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How to Best Address Pension Adequacy and Financial Sustainability in the Context of Population Ageing: The Labour Market as a Key Determinant

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The Future of Pension Plans in the EU Internal Market

Part of the book series: Financial and Monetary Policy Studies ((FMPS,volume 48))

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Abstract

Against the background of population ageing pension debate has focussed for many years on the future increase of the so-called old-age dependency ratio, i.e. the number of older people against the number of people of working age. Incomprehensibly, this ratio is often misinterpreted as the ratio between workers and pensioners. Yet, wrongly equalizing the number of people of working age with the number of people in employment distorts the view of the most effective strategy with which countries can prepare for population ageing—which is improving the employment integration of those of working age.

Referring to a study recently carried out in Germany the authors show that improving employment integration across all ages would help to significantly contain the future increase of economic dependency ratios and, thus, significantly support pension adequacy and financial sustainability.

Raising employment levels … is arguably the most effective strategy with which countries can prepare for population ageing

(European Commission 2008)

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Notes

  1. 1.

    European Commission (2018a), Table III.1.60.

  2. 2.

    See Blank et al. (2018), pp. 194 f.

  3. 3.

    World Bank (1994).

  4. 4.

    See ILO (2018).

  5. 5.

    OECD (2015), p. 9.

  6. 6.

    European Commission (2018a), Table III.1.66.

  7. 7.

    See European Commission (2018b).

  8. 8.

    European Commission (2015a), p. 9.

  9. 9.

    European Commission (2018c), p. 15.

  10. 10.

    Ibid, Chap. 5.

  11. 11.

    Ibid, p. 129.

  12. 12.

    See ILO (2018), p 22 f / 32 f.

  13. 13.

    http://ec.europa.eu/economy_finance/graphs/2015-05-12_ageing_report_en.htm

  14. 14.

    2013 was the base year for the 2015 Ageing Report’s analysis.

  15. 15.

    Furthermore, among those earmarked by Eurostat’s Labour Force Survey (LFS) as being in employment there are many millions only marginally integrated in employment (in LFS each person working at least 1 h for pay during the reference week is counted as employed).

  16. 16.

    European Commission (2015b), Tab III.1.80.

  17. 17.

    https://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=839&furtherNews=yes

  18. 18.

    European Commission (2008), p. 144.

  19. 19.

    European Commission (2018a), III.1.48.

  20. 20.

    See Wöss and Türk (2011, 2014).

  21. 21.

    As children, students, house-wives and—husbands and other people without income are also economically dependent, the tool also allows calculations based on a broader concept of economic dependency—the total economic dependency ratio. Here the focus shifts from social transfers to total transfer needs within a society as a whole.

  22. 22.

    Calculations based on the Dependency Ratio Calculator also reveal a huge impact of employment rates on public budgets (Türk et al. 2012).

  23. 23.

    European Commission (2012).

  24. 24.

    These calculations in the White Paper refer to AK’s ‚ dependency ratio calculator’.

  25. 25.

    European Commission (2012), Sect. 2.3.

  26. 26.

    Türk et al. (2018).

  27. 27.

    European Commission (2015b).

  28. 28.

    Compared to only 56% based on unadjusted LFS data.

  29. 29.

    Revised figures.

  30. 30.

    Türk et al. (2018), p. 17 (own translation).

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Author information

Authors and Affiliations

  1. Chamber of Labour, Vienna, Austria

    Josef Wöss & Erik Türk

Authors
  1. Josef Wöss
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  2. Erik Türk
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Correspondence to Josef Wöss .

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Editors and Affiliations

  1. CIDEEFF - Center for European, Economic, Financial and Tax Law Research, University of Lisbon, Faculdade de Direito de Lisboa, Alameda da Universidade, Lisbon, Portugal

    Nazaré da Costa Cabral  & Nuno Cunha Rodrigues  & 

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Wöss, J., Türk, E. (2019). How to Best Address Pension Adequacy and Financial Sustainability in the Context of Population Ageing: The Labour Market as a Key Determinant. In: da Costa Cabral, N., Cunha Rodrigues, N. (eds) The Future of Pension Plans in the EU Internal Market. Financial and Monetary Policy Studies, vol 48. Springer, Cham. https://doi.org/10.1007/978-3-030-29497-7_17

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