The 3rd EuroNTA Workshop 28 October 2010 Institute for Future Studies Stockholm, Sweden

Changing Patterns of Intergenerational Transfers and Life-Cycle Consumption

in Finland and Sweden 1990-2006

The 3rd EuroNTA Workshop28 October 2010

Institute for Future StudiesStockholm, Sweden

Marja Riihelä, Government Institute for Economic ResearchRisto Vaittinen, Finnish Centre for Pensions

Reijo Vanne, Finnish Pension AllianceJovan Zamac, Inst. For Future Studies, Stockholm

Contents

• Age structure of the population 1900 - 2050

• Real growth and labor force and employment rates 1975 - 2007

• Aggregate LCD and its finance 1975-2007

• Labor income, consumption and LCD by age 1990 and 2006

• LCD and components of its finance by age group 1990 - 2006

…”yesterday when we were young”,Sweden used to be the oldest country in the world

Source: Statistics Finland and Sweden

Source: Statistics Finland and Sweden

Working-aged and employed persons as % of pop in 1975–2009 in Fin and Swe

35

40

45

50

55

60

65

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

% o

f pop

ulati

on

Working-aged 20-64 (year end, pop statistics)Employed (average, national accounts)

Sources: Statistics Finland, own calculations, NTA database

Aggregate LCD as percentage of aggregate labor income in Finland and Sweden 1975 – 2007

Business cycle based changes and one structural change in Finland?

Private and public asset-based reallocations in Finland…higher asset income and private saving

-30

-20

-10

0

10

20

30

40

50

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

% o

f la

bo

r in

com

e

Private saving Public savingPrivate asset income Public asset income

+ = contributing to financing LCD

Labor income and consumption by age in 1990 and 2006 in Finland

0

0,2

0,4

0,6

0,8

1

1,2

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90

Rat

io t

o a

vera

ge

pri

me

age

lab

or

inco

me

Consumption 1990 Labor income 1990Consumption 2006 Labor income 2006

1990 2006

0 %

1 %

2 %

3 %

4 %

0 10 20 30 40 50 60 70 80 90 100

AgeLabor incomeConsumption

18 %

37 %

0 %

1 %

2 %

3 %

4 %

0 10 20 30 40 50 60 70 80 90 100

AgeLabor incomeConsumption

24 % 24 %

31 %

2=-1+3

6=2+4

6=5+1

22 %

LCD diff=Dem+Beh&Pol14=6+8

Labor income and consumption sums by age as percentage of aggregate labor income in 1990 and 2006 including decomposition of the LCD change to demographic, behavioral and policy effects

Labor income by age in 1990, 1993 Sweden

Labor income by age in 1990, 1993, 2006 Sweden

Labor income and consumption by age in 1990, 1993 Sweden

Labor income and consumption by age in 1990, 1993, 2006 Sweden

LCD over wages

LCD and Debt

LCD and Debt Swe

LCD and Debt Fin

LCD /Debt Fin and Swe

LCD /Debt Swe 1950 - 2006