department of social policy and social...
TRANSCRIPT
DEPARTMENT OF SOCIAL POLICY AND SOCIAL WORK
‘Old Europe’ – pensions, taxes and alternatives
David Coleman University of Oxford [email protected] http://www.spi.ox.ac.uk/oxpop
Population ageing: an unavoidable destiny
Population ageing good for young populations. Older population structure here to stay – an irrevocable
feature of mature society. A consequence of beneficial reductions in death and birth
rates. A sustainable youthful population would require a return to
high birth and death rates. Population age-structures will eventually stabilize, given
constant vital rates (i.e. ageing does not get worse and worse).
However longer life means even older populations, but changes meaning of ‘old age’.
A warning from the 1930s. Source: Population Investigation Committee 1936 ‘The Future of Our Population?’.
Population structure circa 1700 at the then lowest possible level of mortality. Best kept in the past.
Expectation of life at birth male 37 years, female 40 years. Infant mortality = 193 infant deaths per 1000 live births.
Population aged under 15 years 28%; population aged 65 and over 7%. Growth rate zero.
Source: Coale and Demeny West Level 9 model life table. Population pyramid, stationary population with female e0 = 40 years (percent of total)
6.0 4.0 2.0 0.0 2.0 4.0 6.0
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80+
male female
The demographic transition in England and Wales 1730 – 2009. Sources: England up to 1836 Wrigley and Schofield
1981 ; England and Wales from 1837 ONS.
-10
0
10
20
30
40
50
1730
1738
1746
1754
1762
1770
1778
1786
1794
1802
1810
1818
1826
1834
1842
1850
1858
1866
1874
1882
1890
1898
1906
1914
1922
1930
1938
1946
1954
1962
1970
1978
1986
1994
2002
Rat
es p
er th
ousa
nd p
opul
atio
n
Vital Rates, England / England and Wales 1730 - 2009.all rates per thousand population. Sources: up to 1837 Wrigley and Schofield 1981, for England only. 1838
onwards, civil registration for England and Wales (OPCS / ONS).
Crude Birth Rate
Crude Death Rate
Rate of Natural Increase
Examples of youthful, and ageing, populations (one showing positive momentum; the other negative).
Population by sex and age, Uganda 1991 (percent)
25.0 20.0 15.0 10.0 5.0 0.0 5.0 10.0 15.0 20.0 25.0
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90-94
95-99
Age
-gro
up
Percent by sexMales Females
Population by sex and age, Italy 1998 (percent)
10.0 8.0 6.0 4.0 2.0 0.0 2.0 4.0 6.0 8.0 10.0
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90-94
95-99
Age
-gro
up
Percentage by sex
Males Females
Evolution of a new age-structure in Austria 1: 1869 – 1934. Source: Demografische Informationen 1995/6 page 109.
Evolution of a new age-structure in Austria 2: 1951 – 1995.
Evolution of a new age-structure Austria 3: 2015 – 2050.
Theoretical relationship between proportion of population of working age and total fertility.
Source: Bloom, Canning et al. 2010 Figure 3.
Causes of population ageing
Lower fertility (‘ageing from the bottom’). Always makes populations older. The main force behind population ageing during the demographic transition. In developed societies now giving way to effects of:
Lower mortality (‘ageing from the top’). Makes populations YOUNGER when death rates are high, OLDER only when death rates are low.
Total Fertility trends TFR trends Major Regions 1950 - 2006
unweighted means. Source: Council of Europe, Eurostat, national statistical offices
1.0
1.5
2.0
2.5
3.0
3.5
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
CEE unweighted meanSouthern unweighted meanFSU unweighted mean (excluding Moldova)Northern EuropeWestern EuropeUSA
TFR trends UK and comparable countries 1950 - 2009
Total Fertility trends, UK, Northern Europe and 'Neo-Europes' 1950 - 2009 (unweighted means)
Sources: Council of Europe, Eurostat and National Statistical Yearbooks
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
Mea
n To
tal F
ertil
ity
NeoEuropes mean
Scandinavia mean (excludingIceland)
UK
An uncertain future: ‘lowest-low’ fertility in the Far East
Total fertility trends, Japan and the Far East 'little dragons' to 2006Source: national statistical offices.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Hong KongSouth KoreaSingaporeTaiwan ROCJapan
Birth rates can go up…. Total Fertility trends, industrial higher-fertility countries 1945-2008
Source: Council of Europe, Eurostat and national statistical yearbooks
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.519
45
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
Denmark
France
NZ
USA
Norway
United Kingdom
Period expectation of life at birth 1850 - 2000, E&W. Source: ONS.
30
40
50
60
70
80
90
1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Year
Exp
ecta
tio
n o
f li
fe (
year
s)
Males
Females
Period expectation of life at age 65, 1850 – 2000, E&W.
6
8
10
12
14
16
18
20
1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Year
Exp
ecta
tio
n o
f li
fe (
year
s)
Males
Females
Actual and projected expectation of life at birth, UK 1981 – 2083. Source: ONS 2009.
UK population by age and sex 2006 UK population distribution by age and sex 2006
(percent)
4.00 3.00 2.00 1.00 0.00 1.00 2.00 3.00 4.00
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90-94
100+
males females
UK population distribution by age and sex 2056 (percent) GAD 2004-based PP assumptions
-4.00 -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90-94
100+
males females
A worse case: Japan 1920, 2010, 2060. source http://www.ipss.go.jp/pp-newest/e/ppfj02/suikei_g_e.html
http://www.ipss.go.jp/site-ad/TopPageData/2010.png
From ‘bonus’ to ‘onus’: India and China in 2050. Source: United Nations.
Contrasts in demographic bonus - population of China and India 2050 by age-group (millions). Source: United Nations 2006-based projections.
0
20
40
60
80
100
120
140
0-4
5-9
10-1
4
15-1
9
20-2
4
25-2
9
30-3
4
35-3
9
40-4
4
45-4
9
50-5
4
55-5
9
60-6
4
65-6
9
70-7
4
75-7
9
80-8
4
85-8
9
90-9
4
95-9
9
100+
China 2050India 2050
China dependency ratio: 63.9India dependency ratio: 48.5
Problematic aspects of population ageing
Lower birth and death rates increase the aged dependency ratio, only partly relieved by lighter youth dependency ratio.
Generally adverse effects on economic production/consumption balance.
Specific problems: labour shortage, possible inflation, care arrangements for elderly, adequacy of pension provisions (last affected by longer life alone, even with constant birth rate)
Demographic dependency ratios are based upon the ratios of the population of nominal dependent ages to the population of nominal economically active age (irrespective of level of workforce participation). Conventional age-groups are 0-14, 15-64 and 65+. More realistically, as used by Eurostat, the conventional age-groups are 0-19, 20-59 and 60+. Total Dependency Ratio : Total Dependent Population = pop 0-14 + pop 65 and over * 100 per 100 Active Population pop 15 - 64 The youth and aged components of dependency can differ substantially and are often calculated separately. Youth Dependency Ratio: Youth Dependent Population = pop 0-14 * 100 per 100 Active Population pop 15 - 64 Aged Dependency Ratio: Aged Dependent Population = pop 65 and over * 100 per 100 Active Population pop 15 - 64
The Potential Support Ratio is the reciprocal of the Dependency Ratio and indicates the number of persons in the nominally active population per dependent. In view of concerns about population ageing, it is most often encountered in the form of the Aged Potential Support Ratio, the number of active persons aged 15-64 per aged dependent aged 65 and over. e.g: Yemen 2000 UK 2000 Italy 2025 Italy 2050 Population 0-14 48.3 18.9 11.4 12.4 Population 15-64 49.4 65.3 63.0 48.1 Population 65 and over 2.3 15.8 25.6 35.7 Overall Dependency Ratio 102.4 53.1 58.7 107.8 Youth Dependency Ratio 97.8 28.0 18.1 25.8 Aged Dependency ratio 4.7 24.2 40.6 74.2 Aged Potential Support Ratio 21.4 4.1 2.5 1.4
Longer life after retiring age
Projected expectation of life 2004 based projectionsUnited Kingdom
at birth age 65males females males females
2002-03 76.8 81.3 16.8 19.62011-12 78.6 82.5 18.3 20.72021-22 80.3 84.2 19.8 22.12031-32 81.4 85.3 20.6 23.0
Potential Support Ratio, UK 1980-2100 GAD PP 1998-based. Population Trends 103
Figure 7 Ratio of persons aged 15-64 to those aged 65 and over, United Kingdom, 1980-2100
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1980 2000 2020 2040 2060 2080 2100Year
Rat
io
HF - HM
PP
HF - PMHF - LMPF - HM
LF - HMPF - LMLF - PMLF - LM
See Box 4 for keyProjected
Aged potential support ratio, selected countries 2000
and 2050. Source: UN 2004 medium variant.4.17 4.00 4.17 4.17
3.70
2.63
2.13 2.00
1.52 1.45
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
UnitedKingdom
France Germany Spain Italy
2000 2050
UK population – rapid growth but still ageing Population projection, United Kingdom 2008 - 2081 (millions).
Principal Projection and variants. Source: ONS 2009.
50
55
60
65
70
75
80
85
90
95
2008
2011
2016
2021
2026
2031
2036
2041
2046
2051
2056
2061
2066
2071
2076
2081
Principal ProjectionHigh MigrationLow MigrationNatural change (zero migration)
Immigration as demographic salvation
Do we need to be saved? Why should ‘no decline’ targets be met (UN 2000)? Is zero growth or decline axiomatically undesirable?
Immigration can keep population, or workforce size, approximately constant.
But that can require very large inflows; and adjustment difficult. Immigration can 'solve' population ageing only with huge population
increases. Given sub-replacement fertility, migration to maintain constant size
must eventually replace original population with immigrant population. Does a society ‘save’ itself that way?
‘Economism’ and ‘Demographism’ tend to ignore environmental and social problems of immigration and population growth.
Potential effect of migration upon age-structure. Source Eurostat 2011 Statistics in Focus 1/2011
Indian population, England and Wales Census 2001 (percent)
5.00 3.00 1.00 1.00 3.00 5.00
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90 +
percent of population
females males
Pakistani population, England and Wales Census 2001 (percent)
7.00 5.00 3.00 1.00 1.00 3.00 5.00 7.00
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90 +
percent of population
males females
No limits to migration? Immigration and the PSR
Population Trends 103 Figure 8 Support ratio under alternative assumptions, United Kingdom, 1980-2100(a) alternative migration assumptions
0.00.51.01.52.02.53.03.54.04.55.05.5
1980 2000 2020 2040 2060 2080 2100Year
Rat
io
Zero95,000 (principal)
500,000250,000
Long-term TFR: 1.8Long-term annual net inward migration: as shown
1,000,000
Projected
0.00.51.01.52.02.53.03.54.04.55.05.5
1980 2000 2020 2040 2060 2080 2100Year
Ratio
2.5
1.61.8 (principal)2.02.25
Long-term TFR: as shownLong-term annual net inward migration: 95,000
Projected
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1980 2000 2020 2040 2060 2080 2100Year
Rat
io 65
69686766
7071
72Long-term TFR: 1.8Long-term annual net inward migration: 95,000
Net Annual Immigration required to maintain UK Potential Support Ratio, 2000 -
2100 (millions)
0
1
2
3
4
5
6
1998
2000
2010
2020
2025
2030
2040
2050
2060
2070
2080
2100
mill
ions
UK population size required to maintain given PSRs by immigration, 2000 - 2100 (millions)
0
50
100
150
200
250
300
35020
00
2010
2020
2025
2030
2050
2060
2080
2100
PSR 3.0 PSR 3.5 PSR 4.22
All the world must go to live in Korea
0
1000
2000
3000
4000
5000
6000
700019
95
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
mill
ions
UN Medium variant population Population from PSR replacement migration
Can higher fertility save the day? Only up to a point.
Replacement TFR (2.08) would eventually maintain population size and raise PSR to near 3. If no net migration, no popn. growth
TFR would need to rise to about 3.5 to ‘preserve’ current PSR of about 4.
That would raise population growth rate to about 1.8% per year: considerable population growth though not as great as ‘equivalent’ effect with immigration.
Effects on UK PSR of different fertility levels (Population Trends 103)
0.00.51.01.52.02.53.03.54.04.55.05.5
1980 2000 2020 2040 2060 2080 2100Year
Ratio
Zero95,000 (principal)
500,000250,000
Long-term TFR: 1.8Long-term annual net inward migration: as shown
1,000,000
Projected
0.00.51.01.52.02.53.03.54.04.55.05.5
1980 2000 2020 2040 2060 2080 2100Year
Ratio
2.5
1.61.8 (principal)2.02.25
Long-term TFR: as shownLong-term annual net inward migration: 95,000
Projected
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1980 2000 2020 2040 2060 2080 2100Year
Ratio 65
69686766
7071
72Long-term TFR: 1.8Long-term annual net inward migration: 95,000
How to restore UK PSR to about 4 by 2056 (i) TFR of 5.5
0
10
20
30
40
50
60
70
2006
2016
2026
2036
2046
2056
2066
2076
2086
UK population 2006-86. Major age-groups (percent of total)
.
0-14
15-64
65 and over
50,000100,000150,000200,000250,000300,000350,000400,000450,000500,000
2006
2016
2026
2036
2046
2056
2066
2076
2086
United Kingdom. Population projection 2006-2086 (thousands).
OXPOP projection
ONS Principal Projection
1.02.03.04.05.06.07.08.09.010.0
2006
2016
2026
2036
2046
2056
2066
2076
2086
United Kingdom 2006-86. Aged potential support ratio
4.0 3.0 2.0 1.0 0.0 1.0 2.0 3.0 4.0
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90-94
95-99
100+
UK population distribution by age and sex 2006 (percent)
females males
-10.0 -5.0 0.0 5.0 10.0
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90-94
100+
UK Population distribution by age and sex 2086 (percent)
females males8.007.006.005.004.003.002.001.000.001.002.003.004.005.006.007.008.00
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90-94
100+
UK population distribution by age and sex 2026 (percent )
females males
How to restore UK PSR to 4 by 2056. (ii) increase net annual immigration to 800,000.
50,000
70,000
90,000
110,000
130,000
150,000
170,000
190,00020
06
2016
2026
2036
2046
2056
2066
2076
2086
United Kingdom. Population projection 2006-2086 (thousands).
OXPOP projection
ONS Principal Projection
0
10
20
30
40
50
60
70
2006
2016
2026
2036
2046
2056
2066
2076
2086
UK population 2006-86. Major age-groups (percent of total)
.
0-14
15-64
65 and over
4.0 3.0 2.0 1.0 0.0 1.0 2.0 3.0 4.0
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90-94
95-99
100+
UK population distribution by age and sex 2006 (percent)
females males
-4.0 -2.0 0.0 2.0 4.0
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90-94
100+
UK Population distribution by age and sex 2086 (percent)
females males5.00 4.00 3.00 2.00 1.00 0.00 1.00 2.00 3.00 4.00 5.00
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90-94
100+
UK population distribution by age and sex 2026 (percent )
females males
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2006
2016
2026
2036
2046
2056
2066
2076
2086
United Kingdom 2006-86. Aged potential support ratio
Demography isn’t everything Ageing Vulnerability Index 2003
Public Fiscal Benefit Elder
Overall Index Burden Room Dependence AffluenceRank Score Rank Rank Rank Rank
Australia 1 -1 2 2 4 6UK 2 7 1 1 6 11US 3 18 3 4 3 1Canada 4 42 6 6 5 2Sweden 5 48 4 3 8 10Japan 6 50 9 9 1 3Germany 7 52 7 5 11 5Netherlands 8 62 8 7 9 4Belgium 9 63 5 8 10 9France 10 81 10 10 12 8Italy 11 84 11 11 2 12Spain 12 93 12 12 7 7
weight 1/3 1/3 1/6 1/6
Source: Jackson and Howe 2003, Figure 18
Managing population ageing
Improve the actual support rate (a) increase workforce participation • retraining unemployed, discouraging early retirement and perpetual students, • more flexible labour market arrangements • help women to combine work with childcare (part-time work, school hours)
(b) increase the average age of retirement • increase pension entitlement age • remove tax and other disincentives for working pensioners • end of ‘cliff-edge’ retirement.
Moderate financial burden • limit state pension, 'second and third pillar' funded pensions .
Increase labour productivity
Real support ratios- lower or much lower than ‘potential’ ones
Real aged support ratio: number employed / number of pensioners
Real overall support ratio: Number employed / number of pensioners + working age not employed + children
Effect on EU15 labour force of Danish participation rates
Potential increase in EU 15 workforce , 1999, given Danish participation rates (millions)
0
5
10
15
20
25
30
35
40
Economically active Actually employed
all males females
Effects on UK PSR of higher retirement ages Population Trends 103
0.00.51.01.52.02.53.03.54.04.55.05.5
1980 2000 2020 2040 2060 2080 2100Year
Rat
io
Zero95,000 (principal)
500,000250,000
Long-term TFR: 1.8Long-term annual net inward migration: as shown
1,000,000
Projected
0.00.51.01.52.02.53.03.54.04.55.05.5
1980 2000 2020 2040 2060 2080 2100Year
Rat
io
2.5
1.61.8 (principal)2.02.25
Long-term TFR: as shownLong-term annual net inward migration: 95,000
Projected
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1980 2000 2020 2040 2060 2080 2100Year
Rat
io 65
69686766
7071
72Long-term TFR: 1.8Long-term annual net inward migration: 95,000
Effective retirement ages, men, 2000 – 2009. Source: OECD
57
59
61
63
65
67
69
71
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Australia
Austria
belgium
Czech republic
Estonia
Japan
Spain
Sweden
Pension variety and reform PAYG unfunded, directly vulnerable to population
ageing, cheap to administer, state system, huge vested (voter) interest.
Occupational funded, employer and employee contribute, can promote investment, vulnerable indirectly to population ageing. ‘Final salary’ schemes now unaffordable, being dropped.
Private funded, employee only contributes, and takes risk.
But reform is difficult…..
Global defined-benefit pensions: ratio of liabilities to assets. Times 8 Feb 2011 Business p. 12. UK assets $2.3 trillion
Protests against austerity turn nasty – Greek general strike , Athens 2011. Times 24 February 2011
Conclusions No demographic ‘solutions’ for inevitable population ageing.
Some pain unavoidable. ‘Replacement’ migration for total and working-age
population difficult, for age-structure a fantasy. Return to fertility closer to 'replacement' very helpful, but still
no ‘solution’. Non-demographic management crucial. ‘Doomsday’ or ‘timebomb’ scenarios assume no adaptation
by public policy or the market. Management much more difficult if birth rates persistently
low, as in Italy, Japan. Countries in Southern Europe disadvantaged by low fertility,
low mortality, low participation rates, early retirement, , strict employment protection, high PAYG pensions.
Management needs parallel reforms of workforce participation, retirement age, pensions funding, capital investment, productivity improvement.