BACKGROUNDCoping 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.
OBJECTIVETo conceptualize and estimate the trade-off between pension age and labor force participation rate policies.
METHODWe 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.
RESULTSWe 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.
CONCLUSIONBecause 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.
The interplay between changes of different demographic determinants may trigger or prevent convergence of various dimensions of demographic behaviour both within and between countries of western and Eastern Europe. We investigate whether convergence or divergence dynamics prevail across cohorts in Austria, Hungary, northern Italy and Slovenia with regard to union formation and transition to motherhood. Our findings suggest that convergence in patterns of union formation and first birth is far from being achieved across the countries considered. Postponement of family formation and motherhood has spread, but between-country differences persist and even suggest diverging cross-country patterns.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.