What exactly have the baby boomers left us with? A bunch of debt. As baby boomers reach retirement, they’re able to enjoy pensions, health-care benefits, and old-age benefits while the workforce diminishes at a rapid rate. Since the 1950’s there has been a steady decline in Canada’s birth rate; coupled with the fact that there aren’t enough immigrants arriving, it is estimated that the ratio of working Canadian’s to retirees, will fall. What does this mean for young workers? It means we are in charge of clearing the debt they left behind- meaning we have to pay more taxes, and that there’s less of us to take on the burden. It is estimated that Canada will have a debt of 1.5 trillion dollars over the next 5 decades and that younger workers will have to work longer before retiring. Young workers now are at a disadvantage compared to the young workers 50-60 years ago. Boomers had the “best bang for their buck” in terms of education, and they’re able to sell their long-term assets to fund their retirement. With increased tuition costs, increased national debt, and a whole lot of old people to take care of, the future seems hard for many young workers.

Sources:

http://www.economist.com/node/21563725?spc=scode&spv=xm&ah=9d7f7ab945510a56fa6d37c30b6f1709

http://www.arbitragemagazine.com/topics/international-affairs/canada/canada-handle-debt-baby-boomers-2020/

What attracts consumers? Expensive new Lululemon pants? Or is there something else that catches ones attention? The answer is cheap goods. Not everyone can afford expensive Lululemon pants, but everyone can afford items that are worth only a few dollars; that is why dollar store industries are one of the fastest growing retailers in Canada. The concept of goods only being a dollar attracts many customers. With a growing amount of customers, dollar stores are able to take risks; they started jacking up prices of goods to $2 or even up to $3. The success of dollar stores forces other major retailers such as Canadian Tire and Wal-mart to emulate their formula. Ultimately, they fail to do so because they aren’t as appealing as dollar stores (they don’t have dollar in their names!). Canadian Tire and Wal-Mart have started promoting their $1-3 goods in hopes of attracting consumers. When I go to Wal-mart, I always buy a 6 pack of Reese’s pieces because they’re only a dollar each! What these big retailers hope for is that consumers will be attracted by their $1 goods, but at the same time purchase more expensive products. With a combined 21,311 stores, dollar stores are closely becoming the largest chain in the U.S.

Sources:

http://www.theglobeandmail.com/globe-investor/how-canadas-retailers-discounted-the-rise-of-the-dollar-store/article4596897/

http://www.forbes.com/sites/investor/2012/04/16/dollar-stores-take-on-wal-mart-and-are-starting-to-win/

The increase in the price of health care in the United States has been astounding. In 1960, it was around 5% of the total GDP; now, it’s around 18% and predicted to be about 60% in 2105. What does this mean for the American consumer? Well, one first must understand the concept of cost disease. Let’s take a look at the economy’s average rate of growth. Some industries such as the car industry are able to cut costs because of new technology, therefore can afford to increase wages. Other industries such as the music industry, aren’t able to cut costs (A string quartet in the 18th century is as efficient as a string quartet in the 21st century); in order to compensate and keep up with wages, they are forced to increase the price of tickets. These type of industries are stagnant in terms of productivity, thus the term “cost disease” is given to them. Cost disease mainly applies to industries that require human interaction such as haircuts, health care, education, etc. Human input are the main costs in the industry and cutting labor would be counterproductive.

Since the 1980’s, the price of a university education has risen 440% while the price of medical care has risen 250%. The average prices of goods has increased by 110% while wages have increased by 150%. Although the price of health care is increasing at an alarming rate, it also means that consumers have more money to spend on other consumer goods (shown in the graph). Buying power is growing and innovation in industries are making many goods such as cars more affordable. This topic is relevant to what we have been learning in class. Many different sectors of the economy have to keep up with inflation in order to make it more efficient, and different sectors grow at different rates.

Sources:

http://www.economist.com/node/21563714

http://en.wikipedia.org/wiki/Baumol%27s_cost_disease