Open Access Open Access  Restricted Access Subscription or Fee Access

A GLOBAL VIEW ON DEMOGRAPHIC PRESSURE AND LABOUR MARKET PARTICIPATION

Marga Peeters, Loek Groot

Abstract


Demographic change exerts pressure on labour markets and public finances across the globe. Most studies on ageing focus on the projected development of the old age dependency ratio, the ratio of persons 65 or older relative to the working age population. This ratio gives a very incomplete picture of the (fiscal) pressure from demographic changes. In this study, besides the share of the dependent population composed of the young and old we include the share of the working age population that is not active on the labour market, labelled as the labour market space. By analysing 21 developing and 29 developed economies across the globe, we cover 75% of the 9.3 billion people that the United Nations projects for the whole world in 2050. A new indicator, relating demographic pressure from fiscal spending to the available space at the labour market, enables us to quantify and compare the pressure-to-space across countries over the time span 2010-2050. The indicator points out that Poland, Turkey and Greece are most under pressure, whereas developing countries Uganda, the Democratic Republic of Congo and Tanzania will experience a very low pressure up to 2050. Across countries, the relation between fiscal pressure exerted by the dependent population and the labour market space is positive. There is thus room for using this space by, for instance, working more hours or increasing the retirement age, as this will alleviate the fiscal pressure. This suggests a policy trade-off between maintaining publicly financed services to the dependent population and maintaining labour market space.


Keywords


public finance, demography, dependency rates, labour market, unemployment, social security, pensions.

Full Text:

PDF

References


Andersen, Torben M., 2006, The Scandinavian model – Prospects and challenges, International Tax and Public Finance, 15(1): 45-66.

__________________________., 2008, Fiscal sustainability and demographics – should we save or work more; CEPR Discussion Paper 7044.

Authors, 2011, A global view on demographic pressure and labour market participation (extended version with data description), MPRA 30257.

Bloom, David E. and David Canning, 2004, Global demographic change: Dimensions and economic significance, Proceedings, Federal Reserve Bank of Kansas City, issue August, 9-56.

__________________________________________, Rick Mansfield and Michael Moore, 2007, Demographic change, social security systems, and savings, Journal of Monetary Economics, 54(1): 92-114.

____________________ and Roddy McKinnon, 2010, Social security and the challenge of demographic change, Program on the Global Demography of Aging (PGDA), working paper no 61.

Bovenberg , A. Lans., 2008, The life-course perspective and social policies: An overview of the issues, CESifo Economic Studies, 54(4): 593–641.

Brooks, Robin, 2000, What will happen to financial markets when the baby boomers retire?, International Monetary Fund Working Paper 00/18.

Bryant, Ralph C. And Warwick J. McKibbin, 1998, Issues in modelling the global dimensions of demographic change, Brookings discussion papers in international economics no. 141.

Esping-Andersen, Gøsta, 1990, Three worlds of welfare capitalism, Cambridge: Polity Press.

European Commission DG Economics and Financial Affairs, 2006, The Long-term sustainability of public finances in the European Union. European Economy 4.

Goodin, R.E. and A. Smitsman, 2000, Placing welfare states: The Netherlands as a special test case, Journal of Comparative Policy Analysis 2: 39-64.

Heller, Peter S., Assessing a government’s exposure to fiscal risk, John Hopkins University.

Horioka, Charles Yuji, 2010, Ageing and saving in Asia, Pacific Economic Review 15(1): 46-55.

Horton, Mark, Manmohan Kumar and Paolo Mauro, 2009, The state of public finances: A cross-country fiscal monitor, International Monetary Fund Staff position note SPN/09/21.

International Labour Office (ILO), 2010, Employment and labour market adjustments in G20 countries during 2007-09 and outlook for 2010: A statistical overview. Washington DC.

International Monetary Fund, Article IVs China, India and other countries.

Kent, Christopher, Anna Park and Daniel Rees (eds.), 2006, Demography and financial markets. G20 Proceedings of a conference held in Sydney, 23-25 July 2006.

Lee, Ronald, Sang-Hyop Lee and Andrew Mason, 2006, Charting the economic life cycle, NBER Working Paper Series 12379.

Mason, Andrew, Sang-Hyop Lee and Gerard Russo, 2006, Demography of aging across Asia, in: Handbook of Asian Aging, H. Yoon and J. Hendricks (eds.), Baywood Publishing, chapter 2.

Meier, Volker and Martin Werding, 2010, Ageing and the welfare state: Securing sustainability, CES-IFO Working Paper 2916.

OECD Economic Outlook, 2007, Financing social protection: The employment effect, chapter 4.

Peeters, Marga, 2011, Demographic pressure, excess labour supply and public-private sector employment in Egypt – Modelling labour supply to analyse the response of unemployment, public finances and welfare, Journal of Economics and Econometrics 54(2):58-92.

Peeters, Marga and Loek Groot, 2012, Demographic change across the globe – Maintaining social security in ageing economies, forthcoming in World Economics 13(2)

Pissarides, Christopher A., 1998, The impact of employment tax cuts on unemployment and wages: The role of unemployment benefits and tax structure, European Economic Review 42: 155-183.

Van der Veen, Robert and Loek Groot, 2006, Post-productivism and welfare states: A comparative analysis, British Journal of Political Science 36: 593-618.

World Bank, Public expenditures reports.


Refbacks

  • There are currently no refbacks.


Print Version ISSN 0975-3931

Online Version ISSN 2278-1277