Hello, and welcome to Stephanomics, the podcast that brings the global economy to you. We have two takes on aging this week from opposite sides of the world. First, from Shanghai, we hear how the Chinese Communist Party is turning to an old idea time banking, to help them deal with the looming challenge of a fast aging population. Then from the US, a piece on student debt, which could surprise
you sky. Higher university fees and the heavy burden of student debt have been big issues on the campaign trail in recent U S elections. But if I asked you to conjure up a mental image of the people saddled with all this debt, it probably wouldn't be a seventy or eighty something retiree living in Florida. It turns out the burden of student debt is growing fastest among the over sixties. In a few minutes, we'll hear from some of the people struggling with this and learn how government
programs seem to be making it worse. We'll also here why menu prices are quietly soaring but many of your favorite restaurants. But first let's head to Shanghai for that report from Bloomberg Economy reporter Charlie Juma. What you heard is parking music for some elderly folks in Shanghai. It's
five pm on a Monday. About a dozen elderly men and women were already gathering at the leafy downtown street side park in Shanghai to get ready for one of their routines, dancing in the squares or guangchang wu in Chinese. It's a familiar side in cities across this vast nation, which is rapidly aging. The latest census data show the country has two sixty million residents aged sixty and above, more than eight percent of its population. By twenty fifty,
it will be one in three. To diffuse this demographic time bomb, the Chinese Communist Party is turning into a foreign invention. Time banking, the brain child of Japanese lady Taruku Missushima in the nineties seventies. Time banking involves people providing social services to others in exchange for time credit that the participant can use to access similar services later in life. On a recent Wednesday morning, I went to see a time bank for myself at an elderly care
home in Shanghai's Changning district. A handful of Time Bank volunteers, mostly retirees in the sixties or seventies, are busy working, each wearing badges bearing the logos of the Time Bank the workforce. One was teaching an elderly neighbor how to use a stationary bike in a small gym another word advertising bathroom and kitchen accessories designed for seniors. For the work, the volunteers will get paid not in money, but in time. They can use their accrue hours to access services from
other members of the bank. One I met was Fundundi. The seventy six year old former travel services manager, is one of many so called empty nest seniors. Her husband passed away several years ago, and her only child is married and lives in another part of the city. She started working for the Channing Time Bank as a part time receptionist at the senior care house two years ago.
More recently, she ventured into something slightly more challenging, teaching her fellow seniors how to download pictures on Wi Chat, the Chinese super app used for everything from instant messaging to payment. Asked why she came here to do this, she said she wanted to save time dollars for her future. What's probably more important, she said, the job is the past time for her either. It feels kind of lonely at home. It's staying by myself for too long. I'm
afraid i will get in mania. I'm not really happy to hand around with other seniors. Fun has accumulated eight time dollars so far, a sum that would have been much higher if not for the pandemic last year. She told me she has no plan to spend it now, and she's keen to save more for future. China launch a pilot time banking program in some cities a few years ago. The trial has since spread to about a dozen metropolisis from Beijing to Guangzhou and the financial hub
of Shanghai. Shanghai is planning to extend the trial to the entire city from just a few districts. The reason to broadened experiment is straightforward, a rapidly aging population, rising cost of senior care, and shortage of care facilities. Nin Teger, head of China's National Bureau of Statistics, expressed concerns about China's demographic train last month when he announced China's latest census result at the press briefing don't go and do.
The aging of the population is further deepening. China is facing the pressure of long term sustainable development of its population. The data showed the number of Chinese people aged sixty and above has reason by forty since two thousand and ten, while China's births have fallen to their lowest in almost six decades, putting the country's population on course to peak within the next five years. The demographic clifvage, of course,
is a problem of government's ownmaking. After decades of imposing a heavy handed one China policy, China has announced its planning to raise the retire manage allow all couples to have not two, but three children. But most urgent is strengthening the care for elderly citizens to be sure. Challenges facing time banking and China bound from a lack of public understanding of the concept to maintaining the quality of
services and securely storing time dollars. Yet some industry experts are optimistic, citing the government's commitment and the widespread use of mobile phones. Among the optimists, it's Siging who runs the time back in the central Chinese city of Wuhan in the comers in China has its own characteristics. It usually has grand plans for a lot of things with top down designs. Under such a leadership, I believe different places will come up with different ways to promote time banking.
The reason for Shanghai to push forward time banking is compelling. The city has almost six million residents who are sixt and above, or nearly a quarter of its total population, far above China's national average and about the same as some developed countries. Set Up in two thousand nine, the Chinese Time Bank has signed up more than two thousand members.
They have deposited over two thousand furs into the bank, translating into some fifty five R and B or eighty dollars in the value of senior care services based on Shanghai's minimum wage. Only a fraction of the time deposits has been used, as most members are fifty to seventy euro retirees who have pension income but worry about rising
costs of senior care. In a recent interview, Good Zoo, an official of the Shanghai Municipal Civil Affairs Bureau, told us that unlike overseas time banks whose members are from various age groups. Shanghai is mainly pushing for the model of so called young old serving the elder in light of the city's demographic structure. Due to the age of its members, the scope of the services the Chinese time bank provide is limited to helping with essentials such as
paying utility bills and doing the grocery shopping. Time banking is a concept from abroad. During the process of localization. We have to twicket according to the needs of elderly care for a big city like Shanghai. Wild time banking never really took off with a strong arm of the Chinese Communist Party behind it. China just maybe the country where it does this is Charlie Drew for Bloomberg News
in Shanghai. M h, well, you heard there about the Chinese government encouraging able to say for their retirement with their time as well as their money. But in the US, older Americans are being actively encouraged to run up debts which could make their old age considerably worse. In the last three years, student debt student debt among Americans over sixty two rose by nearly eight In a minute, I'll talk to Bloomberg Senior editor Alex Tanzi about what's driving
this problem. But first I wanted to play you this introduction by Bloomberg Quicktake producer Madison Paglia. I should say she's a video producer. Quick take producers videos. And if you want to put faces to the voices you're about to hear, you can go online and search for older Americans frontline student debt crisis, or just embrace the magic
of radio and produce the pictures for yourself. What turned out to be about thirty tho dollars student loan is now seventy never I'll die before I'll never be able to pay that off. It's kind of like a death sentence from me. I'm in a life sentence, I should say to pay those student debts. Student loan debt in the US is now at one point seven trillion, and
it's growing fastest among older Americans. There are now about eight point seven million Americans over the age of fifty who are still paying off college loans and who have seen their debts increase by about half since And this is my son. He graduated in two thousand and eight from Bridgewater College with a degree in biology. I didn't want him to be stuck with having the debt that a lot of kids have when they get out of college.
So I assumed that loan seventy seven year old Frank Sizer Jr. Is a retired prison warden living in Atlanta, Georgia. By the time he is ninety six years old, he will finally be finished paying off his student loans. The parent plus loan that I took out was through the Department of Education, and of course they then transferred everything over the navyant. But I think I started in two thousand and four. I'm still paying it and according to Navy,
and I'll be done in two thousand and forty. My former job was ahead of the Atlanta City Jail, and before that, I was the warden of three different federal prisons, and of course I ran the prison system in Maryland. My main source of income, of course, is my retirement income and of course social Security. I sort of assumed that, like most loans, you pay it off in a reasonable amount of time, and I expected that I would have
it paid off before I retired. But for a period of time while he was in school, I was just paying interest rate on the loan. Right now, a balance of about fifty two dollars. God knows what the original amount was interest rate compounding, and it just continued to grow. It came as quite a shock to me to find out that I'm going to be label with this, probably
for the rest of my life. As you get older and you don't have the income that you did when you were working, it has a big effect to take about five dred a month from y'all retirement income to pay a student loan. These are the type of buses that we drove. Alma Pett used to be a school bus driver in Stockton, California, but back to back traffic accidents led to debilitating medical issues and ultimately put her out of a job. My main objective after that was
to go back to school. I was in the middle of a divorce and was a single parent. I took out student loans too, not only to cover my books and the classes, but to help assist in my daily bills. Almost medical issues have caused her to be in and out of work over the years, and she is currently collecting state disability. At this age, I can't be the same worker that I was before that. I just don't see a way out. I've been trying to pay it.
I've had medical problems, lots of jobs, debts in the family where I had to stop work, my husband got laid off, and in between times I couldn't pay the payments, so I had to ask for forbearance. The interests accrued. Like big time borrowers who defer all loans can face severe consequences such as capitalized interest, which can cause the original loan balance to skyrocket. Alma didn't complete her b A, but took enough units to earn a certificate. Today, Almah's
debt has more than doubled. She and her husband have filed for bankruptcy. It's quite um disheartening, troubling, UH to be in the situation like this. I just don't understand why the government allows this to happen. For a thirty tho dollar loan to become a seventy tho dollar loan. I don't come from family with a lot of money, and I wanted a further my life in to provide from my family a better future. So I felt like the need to have to do it. At the time,
I didn't. I didn't realize it was gonna get to this monster that it's at now. Both Frank and Alma are among the more than forty million federal student loan holders were scheduled to begin making monthly payments again on October one, once COVID nineteen debt relief measures expire. Right now, obviously with COVID nineteen, it's not accruing anything, and I don't have to pay right now, but it's soon going to start again, and with me not working, I don't
know how that's gonna be feasible. And unfortunately this is not covered by bankruptcy. I would like to thank that loan forgiveness what happened. I'm very pessimistic that that will happen. You know, if you can't do a way of student loans, do away with the entrance on those student loans, because that's what really runs that cost uff and burden people. My hopes for this issue for myself is for me
to be debt free from it completely. I know President Biden talked about releasing us from all debt, so if he's not gonna give us the blessing of canceling this student loan debt, I would hope and pray that at least he changes the laws so that it could be included into a bankruptcy. If education is important as everyone make it out to be, in which I agree with, that should be a better way. The wealthy not our issue. Well,
I think the average person don't have that luxury. Quite honestly, I'd like for my son to go on and get his master's, but on that's going to have to be on his dime. I'm joined now by one of the people who helped uncover this story for bloom Bag, senior editor for the Real Economy team and one of our best data journalists, Alex Tanzi. Alex, thanks for being on Stephanomics U. I should start by asking you how you
came across this story. It wasn't something that I had heard about, this idea of of really much older people laden with student debt. So for a number of years now, student that's becoming a more prominent problem in the US. It's up to one point seven trillion, so we've really in about that several times. And in the past years before there was forbearents for the pandemic delinquencies on student that was the highest of any consumer debt. So a lot of people are going into a lot of debt.
The government wasn't getting any of this money back. So it's been an issue we've been kind of focused on, and lately we've taken a deeper look at how different parts of the population have different types of debt and the loan program for parents wanting to help their kids with the student debt um that seems to be causing particular issues. So what are the problems there? Why are people running into difficulties. One of the issue there is that type of debt. That portion of student loans is
rising much more rapidly than any other portion. So a lot of parents are trying to do the best thing for their kid and incurring a lot of debt to send them to college. And the debt is not cheap. It comes with a four percent more than a four percent origination fee, So right off the top, you're paying four percent more than everyone else. And the interest rates are over seven that's extraordinary. There's a huge gap between
the student loan interest rate and say the tenure. The US tenure it wu the last dozen years, it's average more than four d basis points. Well, that's four percentage points more expensive. And what is I mean? I think we obviously have seen in as Over the last few years in the US, it's been a very prominent feature student debt, not so much the parent debt, but the certainly student debt. And there's lots of proposals for helping people with it, but what's the politics of of helping
older people with this kind of debt. So in the last election, for the first time it became a campaign issue. UM it rose to that level of prominence overall student that not necessarily the parent portion, but it became, you know, campaign issues, So a lot of different politicians were running on UM forgiving everything. Biden's kind of been opposed to that. So far, he hasn't really staked his ground, but he said he was willing to do a smaller portion of forgiveness.
But for parents in particular. You have a lot of people now at the age when they should be saving for retirement, at the age when they are retired, and there's still paying student lens. So you have some people collect in Social Security retirement income and paying student loans, which UM is not a good scenario, and it's not a it's not a straight Democrat Republican split, is it. People feel differently on different sides of the are now
you know, everything is political these days in Washington. But under Trump, the fellow appointed to be in charge of student loans, he resigned and he said the whole system can't be fixed, and he recommended a universal, um, a universal for parents. Um, you know, have the government pay off all these debts. He simply said, the system is broken and there's no good solution to fix it, and the country as a whole is better off just starting
from scratch. And it was interesting because I think that guy he actually and he blamed the schools for the universities for putting students in this in this problem. There's a massive misalignment and incentives, so parents and students can take out this money very easily. There's no background check of any type. Um, it's much more difficult to get a five thousand dollar small business loan than say a
fifty dollar loan to go to college. At the same time, schools have no incentive, they have no skin in the game, so they have no incentive to keep costs down, and you know, they're happy to have more and more kids paying a lot of fees. The government, you know, gives this money out pretty easily, probably a lot easier than they should, Um, there's no type of distinction on the type of college you're going to, the type of major you're studying. Everyone's paying the same rate, and they do
that for you know, particular reasons. But at the same time, if there was a different incentive, and you know, if you're going to a very good school, your grades are it and you're studying, say a field that's in high demand, you know, and on the in the private market, you would probably pay less and interest Um, you know, with the government running things, everyone is paying the same and
it's creating a misalignment of incentives. And I guess one, I mean, one reason why it's probably easy to get is it's much much harder to write off. I mean, if you that the normal bankruptcy rules don't let you write it off the way you would be able to write off other kinds of consumer debt or indeed, mortgage debt that you could just walk away from. In the US,
it's extremely difficult to get it written off. Lately, there have been some, you know, very few cases where people have been able to get the debt reduced, but for the most part, you know, you're stuck with it, and you know, people are stuck with it so last year that the Partmit of Education was able to claw back five billion dollars from people's social security incomes or tax refunds or other parts of um, you know, government income
when someone wasn't paying their student learned that that's an incredible figure. I mean, I guess that the human, the human aspect of this is and I remember learning this many years ago, that some of the different repayment rates relate to how people feel about the debt and if you people will try very hard to hold onto their
homes and to carry on paying their mortgages. If you took it, if you did a degree and actually it didn't help you much and you didn't get a great job out of it, you don't have the same kind of association. You don't feel the same kind of determination of pride in in paying it back if it hasn't worked out so well. So it's I think there's an element of of psychology around this. But in the UK you can write it's written off after thirty years student debt.
I wonder whether do you think that might make sense in the US too. I think it would definitely makes sense, especially for older people or people that become disabled. One issue is people's incomes and their lives are not always a straight line. People get divorced, people have health problems, people have a death in the family, so their incomes fluctuate.
They lose their jobs, so it's difficult to always pay the same amount every month with student debt, and for some people they are more than two hundred thousand dollars, so it can be quite a significant amount every month that has to go out. There's also the St. Louis FED has done some studies on the outcomes for college graduates, and for many that don't necessarily go to the best school and don't necessarily have the best grades, there's not much benefit to go to college. It's not much better
than a high school degree. So there is um. There is, Like you're saying, there's a lot of problems with people feeling good about getting this that if they can't find a job that helps them pay for it, there's a massive investment. Is not very high. Turn well, Alex Tansy, thank you so much for talking us through it. Thank you, thank you very much. In case you hadn't noticed, inflation is back. The headline rate of inflation in the US hit five percent last month. That's the highest since two
thousand and eight. We've talked before on this podcast about rising commodity prices and the record cost of shipping. Now it's diapers on nappiece and restaurant meals. Diaper banks have seen a jump in demand in many US states as low income families deal with the consequences of price hikes by the two companies which dominate the U S diaper market, PNG and Kimberly Clark. And now you can finally go to your local restaurant, you're probably finding that prices have
gone up there as well. US Economy reporter Olivia Rockman has more on that last story. Olivia, tell me why restaurant chains are feeling the strain and needing to hike prices. And one side, they're getting a lot of pressure from commodities, so that could be chicken, beef, even shipping costs for their products. Chicken, for example, is at a decades high in terms of price increases. And on the other hand, they're being hit with with wage increases that they're having
to take in order to attract workers. Because in the US we've had a lot of generous unemployment benefits, which is not motivating many people to return to the workforce, and so it's really on every end of their cost cycle that they're facing these pressures and then in turn having to raise prices. Yeah, and I think it's always worth remembering when people talk about the fear of inflation.
I mean, there's lots of things to worry about inflation, and often it does affect poor people the most because they haven't necessarily got wage increases rising in line with inflation. But on the other hand, you know, some of this inflation is about increasing people's incomes, people getting paid more um to work in restaurants and other places. And what companies are we seeing increased prices and what what kind
of peace we've seen. The first big company that we saw do this was Chippotle, Mexican restaurant chain here in the US, and they had taken a wage increase a couple of months ago and then shortly after announced that they were raising their prices about four percent. We saw the same with Cracker Barrel and other restaurant chain. McDonald's has talked about needing to take price increases soon because of wage increases, and we're hearing it from small businesses too.
And they do come up with a few sneaky ways of hiding this from us. You don't you don't necessarily know that the price has gone up. Yes, so companies in their earnings cause will say they're looking at their pricing strategy, or they're going to take pricing, or they're looking at their price calculation, and they won't overtly say that they're increasing prices. And so it is sort of a game that they're playing between their investors and their customers.
But if you're a customer, you're gonna notice. I mean they also trying to shrink the pulsian sizes or do something I know that often happens with consumer products. You find that your favorite chocolate bar is actually more than it was a few years ago. Yeah, we heard from Wingstop at Chicken Company that they're starting to use every part of the chicken to make their products rather than just the legs are just the breast that they used to use. So there are some creative cost manipulations going
on as well. I'm surprised that they wanted to publicize that. It doesn't make me want to jump in, but maybe that's it's good. It's good environmental grounds. You should use every last drop. Thanks very much, Olivia. That's it for Stephonomics this week. I'll be back next week with a special episode on the future of the global economy, featuring a discussion with former US Treasury Secretary Larry Summers and
big name investor Ray Dalio. So tune in for that and follow as Economics on Twitter to hear more economic news and analysis from Bloomberg. This episode was produced by Magnus Hendrick Soon. The report from China was written and reported by Charlie jou, Lyn Ju and Daniel Away, with special thanks to tong Jiang Dong, Doug Huang, Madison Baglia, Alex Tanzi, and Olivia Rockman. Mike Sasso is the executive producer of Stephanomics and the head of Bloomberg Podcast is Francesco Lea.