Are you working too hard and saving a lot for your retirement even when you are not sure that you would live that long to enjoy all the fortune that you have accumulated?
Think again. Researchers have found that working a little less and spending a little more early in life may be good for some, as it curbs the inequality that exists between the short- and long-lived.
“The only way in which inequalities between short- and long-lived can be attenuated is by having everyone spend a little more and work a little less early in life,” said Marc Fleurbaey, professor at Princeton University in the US.
“That way, for those who are unlucky and die prematurely, their life is not as bad economically as it would be if they had planned to enjoy more consumption and leisure later,” Fleurbaey added.
The researchers constructed a mathematical model that measured the loss of an early death in terms of an equivalent loss in income or consumption.
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To test their model, they used data on income and longevity to examine four socio-professional groups: executives, professionals, blue-collar workers and clerks from age 20-100.
Across the four groups, those who die at age 55 lose, on average, the equivalent of 40 percent of income compared to those who live until age 85.
In sum, short lives result in big losses, comparable to the gaps between socio-economic groups.
While the authors did not recommend that savings should be curbed, they argued that now, thanks to growing affluence, there is an opposite risk: not living long enough to enjoy all that money squirreled away.
The study appeared in the Journal of Mathematical Economics.