Terry McKinley, Jo Michell and Giovanni Cozzi Centre for Development Policy and Research (CDPR) School of Oriental and African Studies (SOAS) University of London AUGUR stakeholder’s workshop, 17-18 November 2011 DG Research and Innovation, CDMA building, 21 rue Champ de Mars, Brussels AUGUR TRENDS IN DEMOGRAPHY TRENDS IN DEMOGRAPHY AUGUR WORK PACKAGE #4 AUGUR WORK PACKAGE #4
Terry McKinley, Jo Michell and Giovanni Cozzi Centre for Development Policy and Research (CDPR) School of Oriental and African Studies (SOAS) University.
Dec 19, 2015
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Terry McKinley, Jo Michell and Giovanni CozziCentre for Development Policy and Research (CDPR)
School of Oriental and African Studies (SOAS)University of London
AUGUR stakeholder’s workshop, 17-18 November 2011
DG Research and Innovation, CDMA building, 21 rue Champ de Mars, Brussels AUGUR
TRENDS IN DEMOGRAPHYTRENDS IN DEMOGRAPHY
AUGUR WORK PACKAGE #4AUGUR WORK PACKAGE #4
AUGUR stakeholder’s workshop, 17-18 November 2011
This presentation covers demographic trends, except for migration (covered in the companion presentation)
The focus is on Europe (which is disaggregated by blocs) and on the evolution of the age structure of the European population (young, working-age and elderly)
Within this focus, our research is concerned with addressing the impact of the progressive ageing of the European population
When the research is complete, we hope to be able to assess and recommend various policy options: 1) raising the retirement age, 2) encouraging more in-migration of workers, and/or 3) prioritising gains in employment (especially for young workers)
INTRODUCTORY REMARKS
AUGUR stakeholder’s workshop, 17-18 November 2011
We will begin with illustrative ‘baseline’ projections until 2030 of the age structure of the population for five European blocs (based on data in the CAM macroeconomic model)
We will also do some brief comparative analysis of trends in other blocs or countries (US, Japan, China, North Africa, West Asia)
The basic projections are well known: a relative decline in the young (<15), a relative increase in the elderly (65+) and increasing pressure on those of working age (15-64) to support both of these groups, especially the growing number of the elderly
How can we evaluate the impact of such trends? We use two composite indices for this purpose: 1) a ‘Government Service Standard’ and 2) an ‘Economic Dependency Ratio
INTRODUCTORY REMARKS
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
14
16
18
20
22
24
26
90 95 00 05 10 15 20 25 30
Central Europe
14
16
18
20
22
24
90 95 00 05 10 15 20 25 30
South Europe
15
16
17
18
19
20
21
22
90 95 00 05 10 15 20 25 30
North Europe
10
12
14
16
18
20
22
90 95 00 05 10 15 20 25 30
East Europe
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
15
16
17
18
19
20
21
90 95 00 05 10 15 20 25 30
UK
12
13
14
15
16
17
18
19
20
21
90 95 00 05 10 15 20 25 30
USA
8
12
16
20
24
28
32
90 95 00 05 10 15 20 25 30
Japan
4
6
8
10
12
14
16
18
90 95 00 05 10 15 20 25 30
China
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
59
60
61
62
63
64
65
66
67
68
90 95 00 05 10 15 20 25 30
Central Europe
64
65
66
67
68
69
70
71
90 95 00 05 10 15 20 25 30
East Europe
64
65
66
67
68
90 95 00 05 10 15 20 25 30
South Europe
62
63
64
65
66
67
90 95 00 05 10 15 20 25 30
North Europe
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
61
62
63
64
65
66
67
68
90 95 00 05 10 15 20 25 30
USA
56
58
60
62
64
66
68
70
90 95 00 05 10 15 20 25 30
Japan
66
67
68
69
70
71
72
73
90 95 00 05 10 15 20 25 30
China
62
63
64
65
66
67
90 95 00 05 10 15 20 25 30
UK
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
Our first assessment tool is called the ‘Government Service Standard’, which is essentially a combination of two ratios:
1) Government Expenditures/a ‘Weighted Population Index’
2) Compared to Average Income per Person
The ‘Weighted Population Index’ contains three groups:
1) The Elderly Population (65+ years), which is given a weight of 3;
2) The Young Population (<15 years), which is given a weight of 2;
3) The Working-Age Population, which is given a weight of 1.
As the Young or Elderly grow relative to the Working-Age population, the Population Index increases
THE ‘GOVERNMENT SERVICE STANDARD’
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
This Index will fall for two basic reasons:
1) Government Expenditures fall relative to Total Income
2) The ‘Weighted Population Index’ rises relative to the Unweighted Total Population, meaning that either the Young or the Elderly are growing faster than the Working-Age Population
In many European countries, the Elderly are growing the fastest , meaning that the ‘Weighted Population Index’ is increasing fairly rapidly, as the shrinking Working-Age Population has to support them through Government Expenditures
Though the ‘Government Service Standard’ represents a rough approximation of what we want to measure, it is useful in highlighting general trends
THE ‘GOVERNMENT SERVICE STANDARD’
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
12
13
14
15
16
17
18
19
20
90 95 00 05 10 15 20 25 30
Central Europe
12
13
14
15
16
17
18
19
20
90 95 00 05 10 15 20 25 30
East Europe
12
13
14
15
16
17
18
19
20
90 95 00 05 10 15 20 25 30
South Europe
12
13
14
15
16
17
18
19
20
90 95 00 05 10 15 20 25 30
North Europe
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
8
10
12
14
16
18
90 95 00 05 10 15 20 25 30
USA
8
10
12
14
16
18
90 95 00 05 10 15 20 25 30
Japan
8
10
12
14
16
18
90 95 00 05 10 15 20 25 30
China
8
10
12
14
16
18
90 95 00 05 10 15 20 25 30
UK
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
16
18
20
22
24
26
28
30
90 95 00 05 10 15 20 25 30
Central Europe
16
18
20
22
24
26
28
30
90 95 00 05 10 15 20 25 30
East Europe
16
18
20
22
24
26
28
30
90 95 00 05 10 15 20 25 30
South Europe
16
18
20
22
24
26
28
30
90 95 00 05 10 15 20 25 30
UK
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
.60
.62
.64
.66
.68
.70
90 95 00 05 10 15 20 25 30
Central Europe
.60
.62
.64
.66
.68
.70
90 95 00 05 10 15 20 25 30
East Europe
.60
.62
.64
.66
.68
.70
90 95 00 05 10 15 20 25 30
South Europe
.60
.62
.64
.66
.68
.70
90 95 00 05 10 15 20 25 30
UK
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
One of the aims of our research is to link demographic trends, such as ageing, with employment.
Hence, we are not just interested in trends in the Age Structure of the Population, namely, the dependency ratios based on the relative size of the Young and Elderly Populations
We want a broader measure of Dependency that takes into account the prevalence of Inactivity Rates and Unemployment Rates among the Working-Age Population
Hence, we utilise an ‘Economic Dependency Ratio’, which helps us track such trends (see Palley 1991)
Essentially this indicator represents the ratio of the various categories of ‘the Economically Dependent’ to the Employed
THE ‘ECONOMIC DEPENDENCY RATIO’
AUGUR stakeholder’s workshop, 17-18 November 2011
The ‘Economically Dependent’ include four categories:
1) Those Younger than Working Age (<15 years)
2) Those Older than Working Age (65+)
3) Those of Working Age who are ‘Economically Inactive’ (many women, students, persons on benefits)
4) Those of Working Age who are ‘Economically Active’ but Unemployed (such as young workers)
In our analysis we attempt to decompose the effects of these four categories (two of which are strictly demographic and two of which are defined more by employment status)
The first two categories change slowly; the latter two more rapidly
THE ECONOMIC DEPENDENCY RATIO
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
1.20
1.24
1.28
1.32
1.36
1.40
1.44
90 95 00 05 10 15 20 25 30
Central Europe
1.45
1.50
1.55
1.60
1.65
1.70
1.75
1.80
1.85
90 95 00 05 10 15 20 25 30
East Europe
0.95
1.00
1.05
1.10
1.15
1.20
1.25
90 95 00 05 10 15 20 25 30
North Europe
1.30
1.40
1.50
1.60
1.70
1.80
1.90
2.00
90 95 00 05 10 15 20 25 30
South Europe
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
1.08
1.12
1.16
1.20
1.24
1.28
1.32
90 95 00 05 10 15 20 25 30
UK
1.08
1.12
1.16
1.20
1.24
1.28
1.32
1.36
1.40
1.44
90 95 00 05 10 15 20 25 30
USA
0.920.961.001.041.081.121.161.201.241.281.32
90 95 00 05 10 15 20 25 30
Japan
0.68
0.72
0.76
0.80
0.84
0.88
0.92
90 95 00 05 10 15 20 25 30
China
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
.40
.44
.48
.52
.56
.60
.64
90 95 00 05 10 15 20 25 30
Central Europe
.60
.65
.70
.75
.80
.85
.90
90 95 00 05 10 15 20 25 30
East Europe
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
90 95 00 05 10 15 20 25 30
South Europe
.38
.40
.42
.44
.46
.48
.50
90 95 00 05 10 15 20 25 30
UK
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
0.70
0.75
0.80
0.85
0.90
0.95
1.00
90 95 00 05 10 15 20 25 30
Central Europe
0.70
0.75
0.80
0.85
0.90
0.95
1.00
90 95 00 05 10 15 20 25 30
East Europe
0.76
0.80
0.84
0.88
0.92
0.96
1.00
90 95 00 05 10 15 20 25 30
South Europe
.70
.72
.74
.76
.78
.80
.82
.84
.86
.88
90 95 00 05 10 15 20 25 30
UK
AUGUR stakeholder’s workshop, 17-18 November 2011
Concluding RemarksHighlights of Europe’s Projected General Demographic Trends: A rising Elderly Dependency Ratio combines with a falling share of
the Working-Age Population in Total PopulationThe Government Service Standard: This Index (gauging government expenditures per
dependants) declines, unfortunately, through 2030 across Europe
The decomposition of the GSS into expenditure and demographic factors shows:
Government Expenditures as a ratio to GDP generally declines, but not markedly under current projections (more strenuous fiscal consolidation would sharpen this decline)
The increases in the Dependent Populations, particularly the elderly, have a more dramatic negative impact on the GSS
AUGUR stakeholder’s workshop, 17-18 November 2011
AUGUR
The ‘Economic Dependency Ratio’: This Ratio is generally on an upward (adverse) trend until 2030,
beginning with the global financial crisis
The decomposition into its Employment and Demographic factors shows:
The Ratio of Inactive plus Unemployed to the Employed generally increases in the wake of the global financial crisis and stays elevated (except Central Europe’s ratio)
The Ratio of the Young and the Elderly to the Employed exhibits a more dramatic upward trend across all of Europe
CONCLUDING REMARKS
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