Ageing and policies: Pension systems under pressure

Abstract

A considerable amount of research has already been devoted to examining the impact of ageing at the national level, for instance, on the pension system, economic productivity, and labour market supply. However, it is more difficult to make comparisons between countries, due to differences in models, assumptions, and definitions. In this chapter, I use a demography-based model, along the lines suggested by Calot (Le vieillissement démographique dans l’Union Européenne à l’horizon 2050. Étude d’impact du viellissement démographique. Directorate-General Employment and Social Affairs, European Commission, 1995), in order to assess the implications of ageing on the 27 EU member states and on four non-European developed countries (Canada, Japan, South Korea, and the USA) in the period 2008-2050. I measure the relative impact of a series of alternative policies that could be implemented to counter ageing: increasing the number of (autochthonous or immigrant) people in employment, delaying age at exit from the labour market, increasing the proportion of GDP spent on pensions, or modifying the so-called transfer ratio. Results show that immigration alone cannot fully counter ageing in developed countries. However, it can play a useful complementary role if combined with an increase in labour participation and delayed retirement. The best policy mix will likely differ in each country, depending on the initial situation, demographic trends, and policy preferences.