Responses to Population Ageing: lessons from Europe?

Responses to Population Ageing: lessons from Europe?

OXPOP
Oxford Centre for Population
Studies
Working Paper Series no. 22
Responses to Population Ageing:
Lessons from Europe?
(Published 2003 in the ‘Proceedings of the Seminar on
Low Fertility and Rapid Ageing' Seoul, Korea. National
Statistical Office and the Population Association of
Korea. pp 83 - 110.)
David Coleman, Professor of Demography, University of Oxford
Department of Social Policy and Social Work
Barnett House, 32 Wellington Square
Oxford OX1 2ER
+44 (0)1865 270345 tel
+44 (0)1865 270324 fax
david./coleman@socres.ox.ac.uk
http://www.apsoc.ox.ac.uk/oxpop
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Low Fertility and Rapid Ageing in Korea: Demography,
Analytical Tools, and Socioeconomic Issues.
October 31, 2003, Grand Intercontinental, Seoul, Korea
11:00-12:00 Session: Analytical Tools
Responses to Population Ageing: Lessons from
Europe?
David Coleman
St John’s College, University of Oxford
david.coleman@socres.ox.ac.uk
http://www.apsoc.ox.ac.uk/oxpop/
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Introduction
In this paper I review some responses to population ageing in Europe and other
Western countries to see if they may have any relevance to the situation in Korea.
While Korea preserves its own unique political, economic and cultural characteristics,
it is clearly heading along approximately the same trajectory of population ageing as
the rest of the industrial world. But as Korea is at a relatively early stage of this
process, it might be worthwhile looking at the experiences of those populations,
which have traveled further down the same path. At the very least it may be possible
to conclude which of the perceptions and proposals made in Europe are well founded
on demographic and economic principles, and which are delusions, without making
any presumptions about applying European lessons to Korea’s specific issues. I will
consider briefly how Korea compares with Europe, review critically the assumptions
behind current concerns, and then consider what demographic and non-demographic
‘solutions’, or at least responses, are available.
Comparisons with Europe
Europe comprises a very diverse set of populations, despite the effects and the
intentions of the European Union. Central and Eastern Europe will not be considered
here at all. Most of those populations share a distinctive traditional demographic
regime, now overlaid with the demographic hangover from communism and the
demographic confusion arising from recent economic and political turmoil. To the
west of the former Iron Curtain, great demographic diversity still persists. It has
generally been assumed that for a variety of economic, political and cultural reasons,
that Western populations will converge on a similar set of institutions and on a
common demographic regime. So far, this expectation has not been supported by the
empirical evidence (Coleman 2002a). We must therefore be specific about which of
these diverse populations might most usefully be compared with the Korean situation.
In broad terms, the populations of ‘Western’ Europe sort themselves into three
geographical clusters on demographic criteria. NW Europe, including Scandinavia,
France and the United Kingdom, preserve relatively high and in some cases
increasing birth rates, high proportions of births outside marriage and somewhat
atomised household structures, with high proportions of single-person households and
relatively few complex households with co-resident married children and older
parents. Welfare and family policy is well-developed. The more central Germanicspeaking populations are intermediate in these respects. Southern Europe maintains
the lowest levels of fertility while preserving more traditional family structures.
There, cohabitation and illegitimacy rates are low or very low, and complex
households more common, than in the North-West of Europe. Family policy is
relatively undeveloped and gender roles remain differentiated.
In all these respects, Korea, like the other industrialised countries of Asia, more
closely resembles the ‘Southern European’ category and has moved closer to those
countries as its mortality levels have improved during the 1990s. Korea and Southern
Europe share exceptionally low birth rates and low teenage fertility; despite great
cultural differences they share a ‘familist’ culture with a relatively high proportion of
three-generation households; like Southern Europe, Korea has not embraced the
attractions of the ‘second demographic transition’ in the form of elevated levels of
cohabitation and illegitimacy. Also like those European countries, Korea faces the
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fastest pace of population ageing, the most imminent prospect of population decline
and the most substantial political and cultural obstacles to the more expensive family
polices and reform of gender relations which may be essential if their birth rates are to
increase.
Contrary concerns
The background paper to this meeting: ‘Perspectives on Low fertility and Rapid
Ageing’ was most illuminating. In commenting on the need for a family-friendly
policy in Korea it also noted that ‘some Korean demographers argue that the antinatalist policies are still necessary in Korea because the nation is one of the most
densely populated countries where many couples (wish to avoid) unwanted,
unexpected, or untimely births’.
These positions are by no means incompatible. A practical and ethical pre-requisite of
any family-friendly policy intended to facilitate women’s desire for children and
simultaneously encourage a more benign demographic regime must be the
achievement of full control over fertility, so that every child is wanted and cherished.
There can be no future in modern democratic societies for policies which attempt to
restrict access to family planning or abortion in order to force up birth rates.
Pronatalist results cannot depend on the continued production of unwanted children,
not the least because the lives of such children, and of their parents, are handicapped
by the circumstances of their birth. Insofar as unplanned or unwanted childbearing in
Korea persists, it constitutes a welfare problem which needs attention. By the same
token, if women are not having the number of children that they say they would like
to have by a substantial margin, then that possible ’unmet demand’ for children also
constitutes a welfare problem demanding attention. It is one with substantial
implications for the national future. To varying degrees, this dual problem persists in
many Western countries.
There are great difficulties in defining desired family size, and ‘unwanted’ children
(whether unwanted in respect of their timing or altogether). Nonetheless it has been
estimated that up to 25% of children in some western societies are unplanned or
unwanted, at least in respect of their timing, and that there is still a modest unmet
need for contraception (Klijzing 2000), even though current usage is generally about
70% and ever-usage 90% . Teenage childbearing, undesirable under almost any
circumstances, is a prevalent problem in the UK and in the US, and not just among
their ethnic minority populations. Almost all these births are outside marriage. In
Britain and even more in the US, most are to lone mothers lacking partners and any
means of support other than welfare. These are extreme examples, but in other
European countries as well a need to reduce such premature and unplanned
childbearing co-exists with a long-term need to facilitate wanted births. With Korean
period total fertility below 1.2 in 2002, it is difficult to see how a modest increase in
wanted births could promote or exacerbate environmental difficulties.
In the UK and elsewhere, environmental groups such as the Optimum Population
Trust (Willey 2000) urge rapid and substantial population decline to an ‘optimum’ of
30 million (compared with today’s 60 million). They oppose family-friendly policies
insofar as they might retard such outcomes. Many people (including this writer)
sympathise with the notion that population growth is currently too high and that there
would be benefits from a smaller population, without having much faith in the
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‘optimum’ concept. But for obvious demographic reasons, rapid population change in
any direction is undesirable because of the distorted age-structures thereby created,
which last for decades, and the serious mismatch which inevitably arises between
population and the available infrastructure, which is either over-strained or made
redundant.
Who’s afraid of population decline?
Before the eighteenth century, European and other countries often experienced
population decline or stability, between periods of growth. Then population growth
became the norm, and we have taken continued growth, and its supposed merits, for
granted. That era of growth is ending. In Europe, population decline is expected to
become general by the mid-twenty-first century, and by the end of the century, global
population itself may be falling. The only general exceptions are those cases such as
the US and the UK where growth is increasing thanks to record levels of immigration.
Nonetheless influential bodies persist in assuming that population decline is ipso facto
undesirable, for example the UN Report on Replacement Migration (2000). These
notions reflect transatlantic rather than universal Western concerns; population
stabilisation or reduction may be contrary to the American dream but it may be
regarded with equanimity elsewhere.
It is true that ‘Malthusian’ views do not find favour among some European opinion,
notably in France (Chesnais, 1995). However the last official report on population in
the UK (Population Panel 1973) welcomed the prospect of an end to growth. In
Germany, too, the management of population decline has been discussed with
equanimity by authoritative sources (Höhn, 1990). The government of the
Netherlands has in the past defined the end of growth as a long-term policy aim. For
example the report of the Dutch Royal Commission on Population 1977 stated that
‘termination of natural population growth is desirable and possible as a consequence
of below replacement fertility as expected in the official population projections.
However, government should not lose sight of reaching, in due time, a more or less
stationary population situation which could imply that in the longer term government
should promote fertility stabilising on a level guaranteeing the replacement of
successive generations’. The Dutch government response (Tweede Kamer der Staten
Generaal 1983) concluded that ‘Continuing population growth will have an adverse
effect on the well-being of the nation, and therefore the perspective of growth coming
to an end as a consequence of below-replacement fertility….. is welcomed’ ( both
quotations translated and summarised by van den Brekel and van de Kaa (1994), pp.
234 – 236). More recent official Dutch statements still maintain the view that ‘in the
longer run a stationary population is viewed as desirable’ (Government of the
Netherlands 1998 p 9). Even in the United States, the report of the Commission on
Population Growth and the American Future (1972) saw an end to U.S. population
growth, although not a decline, as on balance, advantageous. In the US, in Australia
and other countries environmental activists and others continue to argue the
ecological benefits of lower population size, arguing from considerations of
sustainable environmental footprint (the area of land needed to sustain the current
consumption or lifestyle of an particular community or country). While many are
sympathetic to the notion of the benefit of a smaller population, the definition of
‘optimum population’ has so far defied any consensus. The economic and social
consequences of population stabilization and decline (as opposed to population
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ageing) are seriously under-researched, and seem to have received little systematic
attention since the time of Reddaway (1938).
While population decline brings problems, it may be also be argued that a smaller but
stable population, once achieved, has advantages. Problems of overcrowding are
ameliorated and the environment is potentially better protected. Unsatisfactory
infrastructure, notably urban housing, hastily constructed to accommodate the
population growth of the 19th or 20th centuries, can be demolished. Labour shortage
may reduce unemployment and moderate inequality through higher wages, and
promote capital substitution and labour productivity as wages rise. With international
trade and alliances, markets and security transcend frontiers. Economists tend to put
too much emphasis on overall national gross domestic product (GDP), which of
course must be smaller in a rich country with fewer people. But what matters for
human welfare is the GDP per head, which defines the standard of living for the
individual. In Western populations there is no statistical relationship between the GDP
per head (standard of living) and population size or rate of population change of
particular countries (Figure 1).
Population ageing is unavoidable
Policy-makers and the media in Western Europe persistently fail to understand the
absolute inevitability of a very substantial level of population ageing in the future,
come what may, even if birth rates rise somewhat. Population ageing, and the end of
population growth, are the inevitable consequence of low vital rates throughout the
world. Declines in the birth rate were initially the primary engine behind population
ageing. Lower birth rates reduce the size of young cohorts and therefore the burden of
youth dependency (‘ageing from the bottom’, or ‘ageing from the base’ in Pressat’s
terminology). In most Western countries, a two-child family norm was established
about 60 years ago and birth rates have not declined since the early 1980s. Because of
this relative stability, low fertility is giving way to low mortality as the primary force
behind population ageing. Today in modern societies, 97% of babies can expect to
live to age 50, which is above the average age of the population. Death rate
improvements are now inevitably and increasingly concentrated among the late
middle aged, the old and the ‘oldest-old’ aged over 85. Death rates continue to fall at
between 1-2% per year even among the very elderly – an unexpected and remarkable
phenomenon (Wilmoth and Robine 2003). All this directly increases the number of
elderly – ‘ageing from the top’ or ‘ageing from the summit’.
In those countries where birth rate decline happened first, notably France, almost all
population ageing is now due to continued falls in the death rate (Calot and Sardon
1999). Eventually, all other countries, including Korea, will follow as long as birth
rates fall no further. The extent to which declines in the death rate can continue at
their present rate is hotly disputed (Olshansky and Carnes 1996). Few have much faith
in expectations of life beyond age 85, although in the last few decades, national and
UN projections have consistently under-stated the improvements of survival which
have been obtained in reality and may well continue to do so.
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Figure 1 relationship between population size and growth, and GDP per head and
growth in GDP per head , 2001-2002, Western Countries and Japan.
G DP per head in relation to pop ulation size, W estern countries and Japan,
2002.
60000
PPP GDP per head
50000
40000
30000
20000
y = -7 3 24 x + 5 83 7 2
R 2 = 0 .2 64 3
10000
0
2.50
3.00
3.50
4.00
4.50
5.00
5.50
log10 pop ulation size
R elation b etw een G DP grow th p er h ead and p opulation grow th, 2001-2,
W estern cou ntries an d Japan (both percent)
4.00
y = 0 .0 95 7 x + 0.6 37 1
2
3.50
R = 0.0 01 4
GD P grow th per head, 2001-2 (percent)
3.00
2.50
2.00
1.50
1.00
0.50
0.00
0.00
- 0.50
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
- 1.00
- 1.50
P opulation grow th 2001-2 (per cent)
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If continued improvement in expectation of life contributes to yet further
population ageing, it may be natural to regard this benefit to individuals as a
burden on society. In fact, however, increased expectation of life may at least
in part bring with it its own solution, as long as active and healthy life is also
being stretched in reasonable proportion. If healthy life expectation increases
pro rata with expectation of life, then longer active working life can, indeed
must, follow longer lifespan (Lee and Goldstein 2003). Evidence on this rescaling of the life-cycle is mixed. Earlier evidence from the UK, for example,
showed that since 1981 expectation of life at birth has increased by 3.3 years
for males and 2.6 for females. Of these additional years, 2 years in the case of
each sex are 'healthy' additional years, 1.3 and 0.6 are unhealthy. Methods
using cohort data, however, capture more substantial advances in expectation
of active life. For the US population, for example, these new methods give
almost double the expectation of active life at some ages compared with
traditional methods. For males in the 1990s, this amounted to 13.7 years of
active life out of a total of 15.7 from the completed-cohort estimates compared
with 7.4 active years out of 15.1 for the period estimates (Manton and Land,
2000, table 4). The more recent the research, the more favourable the result.
‘Solving’ population ageing: replacement migration and other temptations
The question of population ageing bring us to the concept of so-called ‘replacement
migration’. Many in the European political class and in the media have been
persuaded, partly thanks to an influential but misunderstood UN report (2000), that
Europe ‘needs’ very large numbers of additional migrants to save itself from its own
geriatric future, to make up for the babies which Europeans cannot be bothered to
have, to stimulate the economy, to pay its pensions, and so on. The UN’s ingenious
calculations showed that if Europe wanted to preserve the present size of its
population of working age on present trends, then it would need to import millions of
persons every year into the foreseeable future, assuming that the birth rate did not
return to the replacement level. Demographers understand that population ageing is a
fundamental and unavoidable consequence of low birth and death rates. Any modern
population, which enjoys a high expectation of life of (let us say) 75 years, where
family size is controlled even at the replacement level of an average of about two or
less, is bound to acquire a permanently different age structure from that of the present,
forever.
Today’s age structure, inherited from the 20th Century, was created by its vital rates,
not those of the present. It is unstable and non-sustainable. The only way in which it
could be preserved into the future is either by cutting back expectation of life to about
fifty years, by persuading the average family to have at least three and a half children,
or by importing very large numbers of immigrants. The latter options, especially the
last, would unleash unsustainable levels of population growth and eventually exhaust
world population.
Today the potential support ratio (PSR; the number of people of potential working
age, nominally 15-64, for every person of retired dependent age, normally over 65)
stands at just over four to one in most European countries. That is not the real ratio of
actual workers or taxpayers to retired dependents, which is much less (about 2.5 to 1).
Only about 64% of Europeans aged 15-64 are at work.
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In the future it is likely that the potential support ratio will go down to not more than
two and a half, and in some countries not more than one and a half, depending mostly
upon the future level of the birth rate. The official projection by the UK Government
Actuary’s Department (GAD) of the potential support ratio for the UK until 2100 is
given in Figure 2. On its assumptions of mild increases in survival and in fertility,
with 95,000 net immigrants, the PSR falls from about four about two and a half.
Figure 4 shows the likely future in other European countries on current assumptions
as projected by the United Nations (2000). France, the UK, Germany, Italy and Spain
all begin with a PSR of around about four but decline to different levels: over two in
the case of France and the UK, well under two in the case of Germany, and in the case
of Italy and Spain, less than one and a half (Spain 1.36). These results imply quite big
differences in future implications for the economy, productivity, dependency, and
other indicators.
Figure 2 UK PSR projection on various scenarios
Potential support ratio
Potential support ratio, UK 1998 - 2100, variant
projections
4.0
3.5
3.0
2.5
2.0
1991
2011
Principal
High migration
HfLm
2031
2051
High fertility
Low migration
LfHm
2071
2091
Low fertility
HfHm
LfLm
9
Figure 3 Various countries, PSR projections on various assumptions. Source: United
Nations
Potential Support Ratio, selected
countries 2000, 2050
4.08
4.15
4.13
4
4.01
3.73
3.5
3
2.5
2.15
2.12
2
1.83
1.47
1.5
1.36
1
0.5
0
2000
2050
F
UK
G
I
Sp
Cannot these problems be solved with more immigrants? The answer is ‘yes’, but
only if very high levels of population growth can be contemplated. Figure 4 derived
from official calculations (Shaw 2001) shows the population size consequent on the
migration needed to preserve the current potential support ratio in the UK up to 2100.
By 2050 the UK would have to import 1.2 million net immigrants per year, which
would double today’s population of 60 million to 120 million. By 2100, up to five
million new immigrants would be needed every year, and the population would have
risen to 312 million, not much less than the present population of the whole European
Union. To preserve through immigration the PSR of the EU itself up to 2050 would
require its population to rise to about 2500 million, approximately the same size as
today’s populations of India and China put together.
Figure 4 Population trend in the UK to maintain current PSR (millions). Source:
GAD unpublished
Population size required to maintain
given PSR by immigration, UK 1998
- 2100
350000
250000
200000
150000
100000
SR 3.0
SR 3.5
21
00
20
90
20
80
20
70
20
60
20
50
20
40
20
30
20
25
20
20
20
15
20
10
20
05
20
00
50000
19
98
population (1000s)
300000
SR 4.22
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The reductio ad absurdum of all this is what one might call the ‘Korea syndrome’. It
concerns the level of immigration required in order to preserve the current potential
support ratio in the Republic of Korea and its consequences for population growth. As
this audience will be well aware, in order to preserve the present potential support
ratio of Korea – 10: 1– the population would need to increase to 6.2 billion people by
the year 2050. Just by coincidence, this happens to be the entire population of the
planet at the present time, so all of us who are not Korean would have to move to
Korea. Perhaps this conference is a rehearsal for that great migration.
Attempting to maintain the PSR is an extreme aim, and it would not do to pretend that
immigration does not have a favourable impact upon the age structure. The problem is
that the effect is not very great and immigration is an inefficient way of achieving this
end. Immigrants are only about 10 years younger, on average. than the average of the
Western populations to which they move. They themselves age and then require even
more immigrants, as it were, to replace their number and compensate for the
inevitable ageing of the earlier immigrants and of the native population. Also, there is
a tendency for immigrant birth rates to converge on those of the host population,
although by no means a complete one. Population ageing is a consequence of low
birth and death rates, not of a failure of migration: birth rates are a more effective way
of changing age-structure without the complication of inevitable population growth.
We noted earlier that population ageing cannot be ‘solved’ by fertility either, although
it is easier to moderate it by that route. Even if the birth rate rose up to replacement
level (TFR 2.1 in low mortality countries), the support ratio would only increase to
about 2.9. But that would imply no further population growth and eventually, as with
all constant rates, an end to further population ageing. To keep the PSR at four, a
family size of three and a half would be required, which would generate population
growth of 1.8% per year.
In real populations, fertility and migration levels both act to affect the rate of
population ageing (Lutz 2003). A more flexible set of replacement scenarios than
those afforded by the UN, which recognize the importance of the possibility of further
substantial declines in mortality, show the equivalence of given levels of migration
and fertility. They omit, however, the different consequences for population growth;
replacement fertility requiring no further growth, replacement migration having more
substantial consequences either for the population growth or replacement of the
original population.
Can immigration ‘solve’ economic problems?
In a related argument, it is claimed that Europe and other developed countries 'need’
more immigrants to fill specific labour shortages, generally to maintain the size of the
labour force. Immigration is held to promote economic growth (even in the absence of
demographic shortages) and thereby benefits both migrants and natives. These are
complex and controversial maters which can only be addressed here very briefly.
The actual record of immigration
Few doubt the short-term advantages to employers, and probably to the economy, of
recruiting highly-skilled workers to fill real job vacancies, although these tend to be
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on a modest scale, temporary, and often reciprocally balanced between (developed)
countries. Many analyses of the net economic effects of immigration to Continental
Europe, especially those done during the 1960s guest worker period when most
immigrants were workers, came then to unequivocally favourable conclusions. But
many of those ‘temporary’ workers stayed on even when unemployed when the
economy moved on, and were joined by their dependants, contrary to expectations. In
the long run, the guest worker era, which Japan notably avoided, may have retarded
the inevitable and necessary automation of production in Europe, and reduced its
competitiveness.
Over time, the pattern of economic demand and of immigration has changed. Modern
economies should not need large inflows of unskilled labour. It was interesting to hear
the complaints from employers in Korea, noted in the briefing papers, about their
inability to hire unskilled workers from abroad. The lessons are obvious; to make the
processes more productive, increase wages, or export the enterprise. The growth
sectors of the economy now demand skilled or professional workers, and changes in
systems to enhance productivity. Recent research findings on the economic benefits of
migration have become more nuanced and in some cases negative. Since the 1970s
the majority of legal migrants to the UK, and to Europe, and also to the United States
have come as dependants, as students, as new spouses for the growing immigrant
populations or more recently as asylum claimants. Only a minority entered
specifically for work reasons: in 2000 well under 20% in Denmark, the US, France,
Norway and Sweden, for example (OECD 2002 Chart 1.2). In France in 1999 78% of
the inflow was family related. The skills of such migrants, especially those from
outside Europe, are not usually at a high level. Unemployment among existing foreign
populations in Europe is about double the national average in many countries, and
workforce participation rates, especially among women, are typically lower, just 20%
and 30% among Bangladeshi women and Pakistani women in Britain, for example..
Computing the benefit or cost of immigration is obviously difficult. The US National
Research Council (Smith and Edmonston, 1997) concluded even on a narrow fiscal
calculation that all immigration (legal and illegal) to the US might add as little as $1
billion or as much as $10 billion per year to the US economy, which was then
growing at $400 billion per year. Immigration might thus contribute as little as 0.25
per cent to the annual rate of growth or as much as 2.5 per cent. More certain is the
fact that immigration was then adding about 0.5 per cent per year to population
growth and comprised about 60 per cent of that population growth. If the lower end of
the growth estimate is taken, in the 1990s immigration was making the average US
resident slightly poorer, not richer.
In the US as in Europe immigration may bring cheap services and a wider choice of
ethic restaurants to the middle classes and elites, but it is not to the advantage of the
lower paid. Borjas, Freeman and Katz (1997) conclude that ‘Immigration has had a
marked adverse impact on the economic status of the least skilled US workers (high
school dropouts and those in the bottom 20% of the wage distribution). Borjas (1999)
more recently concluded that more recent immigrants to the United States contributed
much less to the economy than in previous decades, partly because of a declining skill
level, and that their presence might well disadvantage poorer American workers.
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This deterioration is shared in the immigration experience of some European
countries, where in net terms resources are transferred from natives and rich
immigrants to poor immigrants (Wadensjo 1999). In the UK, at local level, a 1
percent increase in the share of immigrants leads to an increase of between 0.2 and
0.6 percentage points in the local unemployment rate (Dustmann, Fabbri , Preston and
Wadsworth 2003). Also in the UK, immigration promotes out-migration of natives
and creates unemployment in areas remote from the area of settlement, which may
explain some of the ‘benign’ results of earlier research (Hatton and Tani 2003). In
Denmark, while immigrants from rich countries are judged to be economically
beneficial, those from poor countries impose a net cost on the host society (SchultzNielsen 2001). In Sweden the net economic effect of recent immigration has been
negative, amounting to an annual net transfer to immigrants of between 1% and 2% of
GDP (Ekberg 1999). There, more recent migrants tended to be much less wellequipped in terms of capital and also much more prone to be unemployed or
economically inactive. The conclusion varies from country to country; Sweden has a
well-developed welfare system and many of its immigrants are poor and unskilled
asylum seekers. Even on narrow economic criteria, however, the general conclusion
from real evidence seems to be that overall, recent immigration has at best marginally
positive net effects and quite likely negative ones.
Immigration, economic distortion and dependency
In Europe, rigid labour laws, and very high social costs (payroll taxes) are blamed
for the chronically high level of unemployment (about 11% in the Euro zone, double
that among the young and among existing immigrants). This unemployment coexists
with high levels of illegal immigration and illegal employment. If employers are
permitted to evade these choices by importing immigrant labour which may
(temporarily) accept a lower standard of living, then wages and status in such
occupations may fall even further. The native workforce will shun such jobs
permanently because they have become ‘immigrant’ occupations.
Easy access to migrant labour can thereby create distortion and dependency in
economies, diverting attention from the solution of serious structural problems. On
the other hand, restricting easy access to unskilled labour can have beneficial results.
In the US, the ‘Bracero’ programme to recruit Mexican agricultural guest-workers
was restricted in the 1960s, against employer protests. In California this promoted
remarkable gains in productivity through the mechanisation of fruit picking and
processing and other efficiencies, accompanied by increases in individual wages, in
union membership and in the employment of US workers (Martin and Olmstead
1985).
Another example of distortion is that of the British National Health Service, one of
the worst funded health systems in the West. Overseas recruitment has permitted the
continuation of chronic public under-funding. It has made continued overseas
recruitment essential, as investment in training remains inadequate to meet domestic
needs. Salaries and wages, and conditions of service for staff remain poor. The health
service provided to the public, except for emergency and acute services, is the subject
of constant complaint. Poor conditions of service weaken the retention of British staff,
and imported staff also do not long endure its problems. Thus over 100,000 trained
UK nurses are no longer nursing, and despite substantial overseas recruitment of
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nurses (half of all who entered nursing last year), the number of foreign nurses in the
NHS remained constant over several years (Dobson et al. 2001) as many left to take
up employment with better conditions. As the OECD notes (2003, p 23)‘in many
countries, the problem is not so much a shortage of nurses as a shortage of nurses
wiling to work under the conditions being offered them.
Immigrants replace natives in low-fertility settings.
Given sub-replacement fertility of the native population, demographic theory shows
that migration sufficient to maintain any constant size must eventually replace the
original population with the immigrant population. Any population trying to maintain
its numbers by importing people to compensate for below-replacement fertility would
eventually be replaced by the newcomers. Its culture too would therefore be replaced
unless the new immigrant populations showed a willingness to adopt local identity,
values and habits in a way often radically different from the preferences of many
third-world populations moving to the developed world today. A society does not
automatically ‘save’ itself simply by maintaining the population density in the
national territorial space with people of different and diverse social origins. If the
current pace of immigration into some Western countries continues, combined with
persistence for some time of the often higher fertility of immigrant populations, then
their populations are likely to comprise about one-third ethnic minority origin by midcentury, one-half in the case of the United States (5). In the long run, if countries wish
to maintain their total population or population of working age, they will have to grow
their own.
Figure 5 ethnic minority population growth, selected Western countries. Sources:
national population projections, Ulrich 2001, GAD 2002 based variant projections.
Projected growth of population of immigrant or foreign
origin 2000 - 2050 as percent of total population
35
30
20
15
10
5
Germany medium variant
Netherlands base scenario
UK high migration
2050
2045
2040
2035
2030
2025
2020
2015
2010
2005
0
2000
percent
25
USA medium variant
Denmark 2002-based
14
Fertility rates can go up as well as go down
In the West, birth rates first declined to below the ‘replacement’ TFR of 2.1
children on average as early as the 1930s, a fact obscured by the unexpected
intervention of the’ baby boom ‘ of the 1950s and 1960s. Since the 1970s most
western countries have returned to lower birth rates, in almost all cases below
the replacement level – much as in the 1930s. The Republic of Korea, along
with the other Asian industrial countries, has had a different history. In Korea
the TFR fell below the replacement rate around 1985 and appears still to be
falling. This is no longer the case in most European countries.
Birth rates can go up as well as down, partly because of the partial
recuperation of fertility at older ages which has been postponed from younger
ages since the 1970s. Of the 15 significant western European countries, just
over half showed increases in TFR between 1995 and the latest available year,
including Belgium, France, Italy, Germany, the Netherlands and Spain (data
from Eurostat 2002 table 3.3).
Much of the reduction in period measures of fertility, it is well known, is due
to the postponement of births. Attempts to ‘correct’ period fertility measures ,
all controversial, typically ‘add’ about 0.2 to 0.3 to the estimate of period TFR
(e.g. Kohler and Ortega Osona 2003). Even so, that re-evaluation does not
save populations from an implied fertility level that would considerably
accelerate aging were it to continue. But in most populations the recovery of
fertility rates at older ages has so far been insufficient to compensate for the
decline in earlier ages, pointing to a fall in completed cohort fertility to below
replacement level (Lesthaeghe 2001, Frejka and Calot 2001). Expectations
here vary greatly between European countries. In general, the populations of
NW Europe have shown the greatest fertility recuperation, those of Southern
Europe the least. As noted in another section, the demographic regime,
household systems and gender relations in Korea (and Japan) put them closer
to the Southern European countries. These; like Korea and Japan, share some
of the steepest projected increases in population ageing and the most marked
population decline unless there is a demographic regime change. The fertility
profile in Korea is still relatively young but is falling fast at younger ages. As
in the southern European counties, So far only modest compensating increases
can be seen in age-specific rates over age 30 .
Most researchers seem pessimistic about a return of fertility to replacement
rates in European countries. Nonetheless, the delay in childbearing has not yet
ended in any country and we cannot foretell likely responses when it does.
There may be general population-level tendencies to equilibrium. Enhanced
welfare arrangements or other measures which improve the status of women
may remove obstacles to childbearing (Lutz, 2000). Biological and behaviour
- genetic models may provide other reasons why fertility should not drop to
very low levels (Foster, 2000; Morgan and King 2002). Finally, the prospect
of higher birth-rates is underpinned by the consistent finding, after 30 years of
surveys , that in most but not all European countries (see Lutz et al 2003)
women wish on average to have about 2 children (although seldom much
more).
15
In some populations that higher-status and better educated women now have
more children than average; female workforce participation is no longer an
impediment to the third child, at least not in Scandinavia and probably not in
the US (Kravdal 1992a, b). The former negative relationship between
women’s workforce participation and fertility had been reversed since the
1990s (Ahn and Mira 1999) For all these and other reasons, most national and
international projections, anticipate a modest recovery in fertility although
stopping short of replacement level. It has to be admitted, though, that the
(relatively early) childbearing pattern of Korea, and its very low aggregate
level, suggests that low fertility has a long way to go before a recuperation can
easily be managed, and as in Southern Europe, the cultural conditions are not
yet very propitious.
Family policy and the birth rate
An increase in the birth rate even to the highest level that is plausible (about
replacement level, in a modern society) cannot ‘solve’ population ageing. Only a TFR
of about 3.5 could do that which, as we noted above, would lead to population growth
of nearly 2% per year. However any increase in birth rates, even to a higher subreplacement level, would moderate population ageing, making it more readily
manageable by non-demographic means. In the absence of net migration, replacement
level fertility would eventually stabilize population size. It could not, however,
prevent a short-term fall in the total population in those populations that had
experienced sub-replacement fertility for many years and that had thereby acquired an
unfavourable population momentum.
Can governments influence the birth rate in directions favourable to the management
of population ageing, either directly or indirectly? ‘Pronatalist’ policies intended to
encourage population growth and avert decline have great antiquity; indeed a
generally pronatalist attitude was almost universal among rulers and governments in
the past as part of a generally ‘mercantilist’ world outlook. In the West today,
however, explicit pronatalist policies are almost absent, even in the presence of
fertility levels so low that they threaten national economic and fiscal systems, They
were closely associated both with the Nazi regime in Germany, and with Fascist or
other authoritarian regimes of Western Europe, some of which persisted until the
1970s. That has put pronatalist policies and their rhetoric outside the pale of political
discussion in many Western European countries. Pronatalist policy was also almost
universal in the totalitarian regimes of the Communist countries, some (as in
Romania) to oppressively extreme degree. Pronatalism in Europe therefore has a bad
press. More generally, pressure on women in such personal matters is nowadays
regarded as incompatible with modern liberal values. Outside Europe, however, Japan
and Singapore take a more robust view.
However, extensive and expensive welfare traditions have developed especially in
NW Europe which accept a specific state responsibility for the welfare of mothers
and children. These family policy measures, originally intended to protect families
with children from poverty, have recently widened their scope to facilitate choice for
women; to fulfil their desires both to enter the workforce and to have a family. This is
less marked in countries where government and perhaps national sentiment still
16
favour more traditionally separate roles for men and women (e.g. Austria and
Switzerland). (Moors and Palomba 1995, Palomba and Moors 1998, Gauthier 2002).
Whatever their ostensible purpose, insofar as they make it easier for women to have
the children that they desire, their provisions tend to be more or less indistinguishable
from those in the more benign kind of ‘pronatalist ‘ policies. They do not, of course,
attempt to restrict choice in family planning or abortion. Neither are they intended to
increase demand for children, but rather to make it easier to satisfy those demands. In
many countries the focus of policy is to ease the apparently conflicting demands of
child care and workforce participation
Elements of family policy
Defining ‘family policy’ is exceedingly difficult, especially when many governments
collect 50% of national income in taxes and distribute it in very many ways which
directly and indirectly could influence decisions on family formation.. They can be
classified under the following headings suggested by Gauthier (2001) and McDonald
(2001).
MONEY
One-off cash payments or loans on birth, or on attaining school age etc. Loans may be
written off as children are born (a policy first introduced in Nazi Germany)
Wage supplements or tax reliefs for parents of dependent children (e.g. Working
Families Tax Credit in the UK). These tend to benefit the higher earning parent,
usually the husband.
Regular cash transfers for parents or specifically to mothers of dependent children
(usually equal for each parity).
Endowment schemes with state help to provide for children’s future.
Pension contributions for people with families (as advocated by Demeny 1987).
Financial Compensation for withdrawing temporarily from labour force for childbirth
and care (well developed in Scandinavia).
Specific (raised) benefits for lone parents.
All these may be universal (as in the UK) or means-tested and varied according to
income.
Other measures, often described as ‘family-friendly employment policies’ subsidize
time and care, particularly intended to allow the combination of childcare and paid
work
Maternity and paternity leave on full pay / part pay
Guarantees of entitlement to return to employment at same level without loss of
seniority.
Free child care: crèches, playschool and other childcare facilities provided by
employer or from local or national authority.
Tax reliefs and other benefits for paid child care (nannies, au pairs, childminders,
crèches).
Flexible working hours and ‘compassionate’ leave for short-term absences for family
purposes.
Equal pay for women
Employment practices/law which minimize discrimination against women with
children.
17
Legislation to limit working hours and make part-time working easier.
Many of these measures may benefit working mothers while being intended to
improve the welfare of all workers, or to advance the cause of sexual equality.
Other, more general subsidies include free education, school meals and other services
for children. free health care, free or cheap public transport for children, indirect tax
reductions (e.g. zero VAT) on children’s clothes, free or heavily subsidized housing
or rent subsidies for families on low income (in UK, council housing, housing
associations and housing benefit, in France HLM housing), especially if access is
dependent on family size.
Policies and law to encourage ‘gender equity’, for example equal pay, and paternity as
well as maternity leave, which have a bearing on several of the forms of benefit noted
above (see McDonald 2001), particularly well developed in the ‘state feminist’
polices of Sweden and Norway.
The details are too complex and varied to summarise here and are given in (e.g.) the
European Observatory the Social Situation, Demography and Family
http://europa.eu.int/comm/employment_social/eoss/index_en.html, (see Bagavos and
Martin 2001). In general the pattern and level of support reflect long-standing national
and regional political culture and socio-cultural traditions. Thus free-market
approaches and private arrangements in the US :Folbre 2001), socialist policies
emphasising cradle to grave welfare in Scandinavia; more modest intervention in
male-dominated ‘familist’ cultures where care for children and elderly was a family
matter where state intervention was inappropriate (Southern Europe, Switzerland, and
Japan). Demographic pressures, however, are forcing change, for example in Japan
with its ‘Angels’ and ‘New Angels’ family-friendly policies. Everywhere the state has
tended to become more interventionist (Moors and Palomba 1995).
It has proved quite difficult to show that these polices have any effect in facilitating
childbearing and thereby raising the birth rate. It has proved difficult to assemble
comparable data on all the relevant public policies. Comparisons and rank-orders can
be influenced by rapid changes over time (child benefit in Italy fell from 13% of the
social security budget in 1970 to 4% in 1992, being then one- tenth the money value
per child as the payment in Sweden: Chesnais 1996). Childcare leave has changed
fastest since the 1980s; more benefits are means-tested and support has converged on
a ‘family+work’ combination ( Gauthier 2002).
Table 1 Simple summary of selected child – related benefits
Cash benefits for children as percent of GDP 1996 (after Gauthier 2000 Figure 2)
Highest (over 2%)
Finland
Luxemburg
France
Sweden
Lowest (below 1%)
Greece
Italy
Portugal
Spain
Maternity and childcare leave 1999 (after Gauthier 2000 Figure 3)
18
Highest (over 100 days)
Finland
France
Germany
Austria
Portugal
Spain (but mostly unpaid)
Lowest (under 50 days)
Belgium
Greece
Ireland
Italy
Netherlands
UK
Percent of children under age 3 in publicly funded childcare, 1993 (after Gauthier
2000 Table 5)
Highest (over 20%)
Lowest (5% or under)
Belgium 30
Austria 3
Denmark 50
Germany 5
Finland 27
Greece 3
France 23
Italy 6
Sweden 33
Spain 5
UK 2
Source: based on Gauthier (2002) and McDonald (2002).
Do family policies affect the birth rate?
Level of family policy shows only a moderate association with high contemporary
birth rates. Finland and France appear in the upper distribution of all three kinds of
benefits summarised in Table 1 and their TFR is among the highest of the European
countries. At the other extreme, Spain, Greece and Italy with their very low TFR
feature prominently in the lowest categories of family support, although Spain and
Portugal do well on maternity leave. In such countries, lacking cash transfers or tax
reliefs, the arrival of successive children reduces living standards of families
substantially. The UK as usual has a somewhat anomalous position: cash benefits for
children as a percent of GDP are little below those of France or Sweden, while levels
of public childcare for young children and of maternity leave are among the lowest in
Europe. Relatively high fertility in the UK has consequently been a source of surprise
and even of irritation to overseas observers, and attributed (probably correctly) to an
excessive level of unplanned pregnancy especially among the young. The recent
decline of TFR may now be taking it down to a more appropriate international
position.
The post-war communist regimes of Eastern Europe provide thirty to forty years of
rather erratic pronatalist policy, mostly starting in the 1950s and 1960s when birthrates in Eastern Europe had all fallen to below replacement level (see Teitelbaum
1999). Family allowances rose to high levels – doubling average wage for the father
of six children in Hungary, for example. Cash subsidies were often accompanied by
free childcare in creches; married couples with children enjoyed preferential access to
state housing. With chronic housing shortages, early and universal marriage was
thereby encouraged. Pronatalist intentions were partly vitiated by the early
legalisation of abortion for ideological reasons in the Soviet Union in 1920 and
elsewhere by the early 1950s. Without access to modern contraception, reliance on
abortion did permit some state control over fertility, however unwanted that fertility
might be, by regulating access; most notoriously in Romania in 1966.
19
Any ‘success’ of these policies may have been more a result of temporary shifts in the
tempo of fertility rather than enduring increases in the quantum (Stloukal 1998). Be
that as it may, fertility rates in Eastern Europe showed little tendency to decline after
around 1970 and TFR remained around 2 until the end of Communist governments
and Communist policies in 1989 and 1992, that is about 0.5 above the average TFR
level in Western Europe. Removal of most of these policies after the end of
communism was followed by sharp reductions in the birth-rate, which remain
universally very low today (Macura 1999). However, that is hardly surprising in view
of the sharp decline in national income and the novel rise of unemployment and
general political uncertainty.
In the West, analysis of the effects of family policy on fertility sends mixed messages.
French pronatalist policy may have elevated the TFR by up to 0.3 around 1980; that is
from an expected 1.5 to the actual 1.8, according to the regression analysis of Calot
and Chesnais (1983). A similar result (an increase of 0.2) was obtained by Ekert
(1986). In Sweden there is a close connection between cash benefits, tax breaks and
especially its paid maternity leave on period fertility. Comparison with the lower
fertility in Hungary points to the importance of gender roles, more equal in Sweden,
while in Hungary more traditional attitudes are preserved (Olah 1998 p. 24) (Sweden
has higher fertility and progression to second birth). The Swedish comprehensive
system of family benefits, child care and work practices (especially the easy
availability of part-time work) made continuous working life a natural choice for
young women, and involved fathers more in childrearing, especially those who were
more educated. This has been contrasted unfavourably with the less flexible work
arrangements in France which pressed French women to choose between working life
and family, putting a double work load on Frenchwomen with jobs. Women with
career aims were much more likely to progress to a third child in Sweden than in
France (Corman 2000). Analyses in Norway come to similar positive conclusions
(Rønsen 2001). Since the mid-1990s, however, the Swedish economy has fallen on
evil times. Unprecedented levels of unemployment for Sweden have hit younger
people hard and reined back the generous but expensive Swedish welfare system,
which is strongly linked to employment.
Sweden’s ‘state feminism’ promotes gender equity : Men and women there share the
burdens of childcare more than elsewhere. By comparison Austria;, where third births
have declined markedly among working women has been described as ‘a country
which has hesitated to put its money on gender equity and ...has retained much of the
old spirit of family-role specialisation’ (Hoem et al 1999 p 22). In this respect, Austria
seems to resemble Germany and Switzerland – with notably low female workforceparticipation and birth-rates. The emergence of a clear positive relationship between
birth-rates and female workforce participation rates (Coleman 1999), contrary to
previous theory, may reflecting the success of family-friendly employment policy in
Northern Europe, and underline the dire fertility consequences of persistent gender
inequity in the South and in Japan (McDonald 2000), which may have lessons for the
development of family –friendly policy in Korea
Ideally, a model would show the effects of all aspects of these policies on an
internationally comparative basis. Results are rather disappointing, showing only
limited positive effects (Gauthier and Hatzius 1997). However these careful studies
only incorporated a limited set of specifically financial variables.
20
Can common features can be found among countries with lower and with higher
fertility? There appear to be three roads to comparatively high fertility rates in the
modern world:
(1) high wages, ample childcare, and well-developed maternity leave
(2) high gender equity and well developed parental leave
(3) high male wage, high percentage of female part-time employment but with less
developed parental leave. According to Fukuda (2003, p 23) the socio-economic
system and childcare support have ‘institutional complementarity such that a high
level of fit between the two will promote fertility. If the fit is bad, public policies can
be expected to have little effect, as they have so far in Japan’. Countries as Japan, and
those of Southern Europe, with low level of gender equity and a tradition of low
public support for the family have a long way to go.
Workforce growth and decline, and European variety.
The threat of future decline in the numbers of people of working age is real, of course
but it tends to be exaggerated. Declines ‘projected’ for the future tend to be
interpreted as actual decline today. The populations of working age – not the same as
the workforce - continues to increase in many Western countries, and the West cannot
be regarded as an homogeneous entity for this purpose. With moderate increases in
workforce participation , as projected by Eurostat, very few counties are expected to
experience falls in the actual working population before 2025 (Feld 2000). In the UK,
for example, the latest projections from the Government Actuary’s Department
envisage a population of nominal working age increasing from 38.4 million in 2001 to
39.4 million in 2026 and declining slightly to 38.3 million, about today’s figure, by
2051. Plenty of time, it would seem, to plan for a projected fall of just 100,000.
(http://www.gad.gov.uk/population/2001/uk/wuk015y.xls).
Figure 6 Projection of 20-24 year old population, selected countries. Source: UN
P o p u la t io n a g e d 2 0 - 2 4 , se le c t e d E u r o p e a n
c o u n tr ie s 2 0 0 0 - 2 0 5 0 (2 0 0 0 = 1 0 0 )
115
105
95
85
75
65
55
45
35
2000
2005
2010
N o rw ay
2015
F ran c e
2020
2025
G e rm an y
2030
I ta ly
2035
2040
N e th e r la n d s
2045
2050
S p a in
Numbers in the potential working age-groups are likely to decline quite soon in
countries which have suffered low fertility for some years, such as Italy, Spain and
Greece, but much less in countries such as Norway and the Netherlands where fertility
21
has remained relatively higher. These UN projections of the working age entry
population, say 20-24, highlight these differences in outlook (Figure 6), with
relatively constant numbers in NW Europe and longer term decline elsewhere. And
the projections do not fully take into account the increases in the birth rates in
Denmark, the Netherlands, and especially in France in recent years. In Korea,
although substantial ageing is inevitable, population decline is not forecast for another
40 years. Furthermore, the population age-structure is about to enter a beneficial
‘demographic bonus’ of exceptionally low dependency ratios (total dependency ratio
39), of a kind which Europe is now leaving behind. Finally these anxieties partly
miss the point - workforce and productivity are not just defined by demography.
Non-demographic management of population ageing
Immigration can only sustain the potential support ratio at the cost of unsustainable
levels of population growth, and that while a return to somewhat higher fertility
would undoubtedly help to moderate population ageing, it cannot restore it. While
there is no 'solution' to lower support ratios in the future, the process can be
moderated in other ways, some of which are already in train. In financial and
actuarial circles, attention tends to be focused in fairly optimistic terms on fiscal,
economic and workforce adjustments to manage ageing (Institute of Actuaries, in
press, ). What matters is whether the economy can manage the changed pattern of
consumption and investment and still deliver acceptable economic growth . Most
opinion suggests that it can, at a loss of perhaps ½% on economic growth rates as long
as birth rates remain reasonably favourable (see e.g. Weil 1997, Gillion 1999,
Daykin 2002). The favoured approach is a multiple response, divided here into three
broad categories:
(1) Improving the real, as opposed to potential 'support ratio'
The EU countries have, overall, the lowest workforce participation rates of any major
modern economic block – hardly 64% of the population aged 15-64 is economically
active and an even smaller percentage is actually in work. This varies greatly between
countries. In Italy and Spain, for example, scarcely half the 15-64 year old population
is employed (Table 2). The actual UK workforce is only about 78% of the working
age population, because of early retirement, tertiary education, and so on. Hence the
real support ratio of taxpayers to pension recipients is already much lower than the
abstraction of the ‘potential support ratio’. In the UK today it is about 3.2, not 4.1, and
the real support ratio of actual workers to all non-workers over age 15 today is just
1.67, a ratio evidently capable of supporting national life without distress. There is
much scope for increasing it: by encouraging higher workforce participation through
retraining of the unemployed, discouraging early retirement, reducing obstacles to
internal labour mobility (Fuchs and Schmidt 2000), and above all by making it easier
for women to combine work with childcare through a variety of measures which in
Europe are best developed in the Scandinavian countries.
If, for example, the whole of the EU15 could acquire the high workforce participation
rates of Denmark as in 1999 then the employed population would be increased by
35.6 million (11.8 million males, 23.5 million females) or 23.2% - about the same as
the supposed numerical deficit by 2050 (Figure 7). Even more impressive increases
would arise if those of Iceland could be emulated (Rowthorn 2003). This of course
22
Table 2 Employment and workforce participation in European countries, 1999.
France
Germany
Italy
Netherlands
Spain
UK
Population aged 15 - 64
Total Fertility Rate Economically
Employed %
Active %
1.87
68.8
60.4
1.37
71.2
64.8
1.21
59.6
52.5
1.72
73.6
70.9
1.19
62.1
52.3
1.64
75.1
70.4
Sources: Council of Europe 2001, Eurostat 2000 Labour Force Survey, OECD
can only be done once – workforce participation rates cannot rise above 100% or even
approach it. Furthermore it is easy to imagine the obstacles to realising this
hypothetical result. But it shows the need to concentrate on reforming the EU’s labour
market, welfare and early retirement systems before tinkering with demography.
Figure 7 Increase of EU working population given Danish participation rates
Potential increase in EU 15 workforce , 1999, given
Danish participation rates (millions)
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Economically active
all
Actually employed
males
females
(a) In the UK case, a return to the male workforce participation rates of 1971 and
reasonable assumptions about extension of female participation up to age 65 when
pensionable ages are unified in 2010 – 2020, increases the active population to 84%
of the age-group (for details see Coleman 2002).
23
(b) increasing the average age of retirement, a step made easier by longer active life.
This would involve moving pension entitlement age upwards and encouraging longer
workforce participation by removing tax disincentives for working pensioners and
removing employment barriers imposed solely on grounds of age. Such steps are
already in train in the US, Italy and Japan. Table 3 shows the level of retirement age
needed completely to compensate for changes in potential support ratio in the UK
(essentially by changing the definition of support ratio). Most scenarios envisaged a
universal retirement age rising to about 72. Complete compensation is not needed, of
course, and furthermore we are not starting from a retirement age of 65. The
calculations summarised in Table 3 above assume a current age of 62. In reality,
actual retirement age is about 58. If maintaining the potential support ratio involves a
longer nominal working life of (72-65=7) years, then maintaining the real support
ratio means a movement of normal retirement from 58 to 65 (58+7).
The ‘preferred’ route into the future can be evaluated by considering a tradeoff between maximising the potential support ratio and minimizing the
growth of population size. It is assumed that higher PSRs are preferred and
that further increase in population is undesirable (see Coleman 2000 for
further discussion of the latter). Change in potential support ratio is intimately
associated with the notional retirement age required to preserve the potential
support ratio. A return to replacement fertility with mortality and migration as
in the GAD principal projection yields the highest potential support ratio of all
(2.75), with population growing to 72 million by 2050. A notional working
age limit of 70.6 years would then be required to keep the PSR at 4.2. The
same fertility with zero net migration, however, produces a PSR of 2.53 but
with 8.7 million fewer people.
Table 3 Comparison of UK scenarios at 2050 by order of potential support ratio.
Projection
(Actual 1998)
Constant 1998 vital rates
TFR=2.07
TFR=2.07, high e0
185k constant migration
TFR=2.07, zero migration
GAD 1998 Principal Projection
TFR=2.07, high e0, 0 migration
TFR=1.7
High e0
Zero migration
Values in 2050
Potential
Total
Median Percent
support Working
population
age
aged 65+
ratio
age limit
59.2
64.2
71.8
72.6
70.6
63.1
64.2
63.9
61.7
65.0
56.1
36.9
42.7
40.4
40.9
43.4
41.6
44.1
42.2
45.5
44.6
45.8
15.7
20.4
21.7
22.4
23.2
23.2
24.2
24.0
25.2
25.1
26.0
4.15
3.12
2.75
2.64
2.61
2.53
2.47
2.42
2.38
2.37
2.25
62.5
68.3
70.6
71.5
71.1
72.1
72.0
73.0
72.6
72.8
73.6
Note: Except where specified, all scenarios employ the same assumptions as the GAD
Principal Projection: TFR rising to 1.8, constant migration of 95,000 per year, expectation of
life rising to 79.7 and 83.9 years for males and females respectively by 2060. The ‘working
age limit’ is the corresponding formal retirement age ‘required’ to preserve the current
potential support ratio of 4.1. e0 is expectation of life at birth, both sexes.
Source: unpublished calculations by UK Government Actuary’s Department.
24
The most efficient process may be considered to be that which yields the
biggest increase in potential support ratio for the smallest percentage, or
absolute, increase in population size.
(2) Moderating the financial burden
(a) by promoting later retirement and by resisting further increases in the value of
state pension entitlement; linking it for example to prices, not wages. The UK has
already done this, although its government is coming under increasing pressure to
change that policy..
(b) Encouraging alternative sources of old-age support through 'second and third
pillar' occupational and private funded pension schemes, which may have the
additional advantage of improving the savings rate for investment (World Bank, 1994,
Daykin and Lewis 1999). Over 70% of the UK population is already covered by
occupational or private schemes, in marked contrast to the continental European
countries (European Federation 1999). However, funded pensions cannot escape all
adverse demographic effects, because their value still depends on the output of the
economy, in which the size of workforce plays an important role (Chand and Jaeger
1996) and on the stability of stock markets. The UK policy, which seemed so superior
to the more demographically-vulnerable ‘pay-as you-go’ Continental state systems, is
at present in disarray because of the severe recent falls in the value of equities.
(3) Responding to stationary or declining workforce by increasing capital investment
to improve worker productivity. This is a desirable step in its own right, to improve
Europe's poor international competitiveness, and one which would naturally follow
from the pressure of higher wages arising from any labour shortage. Several
calculations have suggested that productivity growth per caput required to cover all
increased old-age dependency would amount to about 0.5% per year by 2020, that is,
resulting in 2.5% growth compared with normal annual growth of up to 3% per year.
None of these by itself can offer a complete solution; none is available. For example,
by 2025, additional productivity improvements for the EU would have to be about
0.8% per year if they were the sole means to meet the need for extra resources arising
from population ageing; average age at retirement would have to rise from the EU
average of 60 to 66 (European Commission, 1996 pp 36-39). Many countries have
already begun to implement several of these measures in order to minimize problems
and in the majority of European countries a multiple response appears to make them
manageable. However, increased workforce participation is a 'one-off' response the
effects of which would not last beyond about 2025. Furthermore, the extreme lowfertility countries, especially Italy, face in the long run an apparently unsustainable
burden unless their birth rate increases considerably.
Conclusions
A smaller population is no obstacle to a high standard of living and may be beneficial
for the solution of various social problems, and on environmental grounds. However
the process of decline is inevitably linked with population ageing. There are no
‘solutions’ to population ageing, either demographic or socio-economic. Increased
immigration and raised birth-rates can, however, ameliorate population ageing and /
or avert decline. But raised immigration can only do so at the cost either of population
growth or of the gradual replacement of the original population with a population of
25
immigrant origin. And it is important not to allow the demands of employers to
promote immigration flows which may temporarily distract attention form the reform
of major structural problems of the labour market or of economy.
The European countries cannot offer ‘answers’ to the Republic of Korea as it faces a
period of rapid population ageing. Among other things, their demographic, economic
and social backgrounds are different. Contrasts between European countries, however,
may be instructive, because they face very different demographic futures – some
benign, others much les so - primarily because of their differences in recent and
current birth-rate. Analysis of these differences, and of the family policies, have not
yielded easy answers leading to obvious policy prescriptions. In family policy,
specific measures to ease the contradictions faced by women wishing both to work
and to raise families may need to be accompanied by, or preceded by, substantial
changes in social attitudes relating to the roles of men and women in society, to bring
equity to the domestic as well as to the public scene.
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