Reports of post-pension-reform underfunding do not “prove” that Defined Benefit pensions are better than Defined Contribution systems. In fact, they pretty much miss the point.
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Forbes post, “Is Sweden Our Fertility-Boosting Role Model?”
Originally published at Forbes.com on August 9, 2019.
The conventional wisdom goes like this:
Countries which have traditional cultures (and which lack access to modern contraception) have high fertility rates. Countries in which women want to build careers but there is no social welfare support structure in the form of parental leave, subsidized daycare, and the like (and in which, as a recent Foreign Policy article, “How to Fix the Baby Bust,” demonstrated, workplace culture demands long inflexible work hours), have fertility rates well below replacement. And countries such as Sweden, with its heavily subsidized, always-available daycare, generous parental leave shared by both parents, and a culture ordered around community and family life rather than work, hit the “sweet spot” of replacement-level fertility rates.
Further, that conventional wisdom goes, the United States had maintained a replacement-level fertility rate due to the high fertility of immigrants, and the high rate of unintended pregnancies. Now that women are increasingly using LARCs (long-acting reversible contraceptives such as IUDs and implants), we will need new strategies to boost our birthrate and prevent unwanted consequences such as an imbalance in young and old and an insufficient supply of young people to support the aged, and we will need to adopt the generous policies of a country like Sweden to induce more couples to procreate.
Except that the notion of a replacement rate fertility in Sweden is itself a bit of a fantasy. As of 2018, the total fertility rate in Sweden was 1.76 children per woman. Among native-born Swedes, it was even lower, at 1.67. To be sure, this rate is higher than that of such countries as Germany (1.59 in 2016, or 1.46 among women with German citizenship), and even slightly higher than the record low rate of 1.72 recorded in the United States in 2018, but it’s still not the replacement-level of 2.1.
What’s more, the Swedish birth rate has fluctuated considerably and has hit the magic marker of “replacement rate” only rarely since 1970, with troughs in the late 70s/early 80s, again in the late 90s, and a downward trend again since 2010.
own graph
What accounts for this?
A 2018 Mercatornet article explains the apparent recovery of fertility rates in the late 80s as a fluke:
It turns out that Sweden’s so-called “success” in the early 1990s was a statistical fluke. A change in policy regarding eligibility for parents insurance, called a “speed premium,” had the one-time effect of reducing the spacing between first and second births. This threw off calculations of the Total Fertility Rate, but this change did not significantly increase the total number of children born per family. Judged empirically, then, the Swedish model simply did not work; its so-called “success” in the 1990s was a Euro-urban-legend.
As to the spike and drop in the 2000s, this article finds an explanation in the rising levels of immigration and growing fertility rates among immigrants, but this would appear not to be borne out by the data. (Another source claims a much higher divergence between native-born and foreign-born women, and the reason for the discrepancy is not apparent.) However, if the spike peaking at around 1990 was due to shifting incentives, it stands to reason that the drop and subsequent recovery might be similarly explainable, and a 2008 paper by Stockholm University researcher Gunnar Andersson shows relatively level rates for the other Nordic countries during this time period, and a convergence by Sweden with the remaining three by 2006.
As to the drop in fertility rates since their 2010 peak, the Straits Times reports that this is a worry shared with other Nordic countries, with no particular explanation except for general “financial uncertainty and a sharp rise in housing costs.”
What’s more, Andersson provides further insight into the Swedish approach. He notes,
An important aspect of Swedish policies is that they are directed towards individuals and not families as such. They have no intention of supporting certain family forms, such as marriage, over others.
He also notes that both the Swedish income tax system and its Social Security system function on an individual basis, with no particular recognition of the marital status of a given individual (see TheLocal.se on the tax system and Business-Sweden.se for Social Security.) This, among other policies, works to promote the “dual bread-winner model of Sweden.” Again, Andersson writes,
It is important to note that Swedish family policy never has been directed specifically at encouraging childbearing but instead have been aimed to strengthen women’s attachment to the labor market and to promote gender and social equality. The focus has been on enabling individuals to pursue their family and occupational tracks without being too strongly dependent on other individuals or being constrained by various institutional factors. Policies are explicitly directed towards individuals and not towards families as such.
The operating assumption is that Swedish men and women will simply naturally want to have replacement-rate numbers of children, on average, so long as there are no impediments to this choice.
Now, it might well be that the present low birth rates in Sweden are again a fluke. Or perhaps, in the same way as Americans defer car purchases during economic downturns and then return to the dealers when times are good, this was again a pattern of Swedish parents having babies earlier than they otherwise would have, during the pre-recession 2000s. But, at the very least, these figures call into question the conventional wisdom that the path to replacement-level fertility rates is to emulate Sweden.
December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.
Forbes post, “A Modest Proposal To Solve Illinois’ Pension Woes”
Originally published at Forbes.com on August 7, 2019.
It’s easy-peasy, really.
There’s a way to reduce the Illinois and Chicago pension liabilities by half, with no constitutional amendment required, no hard political truth-telling or compromises, no cuts at all.
And considering that Chicago’s pensions are 23% funded, and Illinois’, 40%, this is not a minute too soon.
Here’s the scoop:
The basic structure of Illinois’ and Chicago’s pensions are the same. In general, Tier I employees/retirees, those hired before 2011, receive a pension based on final pay and service with a fixed 3% per year Cost-of-Living Adjustment; whenever inflation is lower than this (the last ten years, it’s averaged 1.8%, the last 20 years, 2.2%), they come out ahead, to the extent that some retirees get pension checks greater than any paycheck they ever received. Tier II employees, on the other hand, keep the same benefit formula, but averaged out over a longer period of time, receive pseudo-COLAs at half the rate of inflation, without compounding, and have their pensionable pay capped at a level that (unlike, for instance, the Social Security ceiling) doesn’t rise based on average wage growth or even inflation but at half the rate of inflation, so that, to take the teachers as an example, any teacher who earns above-average pay levels will be affected as soon as 2027, based on current inflation projections and average wage data.
Now, the value of any pension without a true CPI-based cost-of-living adjustment will be eroded over time due to inflation, and eroded in very short order in instances of high inflation. And in countries with a history of inflation, employer-sponsored pensions are more likely to include true cost-of-living increases. In some cases, the entire actuarial valuation is done on a “real” basis, evaluating all of the inputs on the basis of “value in addition to inflation” — that is, using the assumed salary increase in excess of inflation and the interest rate in excess of inflation. When both these hold true – true-CPI increases and assumptions all relative to inflation, in principle, neither the liabilities nor the pension benefits’ real value are affected by fluctuations in inflation. (Random trivia: in Brazil, the government even issues its bonds on a “real” basis.)
At the same time, back in the spring, the latest buzzword was Modern Monetary Theory (here’s an explainer), which was the means by which various progressive politicians promoted the idea that there was an awful lot more room for government deficit spending than appears to be the case; concerns about inflation were waved away with the assurance that the government would be able to tack as needed by increasing tax rates.
You see where I’m going with this, don’t you?
If the United States were to hit a period of high inflation rates, sustained over a long period of time, these liabilities would shrink considerably — and I’m not even speaking, snarky photo aside, of hyperinflation. Based on my calculations (and yes, these are real calculations, using real data for this plan collected for another project, not merely back-of-the-envelope estimates, however unlikely the very even numbers make it appear), an inflation rate of 10%, and assumptions for interest rate/asset return rate and salary increases over time which reflect the same net-of-inflation rates as at present, would halve the pension liabilities of the Illinois Teachers’ Retirement System.
Sounds preposterous, I know. And admittedly, beyond all the ill-effects of high inflation, individual state governments don’t control monetary policy anyway. But is it really any worse a proposal than the idea of selling the Illinois Tollway to a private firm which would do the dirty work of raising tolls so as to indirectly fund the pensions by making the tollway an attractive and profitable purchase? Or more ill-conceived a notion than the notion that public pensions can function perfectly well as pyramid schemes in which each cohort of employees funds their predecessors’ benefits?
Or maybe the politicians of Illinois have some better idea? If so, I’m all ears.
December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.
Forbes post, “Is Robert Mueller Too Old? (Some Honest Talk On Cognitive Aging)”
Should we adapt our expectations in order to accommodate older adults’ declining cognitive abilities?
Lies, Damn Lies, and — well, you know the rest

You know how it goes: “there are three kinds of lies: lies, damned lies, and statistics.”
One thing I’ve been following over time is the debate about the minimum wage; most recently, the CBO produced a report projecting the effects of a substantially elevated minimum wage: it would significantly raise income for many low-wage workers, while putting other worker out of a job. Supporters of wage boosts saw this as good news (eh, those newly unemployed would probably cycle into and out of jobs and working half the year at a doubled salary, and enjoying free time the other half) and opponents, understandably enough, saw otherwise. And everyone’s got a study that proves what they want to believe and analysis of their opponents’ studies demonstrating why those studies are wrong. Heck, the other day there was a claim on twitter that when the minimum wage had been hiked in San Francisco or some such place, “only” the low-rated restaurants closed up shop, so it was no big deal.
It’s all a mess. And, to be honest, it’s not simply people intentionally deceiving others by manipulating their statistics, or even unintentionally doing so, but that there are so many factors feeding into how a local or regional or national economy is doing at any given time, and so much difficulty untangling the impact of a change and all its knock-on effects, that there is no simple answer. It stands to reason that an employer faced with boosting employees’ pay will raise prices or try to do with fewer work hours, and I have to say that over the past few days I’ve spent more time in more McDonalds’ (OK, two of them) than has been the case in a while, and they’ve installed automated ordering stations in each of them. And it’s not a simple as saying, “if an employee has work hours cut in half but a doubled pay, then it’s a win because they have more personal time,” because the employer has to keep the business going with half as much production from the employee, because, one presumes, they had already been aiming at keeping that employee busy and productive during their shift.
So look, what follows isn’t “statisticians/economists are liars,” because these instances don’t prove that anyone acted in bad faith and they really just illustrate more the degree to which, to quote a famous doll, “math is hard.”
The question at hand is this:
Did expansion of Medicaid save lives, and, by extension, the decision by some states to reject Medicaid expansion cost lives?
A working paper out today says “yes.” It’s titled “Medicaid and Mortality: New Evidence from Linked Survey and Administrative Data” by Sarah Miller, Sean Altekruse, Norman Johnson, and Laura R. Wherry. (Side note: the National Bureau of Economic Research working papers are paywalled but I put on my journalist hat and requested access some time ago. Yay, me!)
They took a look at mortality data by state for the 6 years prior to and the 4 years after Medicaid expansion, and sliced and diced it to look only at those folks who would have benefitted from expansion, that is, poor pre-65 adults. (I admit that I don’t quite follow exactly they integrated this all together.) They conclude that there are real, statistically significant decreases in mortality for those states which expanded Medicaid.
Here’s their bottom line:
Our estimated change in mortality for our sample translates into sizeable gains in terms of the number of lives saved under Medicaid expansion. Since there are about 3.7 million individuals who meet our sample criteria living in expansion states, our results indicate that approximately 4,800 fewer deaths occurred per year among this population, or roughly 19,200 fewer deaths over the first four years alone. Or, put differently, as there are approximately 3 million individuals meeting this sample criteria in non-expansion states, failure to expand in these states likely resulted in 15,600 additional deaths over this four year period that could have been avoided if the states had opted to expand coverage.
(Now, I would dispute the framing of “additional deaths” — even if Medicaid expansion is unambiguously a tool to reduce deaths, failing to adopt it is not an action that increases deaths above a baseline. It’s also a bit misleading to use the 15,600 as a “headline” figure when it’s a four-year calculation rather than over a single year.)
Expressed differently, they found a percentage point reduction of 0.13. In year one, the probability of dying in an expansion state relative to a non-expansion state decreased by 0.09 percentage points. In years 2 and 3, by 0.1 percentage points, and in year 4, 0.2 percentage points — in all such cases meeting the usual tests for statistical significance.
So, look, my instinct here is to be skeptical, since up to now, there had not been such proof. In fact, the best possible way of evaluating the effect of expanded government provision of health services, a randomized trial, occurred in Oregon, when they gave some poor folks, but not others, Medicaid via a lottery in 2008, then measured the outcomes. The effects?
This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.
Which would suggest that any impacts would be more long-term, if prevention measures take a while to take effect. The new paper even references this as a part of the relevant background (and notes a calculated 16% reduction in mortality had such a large confidence interval as to be useless).
But the new analysis finds an unambiguous, immediate drop in mortality for Medicaid-expanding states relative to non-Medicaid expanding states. This seems too-good-to-be-true, especially since this is occurring at exactly the time when the opioid crisis is causing such a dramatic rise in death rates; Medicaid expansion begin in 2014, and that’s pretty much when death rates exploded per the charts this report.
(What about claims that the expansion of Medicaid ironically increased opioid deaths because people newly-able to receive painkillers through Medicaid were newly prone to opioid addiction and newly able to fill prescriptions and resell the pills? I’m not going to dig into this too much here; so far as I can tell, there’s just as much “proof” for one side or the other of the debate as with the minimum wage. An article I was pointed to via twitter, “Causality, Stories, Medicaid, and Opioids” by Andrew Goodman-Bacon at Vanderbilt and doctoral candidate Emma Sandoe at Harvard, presents what they think is a slam-dunk case that the opioid crisis was well under way before Medicaid expansion and thus unconnected to it, but a graph that they present as key evidence, showing that there was already a higher rate of drug overdoses in the expansion states, beginning earlier, in 2010 (before then, there was no difference between these two groups), so that Medicaid could not be the cause, shows a significant (and I mean visually, not statistically) jump in overdose rates in 2014, and further still in 2015 and 2016. But in any case, if the hardest-hit states are expansion states, and this study’s data shows deaths decreased on an overall basis, then one could make the case that the data supports Medicaid expansion being so fantastic that it even balanced out opioid death increases with even greater decreases in other types of deaths.)
And, for further context, we’re talking about a calculated reduction of 4,800 deaths annually in expansion states and 3,900 potentially fewer deaths in the non-expansion states, for a total of 8,700 fewer actual/hypothetical deaths per year. (Is this math right? The expansion states have, in total, much greater population, so it doesn’t entirely make a lot of sense for there to have been nearly as many hypothetical-lives-saved in the smaller number of non-expansion states than actual/calculated lives saved in the expansion states.) Yes, those are 8,700 people per year whose loved ones per the calculations didn’t/wouldn’t have to say good bye to them too soon. But there are all manner of government programs touting the lives they would save, directly or indirectly, and there’s always a cost-benefit analysis.
For comparison, in the relevant adult, non-elderly population (actually ages 20 – 64), there were 703,298 deaths reported according to the CDC’s website out of a total population of 3,436,501,449. This compares to 697,132 deaths in 2016 and 677,192 in 2015 — and death rates that have been increasing nearly every year since this online tool‘s data starts in 1999. The crude rate was 328.3 deaths per 100,000 in this age group in 1999, and is now 365 — but at the same time, this is called a “crude” rate for a reason, and year-over-year comparisons really need further adjustments to reflect that our population is, in general, aging, so an increasing death rate is, in part, simply because more of the 20 – 64s are older and at greater risk of dying, rather than necessarily saying anything about life expectancy, though that’s a piece of things, too, as the rise in “deaths of despair” is causing drops in life expectancy for middle-aged folk.
A few other thoughts:
It disturbs me that the very regional nature of Medicaid expansion — the non-expanders pretty nearly coincide with the South and Great Plains states (see this map) — means that it would be very difficult to truly differentiate between other influences on death rates impacting different regions of the country differently, and the Medicaid expansion. The study authors attempt to test for this by looking a relative differences in mortality between these two groupings of states as if the “event” started in 2010 rather than 2014; they find “no effect on . . . mortality in expansion states during this pre-ACA period” but visually, where they find an immediate and sudden drop in relative mortality coinciding with the Medicaid expansion in 2014, as soon as they look back four further years, the data actually seems to suggest that there’s a lot of variation in relative mortality (at least at the scale that they show) from one year to the next, which says to me that the changes in relative mortality in 2014 and subsequent years may be statistically significant but that the association with Medicaid expansion might not be the correct identified cause. I would be interested in a different sort of test — if they took 2014 data and sliced and diced it differently – say, separating out different regions of the country, such as East vs. West, rural vs. urban, etc., — would they see similar (apparent) impacts?
It is also, again, striking that the change should be so immediate when the conventional wisdom has always been that, prior to Medicaid providing benefits for the childless adult poor population, their immediate medical crises were taken care of via a combination of county hospitals and statutory requirements that any hospital treat any patient in the ER, but that what they missed was important long-term care like chronic disease management. And this leads me to wonder whether there is a placebo effect going on here — by which I don’t mean the self-perception aspect of the placebo effect (people rating pain levels lower when they’ve been given a sham treatment) but the fact that the experience of being treated has a real, meaningful effect on patient well-being and, it seems to me, could be working to reduce mortality at these very small levels even as the Oregon study couldn’t identify specific measures of health that were impacted.
Now, again, so far as I can tell, the math is all fine, and I don’t have any reason to call out the authors on the basis of their methodology, and (except for a small bit of phrasing) they’re not writing in an ideological manner. And, as a reminder, I’ve said from my earliest days of blogging that, while I reject the notion of “positive rights” or that people have a “right to health care” it is still an appropriate action for government to take, to make provision for the medical treatment of those members of society as cannot do so on their own, though my preference has been some variation of VoucherCare or a Staff Model HMO, the latter because it is clear to me that we simply cannot have a health system in which anyone can truly go to any doctor at any time, but that individuals need coordinated care and, yes, that includes, in part, saying “no.”
But none of this is as simple as “doing the math.”
Forbes post, “Some Good News On Multiemployer Pensions”
So you tell me: is my hope that Congress will find a fair, long-term-sustainable solution to the multiemployer pension crisis reasonable or misplaced?