Volume 30 - Article 20 | Pages 579-608

Quantifying policy tradeoffs to support aging populations

By Sergei Scherbov, Warren C. Sanderson, Marija Mamolo

Print this page  Send this article to a friend  Twitter

 

 
Date received:05 Feb 2013
Date published:04 Mar 2014
Word count:3907
Keywords:aging, labor force participation rates, normal pension age, pensions, retirement policy
DOI:10.4054/DemRes.2014.30.20
 

Abstract

Background: Coping with aging populations is a challenge for most developed countries. Supporting non-working adults can create an unsustainable burden on those working. One way of dealing with this is to raise the normal pension age, but this has proven unpopular. A complementary approach is to raise the average labor force participation rate. These policies are generally more politically palatable because they often remove barriers, allowing people who would like to work to do so.

Objective: To conceptualize and estimate the trade-off between pension age and labor force participation rate policies.

Methods: We project the populations of European countries and apply different levels of labor force participation rates to the projected populations. We introduce the notion of a relative burden, which is the ratio of the fraction of the income of people in the labor market in 2050 that they transfer to adults out of the labor market to the same fraction in 2009. We use this indicator to investigate the trade-offs between changes in normal pension ages and the general level of labor force participation rates.

Results: We show that, in most European countries, a difference in policies that results in an increase in average labor force participation rates by an additional one to two percentage points by 2050 can substitute for a one-year increase in the normal pension age. This is important because, in many European countries, without additional increases in labor force participation rates, normal pension ages would have to be raised well above 68 by 2050 to keep the burden on those working manageable.

Conclusions: Because of anticipated increases in life expectancy and health at older ages as well as because of financial necessity, some mix of increases in pension ages and in labor force participation rates will be needed. Pension age changes by themselves will not be sufficient.

Author's Affiliation

Sergei Scherbov - International Institute for Applied Systems Analysis, Austria [Email]
Warren C. Sanderson - State University of New York, Stony Brook, United States of America [Email]
Marija Mamolo - Austrian Academy of Sciences, Austria [Email]

Other articles by the same author/authors in Demographic Research

» Very long range global population scenarios to 2300 and the implications of sustained low fertility
Volume 28 - Article 39

» Significance of life table estimates for small populations: Simulation-based study of estimation errors
Volume 24 - Article 22

» Projection of populations by level of educational attainment, age, and sex for 120 countries for 2005-2050
Volume 22 - Article 15

» A new perspective on population aging
Volume 16 - Article 2

» Marriage in Russia: a reconstruction
Volume 10 - Article 2

» Period Fertility in Russia since 1930: an application of the Coale-Trussell fertility model
Volume 6 - Article 16

Most recent similar articles in Demographic Research

» How does education change the relationship between fertility and age-dependency under environmental constraints? A long-term simulation exercise
Volume 30 - Article 16    | Keywords: aging

» An examination of black/white differences in the rate of age-related mortality increase
Volume 29 - Article 17    | Keywords: aging

» Generational interdependencies in families: The MULTILINKS research programme
Volume 27 - Article 18    | Keywords: aging

» Senescence vs. sustenance: Evolutionary-demographic models of aging
Volume 23 - Article 23    | Keywords: aging

» Indonesia against the trend? Ageing and inter-generational wealth flows in two Indonesian communities
Volume 19 - Article 52    | Keywords: aging