Aging Challenges
in Central Europe
and the Baltics
and Policies to
Address Them
Victoria Levin, The World Bank
Sofia
June 22, 2016
Approaching the Aging Challenge
2
• Age as a “fixed” concept– Countries aging differently
– Aging as a challenge, but also an opportunity• Ensuring longer lives are productive, economically secure
and healthy
• Good health is a prerequisite
• New framing of aging policy– Moving away from the traditional measure of old-age
dependency
– Aging from below requires higher productivity to sustain growth
– Lifecycle approach
Demographic Challenge
3
Bulgaria Aging Differently: Shrinking Younger
Generations
Aging With Growth in Central Europe and the Baltics 4
Cumulative population change 1990-2010, in percent
Low fertility and high emigration have led to falling or stagnating populations in
Central Europe and the Baltics
Notes: The natural increase in the population is defined as births minus deaths. Net migration is the net total of migrants during the period, that is, the total number of immigrants less the number of emigrants.Source: Based on United Nations (UN) Population Division (2013).
Natural increase Net migration
Bulgaria is Aging Differently to Western Europe:
Lives Cut Short
Aging With Growth in Central Europe and the Baltics 5
Life expectancy gains lag behind the EU-15
Italy gained 14 years of life expectancy since 1960 and Bulgaria 5 years
60
65
70
75
80
85
Lif
e e
xp
ec
tan
cy a
t b
irth
, ye
ars
Life expectancy at birth 2012 Life expectancy at birth 1960
Source: Based on World Bank’s World Development Indicators.
Large Imbalance In Generation Size
Sources: World Bank staff calculations based on the Medium Variant of United Nations, Department of Economic and Social Affairs,
Population Division (2015). World Population Prospects: The 2015 Revision.
9Aging With Growth in Central Europe and the Baltics
Shrinking
middle-age
cohorts
Age Not A Concept Fixed Over Time: “60” As
The New “70”… But Not Everywhere
How old you have to be today to have the same mortality as a
person of 60 in 1959
Source: World Bank staff’ calculations for all ECA countries with data available using Human Mortality Database. University of
California, Berkeley (USA), and Max Planck Institute for Demographic Research (Germany), www.mortality.org
7
57
57
58
59
60
60
62
65
68
71
56 61 66 71Age
Males
France
Slovenia
Czech Republic
Poland
Slovakia
Bulgaria
Hungary
Lithuania
Latvia
Estonia
Age Not A Concept Fixed Over Space: Rural
areas often exhibit higher dependency
8
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0%
25%
50%
75%
100%
125%
150%
1,883100%urban
275100%urban
129100%urban
48100%urban
1690%urban
7.936%urban
5.310%urban
3.92%
urban
2.91%
urban
1.70%
urban
Ag
e d
ep
en
de
nc
y ra
teS
ys
tem
de
pe
nd
en
cy r
ate
Local dependency rates in Romania by level of urbanization / size of locality
System dependency rate (pensioners/employed)
Age dependency rate (65+/18-64)
Source: World Bank staff calculations based on Romania 2011 Census.
Aging With Growth in Central Europe and the Baltics
Productive Aging
6
1. …decreases the share of the labor force in
the total population (growth concern)
• Shrinking labor force
• Expanding inactive older population
2. …alters the structure of labor force
(productivity concern)
• Outdated skills
• Less dynamism: less job reallocation across
occupations, sectors, and places
Concern: An Aging Population…
10Aging With Growth in Central Europe and the Baltics
Dependency Ratios Not Fixed: Labor Force Size and
Composition Can Be Altered By Higher Participation
11
Note: Data are based on past estimates of participation rates in 1990–2010, projections of the International Labour Organization (ILO) for
2015–30 based on past trends, and scenarios for 2035–60 developed by the World Bank for this report (female participation convergence to
male participation rates and working life gradually increases by ten years)
Sources: Based on ILO (2011) and UN Population Division (2013)
Aging With Growth in Central Europe and the Baltics
Ratio of inactive to active population aged 15+
50
60
70
80
90
100
110
1990 2000 2010 2020 2030 2040 2050 2060
Ra
tio
of in
active
to
active
po
pu
latio
n
ag
ed
15
+
Constant participation
Increase work lives by 10 years
Female to male convergence
Dependency Ratios Not Fixed: Significant Potential
to Increase Youth Employment in Bulgaria
12
Source: Eurostat, EU-LFS.
Note: The NEET rate is the percentage of the population aged 15–24 who are not in employment, education, or training.
Aging With Growth in Central Europe and the Baltics
NEET Rates, European Countries, 2008 and 2013
21.6
13.0
0
5
10
15
20
25
Ital
y
Bu
lgar
ia
Gre
ece
Cy
pru
s
Cro
atia
Spai
n
Ro
man
ia
Irel
and
Hu
nga
ry
Po
rtu
gal
Slo
vak
ia
Un
ited
Kin
gdo
m
EU
- 2
8
Lat
via
Bel
giu
m
Po
lan
d
Est
on
ia
Fra
nce
Lit
hu
ania
Mal
ta
Fin
lan
d
Slo
ven
ia
Cze
ch R
epu
bli
c
Swed
en
Au
stri
a
Ger
man
y
Den
mar
k
Net
her
lan
ds
Lu
xem
bo
urg
Percent
2013 2008
Dependency Ratios Not Fixed: Significant Potential
to Increase Older Labor Force Participation in
Bulgaria
13
Note: Simulations based on the gap in labor force participation rates for older workers with levels observed in Iceland.
Sources: Based on ILO (2011) and UN Population Division (2013).
Aging With Growth in Central Europe and the Baltics
Potential to increase labor force participation among 45-64 year olds
0%
5%
10%
15%
20%
25%
30%
35%
Ge
org
ia
Kazakhsta
n
Sw
ed
en
Kyrg
yzsta
n
Ire
land
Esto
nia
Un
ite
d K
ingd
om
Latv
ia
Aze
rba
ijan
Ge
rma
ny
Lith
ua
nia
Fin
land
De
nm
ark
Mo
ldova
Po
rtu
ga
l
Ne
the
rla
nd
s
Sp
ain
Bu
lgaria
Ru
ssia
n F
ed
era
tion
Cze
ch R
epu
blic
Au
str
ia
Slo
va
kia
Ukra
ine
Luxe
mb
ou
rg
Ro
ma
nia
Gre
ece
Fra
nce
Ita
ly
Se
rbia
Cro
atia
Be
lgiu
m
Slo
ve
nia
Hu
ng
ary
Turk
ey
Po
land
45-49 50-54 55-59 60-64
• Deterioration in health
and ability to live
independently is
associated with exit from
work.
• Care responsibilities
interact with older
workers’ labor supply.
• Higher likelihood to work if
the spouse is working:
preference for joint
retirement.
• Changes in the official
retirement age or benefit
structure have potential to
incentivize later
retirement (Austria and
Germany)14
Myth 1: Older Workers Do not Want to Work and
Prefer Retirement
Perceived barriers for employment after 55 in Bulgaria:
% reporting each reason as very, fairly, not very, not at all important, 2011
Source: Eurobarometer 2012.
0% 20% 40% 60% 80% 100%
Retire with partner
Family care obligations
Pension/tax system
Workplaces not adapted
Lack of modern skills
No gradual retirement
Employers' attitudes
Exclusion from training
Very important Fairly important Not very important Not at all important
Myth 2: Older workers are less productive,
more difficult hires
Source: Daselaar and Cabeza (2004)
The Aging Brain Can Compensate: Better-performing older
participants compensated for age-related memory decline by
reorganizing the episodic retrieval network
15Aging With Growth in Central Europe and the Baltics
Myth 2: Older workers are less productive,
more difficult hires
Source: Calculations based on data in Cai and Stoyanav 2014; UN Comtrade.
16
-0.25-0.2
-0.15-0.1
-0.050
0.050.1
0.150.2
0.25
Central Europe and the Baltics (Oldcountries)
Central Asia and Turkey (Young countries)
Age-appreciating cognitive skills Age-depreciating cognitive skills Physical ability
Employers Can Take Advantage of New Strengths:
Change in the skill contents of exports, 2000-2010
Aging With Growth in Central Europe and the Baltics
Dynamics of the Stock Of Human Capital Can
Mitigate or Exacerbate Aging Challenge
17
Working-age population and stock of human capital, 1990-2060
Source: Calculations based on Lutz, Butz, and KC 2014.
40
50
60
70
80
90
100
110
120
130
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
Ind
ex 1
99
0=
10
0
EU28
Working-age population
Stock of years of education
Aging With Growth in Central Europe and the Baltics
40
50
60
70
80
90
100
110
120
130
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
Bulgaria
Working-age population
Stock of years of education
Preparedness of Bulgaria’s future workforce?
1
8
Distribution of students by proficiency level in
math, 2012
Source: PISA 2012 data.
Index of School Social Stratification
Bulgaria has the highest rate of
functional innumeracy in
Europe…
…and the
highest level of
school social
stratification
Policy Agenda
14
More Balanced Demographics Can Be Achieved
through Smart Family and Migration Policies
.
m. 20
• Families in some European countries do not have the second
child they want partly due to insufficient incomes
• A re-increase in fertility can be expected when countries reach
high-country income threshold
• Stable employment for mothers, family-friendly employment
policies, and availability of affordable quality childcare options
may play a role in promoting fertility
• Supporting families can also play a role in stemming out-
migration
Healthy Aging: Achieving the “Cardiovascular
Revolution”
21Aging With Growth in Central Europe and the Baltics
Notes: Data for 2010. EU-14 is Eu-15 group of countries excluding Luxembourg for which data is not available.Source: Based on the WHO Mortality Database.
Excess deaths due to diseases of the circulatory system
-100
0
100
200
300
400
500
600
700
800
Italy
Sp
ain
Fra
nce
Sw
ed
en
Ne
the
rla
nd
s
Ire
lan
d
Au
str
ia
Un
ited
Kin
gd
om
Gre
ece
Ge
rman
y
Fin
land
Belg
ium
Po
rtu
gal
De
nm
ark
Slo
ve
nia
Cze
ch
Rep
ublic
Po
lan
d
Cro
atia
Esto
nia
Slo
va
kia
Hu
nga
ry
Latv
ia
Ro
man
ia
Lith
uan
ia
Bu
lga
ria
EU-14 EU-11
Gap in deaths due to excess DCS
Total deaths in each country if it mortality from diseases of thecirculatory system (DCS) was at EU14 average
Employer Interventions: Age-specific Staffing
Strategies Can Help
• Firms have tried many approaches:
– Age-specific equipment or work place adaptation
– Age-specific tasks for old workers
– Mixed-age working teams
– Working time reductions/flexibility
– Age-specific training/human resource management
strategies
– Evidence that some do work (in orange)
• Adoption rates are unknown
– Scope for dissemination
22
Shared Prosperity Challenge: Pensions Protect
From Absolute Poverty, But Coverage Set to Fall
23Aging With Growth in Central Europe and the Baltics
61
71
72
53
70
69
71
68
74
83
0 20 40 60 80 100
Hungary
Czech Republic
Estonia
Romania
Croatia
Latvia
Lithuania
Bulgaria
Poland
Slovak Republic
Coverage of 65+, in percent
2010 2050
Source: Schwarz et al. 2014.
Share of Elderly Receiving Social Insurance Benefits
Stepping Up Response to Aging
24Aging With Growth in Central Europe and the Baltics
Increase labor force
participation at all ages
Increase healthy life
expectancy and reduce
health inequality
Invest in skills starting
from young age and
adapt to older labor
force
Reorganize social services to
take account of changing
demographics
Target those who will be
vulnerable to elderly
poverty early on