Andr

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THE EUROPEAN UNION ECONOMY, SOCIETY, AND POLITY

• by
• Andrés Rodríguez-Pose
• London School of Economics
• Oxford University Press
• ISBN 0-19-874286-X

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Part II
SOCIETY
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Chapter 3
Ageing
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Introduction

• Western Europe is ageing
• As a consequence of
• Higher life expectancy
• Falling birth and fertility rates
• Ageing is likely to become a serious economic,
  social, and political problem once the baby
  boomers start retiring
• Pressure on the already well-developed European
  welfare systems
• Consequences for the economic potential of the EU
• Countries are setting policies in motion in order
  to curb ageing

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Demographic change in the EU (I)

• The EU is still the most populous among the major
  world economic powers.
• 375 million vs 278 in the US and 117 in Japan
• But the US has been catching up rapidly with the
  EU (57 of the population in 1960, 74 in 2000)
• Low rates of population growth during the second
  half of the 20th century
• Since 1960 the population of Europe never rose by
  more than 1 in a single year
• In contrast, this rate was achieved 18 times in
  the US and 8 in Japan
• Population growth in Europe has been declining
  steadily

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Average annual population growth in the EU,
Japan and the USA
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Demographic change in the EU (II)

• Prospects are bleak
• According to the UN report on Replacement
  Migration will peak in 2005
• By 2050 the EU will have 44 million less than in
  2000 (a loss of 12)
• It will have 18 million less than the US
• Twelve out of the fifteen current member states
  will lose population (exceptions Ireland,
  Luxembourg, and France)
• Population loss in Italy, Spain, and Greece will
  be in excess of 20

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The decline in birth rates (I)

• The second demographic transition
• Fall in birth rates
• Lower number of marriages and marriages later in
  life
• Unstable marriages and growing divorce rates
• Increase in cohabitation
• Increase in the number of children born out of
  wedlock

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The decline in birth rates (II)

• Three types of demographic patterns
• Population growth (France, the Netherlands,
  Ireland, US)
• Early decline in birth rates, but births have
  stabilized and remain above the number of deaths
• Still natural growth
• Early zero growth (Austria, Denmark, Sweden,
  UK)
• Early decline in birth rates without
  stabilization
• Negative growth rates which caused a reaction and
  a rebound of birth rates
• Late zero growth (Italy, Greece, Spain,
  Portugal, Japan)
• Late, but sharp decline in birth rates
• Zero growth since the early 1990s

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Evolution of birth and death rates in selected
European countries, the US, and Japan 1960-97
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The decline in birth rates (III)

• National demographic patterns hide important
  intranational differences
• Significant internal contrasts in birth rates in
• Italy (North/South division)
• Germany (East/West division)
• and, to a lesser extent, in other EU countries

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Regional crude birth rate in the EU, 1997
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The decline in fertility rates

• Women (and families) are deciding to have less
  children than ever before
• Total fertility rates in the EU are the lowest in
  the world, bar some countries in Eastern Europe
  and Japan
• Fertility decline started in the mid 1960s
• Early declines in the North (Denmark, Finland,
  Germany, Luxembourg and Sweden) Demographic
  core/periphery divide
• Subsequent and more dramatic decline in the
  Mediterranean countries (Italy and Spain now with
  some of the lowest TFR in the world)
• Short-lived rebound of fertility rates in Sweden
  and other Scandinavian countries in the early
  1990s

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Evolution of fertility rates
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Evolution of total fertility rates in selected
European countries
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The ageing of the EUs population (I)

• The decline in birth and fertility rates is
  profoundly altering Europes age structure
• Younger population cohorts are becoming smaller
  than older ones
• The population cohort of those aged between 30
  and 34 is 50 larger than those aged between 0
  and 4
• There are more 55 to 59 year olds than children
  between 0 and 4
• Life expectancy is increasing
• Women in most countries of the EU can now expect
  to live until the age of 80
• Male life expectancy in all countries bar
  Portugal above 72

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Life expectancy at birth, 1970-1997
Source World Bank World Development Indicators
(2000).
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The ageing of the EUs population (II)

• Europe is ageing
• There are now 41.5 people million more over 70
  than in 1980 (an increase of 40)
• The percentage of the elderly has risen
  considerably everywhere, bar Ireland
• In Greece, Finland and Portugal the percentage of
  the population aged 65 and above doubled between
  1960 and 1997
• Italy and Spain were not far behind
• Population projections predict that the process
  of ageing is far from over
• According to the UN the over 65 will rise to 95.6
  million in 2050 (29 of the population)

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Population aged 65 and above ( of total)
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Predicted evolution of the total and elderly
population in selected European countries, the
EU and the US 2000-50
Source Own elaboration with United Nations
Population Division data. Medium variant.
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Regional share of senior citizens, 1998
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The factors behind the ageing process (I)

• Causes for higher life expectancy
• Advancement of medicine and health
• Eradication of many infectious and contagious
  diseases
• Advancement in the treatment of degenerative
  diseases
• Nutritional and health improvements
• Social factors
• Relative wealth of European societies
• Reduction in the number of hours worked during
  life

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The factors behind the ageing process (II)

• Causes behind the decline in fertility
• Advances and greater availability of
  contraceptive methods (M. Murphy) (although for
  some this is not a cause)
• Economic factors
• Pecuniary and time cost of having children
• Children cannot longer be regarded as sources for
  future family support
• Opportunity costs of having children in societies
  with a high female participation in the labour
  market. This has become more evident recently
• Decline in job stability in Europe (relying on
  one salary is not enough!)

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The factors behind the ageing process (III)

• Sociological factors
• The gap in educational attainment between men and
  women in western Europe has disappeared
• Female employment has increased dramatically
• Female employment is regarded as the main
  determinant in the fall of fertility rates
• The opportunity cost of having a child increases
• Especially, and despite some changes in male
  attitudes, since the burden of child-bearing
  still greatly falls on women
• The opportunity cost of having a child increases
  as womens wages rise
• However this argument is found wanting when we
  notice that the countries with the lowest
  fertility rates also have the lowest female
  employment

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Evolution of female employment, 1970-1997
Source World Bank World Development Indicators
(2000).
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Family policies (I)

• European governments have adopted different
  policies to tackle declining fertility
• Very high support in Sweden (and Denmark and
  Finland)
• Generous child benefit package
• Generous public childcare provision
• Lengthy maternity and paternity leaves
• Austria and Germany
• Generous policies
• Greatest support for mothers who stay at home to
  look after children

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Family policies (II)

• France (and Belgium and Luxembourg)
• Horizontal and vertical redistribution of
  resources to families with children (especially
  for families with three children)
• UK
• Means testing and tackling child policy
• Low-income mothers benefit the most from support
  meassures
• Lower support in the Netherlands, Ireland, and
  Mediterranean countries

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Family policies (III)

• Have family policies contributed to redress the
  decline in fertility?
• Some claim that the impact has been weak
  (Gauthier Hoem)
• Others suggest that family policies have had an
  impact
• The actual evidence is inconclusive
• Lack of adequate family policies may have
  contributed to the decline in fertility in
  southern Europe
• Some countries with more generous family policies
  (Sweden, Finland, Denmark, France, the UK) tend
  to have slightly higher fertility rates
• But countries with similar family policy regimes
  differ in their fertility rates

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Social policies for old age

• The process of ageing is putting European social
  services under considerable stress
• Social policies for old age have become one of
  the most important areas of public policy
• Old age expenditure (as a of GDP) has risen
  significantly since the 1980s and remained stable
  during much of the 1990s
• Old age expenditure represents two fifths of all
  social expenditure (highest incidence in Italy,
  Greece, and Spain)

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Old age expenditure in the EU
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Conclusion

• Ageing poses a serious challenge for the future
  of European societies
• Society may become more conservative and
  risk-averse, less open to innovation and foreign
  influences, and less dynamic and able to compete
• Ageing represents a challenge for public finances
• More and better targeted policies may be needed
• Even if the perception of an aged society as a
  less dynamic society may be rather reductionist.