A Global View on Demographic Pressure and Labour Market Participation

Journal of Global Economy, Vol. 8, No. 2, p. 165, 2012

30 Pages Posted: 8 Jul 2011 Last revised: 17 Aug 2012

See all articles by Marga Peeters

Marga Peeters

De Nederlandsche Bank

Loek F. M. Groot

Utrecht University - School of Economics

Date Written: July 6, 2011

Abstract

Demographic change across the globe puts pressure on labour markets and public finances. Most studies on ageing focus on the projected development of the old age dependency ratio, being the ratio of persons 65 or older relative to the working age population. This ratio gives a very incomplete picture of the (fiscal) pressure from demographic changes. In this study, besides the share of the dependent population composed of the young and the old, we also include the share of the working age population that is not active on the labour market, labelled as the labour market space. By analysing 21 developing and 29 developed economies across the globe, we cover 75% of the 9.3 billion people that the United Nations projects for the whole world in 2050. A new indicator, relating demographic pressure from fiscal spending to the available space at the labour market, enables us to quantify and compare the pressure-to-space across countries over the time span 2010-2050. The indicator points out that Poland, Turkey and Greece are most under pressure. Developing countries, such as Uganda, the Democratic Republic of Congo and Tanzania will experience a very low pressure up to 2050 in case their fiscal spending per young and elderly person remains at the current levels. In most of the countries under high pressure there seems to be room for using the labour market space by, for instance, working more hours or increasing the retirement age, as this will alleviate the fiscal pressure. This suggests a policy trade-off between maintaining publicly financed services to the dependent population and maintaining labour market space.

Keywords: demography, dependency rates, labour market, unemployment, social security, pensions, government spending

JEL Classification: D6, E24, E62, H51, H52, H53, H55, J0, J11, J18, J21, J26, O57

Suggested Citation

Peeters, Marga and Groot, Loek F. M., A Global View on Demographic Pressure and Labour Market Participation (July 6, 2011). Journal of Global Economy, Vol. 8, No. 2, p. 165, 2012, Available at SSRN: https://ssrn.com/abstract=1881359 or http://dx.doi.org/10.2139/ssrn.1881359

Marga Peeters (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Loek F. M. Groot

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
93
Abstract Views
1,216
rank
344,195
PlumX Metrics