uganda). The projects, which were carried out by a leading microfinance banking organization named Opportunity International, provided mobile banks, point‐of‐service, and mobile phone banking services to the BOP. Several techniques were applied to gather data in the field over a two‐year period: depth interviews, direct observations, and internal document and data analysis. Multiple forms of evidence were triangulated against one another, and analyzed across cases until themes emerged and converged. In doing so, two specific forms of analysis, explanation building and cross‐case synthesis, were employed to make sense of the data. The findings, summarized as research propositions, collectively conclude that implementation is effective when the unique socio‐human, governmental‐regulatory, and market conditions of the BOP are accounted for, such that fit is achieved between the technologies and environments they are situated in. More specifically, effectiveness comes when implementation (1) addresses customer and agent limits with the technologies, and is accepted and supported by trained staff who monitor technology use and make responsive system adjustments; (2) exploits and promotes supportive governmental regulations and actions, as well as leverages sound electronic fund transfer (EFT) switches, whether government or bank established; and (3) accounts for low business capabilities and evolving market competition, along with the underdeveloped financial sector and financial literacy of the population. In sum, there are multiple factors that should be considered in the design and installation activities surrounding these technologies to ensure they provide cost‐effective, quality financial services to the poor.     

Black Spaces/White Spaces: Black Lives,Leisure, and Life Politics

Racial neutrality does not exist within digital and virtual spaces. Our racialized identities are imported into these spaces, as are the ideologies of our respective societies. This reality begs the question, how do Black people situate themselves in digital White leisure spaces, especially when these spaces maintain and replicate off-line spaces of racial discrimination and overt racism? This article presents a background on Black Internet users and highlights how Black people have used digital spaces to counter and disrupt messages that perpetuate inaccurate stereotypes and social inequalities. Examples are offered to support this claim. This article underlines how behaviors of Black people in digital spaces can demonstrate the presence of Black leisure and highlight the realities of Black life. Finally, critical technocultural discourse analysis will be introduced as a technique for advancing this discussion within the context of race and leisure.     

Computational Analysis of the US FTAs with Central America,Australia and Morocco

We use the Michigan Model of World Production and Trade to assess the economic effects of the US bilateral FTAs negotiated with Central America, Australia and Morocco. The model covers 18 economic sectors in each of 22 countries/regions and is based on version 5.4 of the GTAP database for 1997 together with specially constructed estimates of services barriers and other data on sectoral employment and numbers of firms. The distinguishing feature of the model is that it incorporates imperfect competition in the manufacturing and services sectors, including monopolistic competition, increasing returns and product variety. The modelling focus is on the effects of the bilateral removal of tariffs on agriculture and manufactures and services barriers. Rules of origin and other restrictive measures and the non‐trade aspects of the FTAs are not taken into account due to data constraints. The computational results indicate that the benefits of bilateral FTAs for the United States and partner countries are rather small in both absolute and relative terms, and that far greater benefits could be realised if the United States and its FTA partners adopted unilateral free trade and especially if multilateral free trade was adopted by all countries/regions in the global trading system.     

Importers' benevolence toward their foreign export suppliers

In this article, the authors report the development and testing of a model of importers' benevolence toward their foreign export suppliers. The model posits that an importer's satisfaction with and commitment to its relationship with a foreign export supplier will have a positive impact on the importer's benevolence toward that supplier, that an importer's benevolence positively influences relationship performance, and that the benevolence-performance link is moderated by relationship duration. The authors tested the model with a sample of U.S. importers who buy from foreign exporters. The results indicate that the importers' commitment to the relationship significantly influenced its benevolence; however, importers' satisfaction with the relationship did not significantly affect their benevolence. Importers' altruistic benevolence had a positive impact on performance in mature relationships but not in new relationships. Importers' mutualistic benevolence had a significant influence on performance regardless of relationship duration. Dong-Jin Lee (djlee@base.yonsei.ac.kr) (Ph.D, Virginia Tech) is an associate professor of marketing at Yonsei University in Seoul, Korea. His research has been published in theJournal of Marketing, theInternational Journal of Marketing Research, and theJournal of Advertising, among others. His research interests include relationship marketing and quality-of-life studies. M. Joseph (Joe) Sirgy (sirgy@vt.edu) (Ph.D., University of Massachusetts) is a consumer psychologist, professor of marketing, and Virginia Real Estate Research Fellow at Virginia Polytechnic Institute and State University. He has published extensively in the area of consumer behavior and quality-of-life research. He is the author/editor of several consumer behavior and quality-of-life research books. He presently serves as an editor of the Quality-of-Life/Marketing section of theJournal of Macromarketing. He founded the International Society for Quality-of-Life Studies in 1995 and is currently serving as its executive director. He coorganized at least seven conferences related to quality of life. He has served the Academy of Marketing Science (AMS) in many positions dating back to the early 1980s (e.g., board of governors, VP-programs, president-elect, cochair of several AMS conferences, conference track chairs). James R. Brown (jamesb@vt.edu) (D.B.A., Indiana University) is a professor of marketing in the Pamplin College of Business at Virginia Polytechnic Institute and State University. His research has been published in theJournal of Marketing, theJournal of Marketing Research, theJournal of the Academy of Marketing Science, and theJournal of Retailing, among others. He serves on the editorial review boards of several leading academic journals in marketing. His research interests focus on the structure, behavior, and performance of marketing channels and channel institutions. Monroe Murphy Bird (mobird@vt.edu) (Ph.D., University of Arkansas) is a professor of marketing and the National Association of Purchasing Managers (NAPM) Carolinas-Virginia Professor of Purchasing in the Pamplin College of Business at Virginia Polytechnic Institute and State University. His research has been published in theJournal of Marketing, theJournal of the Academy of Marketing Science, theJournal of Retailing, Industrial Marketing Management, and theAcademy of Management Journal, among others. He has served on the editorial boards of several of the business-to-business marketing journals for many years. His major research interests have been in profit and productivity advances within the business-to-business area, with a special emphasis in the industrial sector of that field. As of late, he has turned his interests to ethical issues in business-to-business buying and selling.     

Asset allocation and portfolio performance: Evidence from university endowment funds

We use university endowment funds to study the relationship between asset allocation decisions and performance in multiple asset class portfolios. Although endowments differ substantially in asset class composition, policy portfolio returns and volatilities are remarkably similar across the sample. The risk-adjusted performance of the average endowment is negligible, but actively managed funds generate significantly larger alphas than passive ones. This is consistent with endowment managers exploiting their security selection abilities by over-weighting asset classes in which they have superior skills. Contrary to both theory and prevailing beliefs, asset allocation is not related to portfolio returns in the cross-section but does indirectly influence performance.