The First and Second Demographic Dividend in European NTA Countries

Jože SambtUniversity of Ljubljana, Faculty of Economics

 

Alexia PrskawetzVienna University of Technology and Vienna Institute of Demography

 

European NTA Workshop October 2010

Outline

Data and methodology

Population projections (EUROPOP2008) NTA profiles Support ratios and demographic dividends

Results

Support ratios and the first demographic dividend Second demographic dividend

Data and methodology

Population Projections

Latest EUROPOP2008 population projections from Eurostat for the 2008-2060 period, technically extended until the year 2300 (assuming mortality, fertility and migration from 2060)

1-year age groups

Assumptions about Fertility and Mortality in Eurostat’s EUROPOP2008 Population Projections

TFR2008 TFR2060 e0,m,2008 e0,m,2060 e0,f,2008 e0,f,2060

Austria 1.41 1.57 77.4 84.9 82.9 89.2

Finland 1.84 1.84 76.1 84.3 83.0 89.3

France 1.98 1.93 77.5 85.1 84.3 90.1

Germany 1.34 1.53 77.3 84.9 82.6 89.1

Hungary 1.35 1.53 69.7 81.9 78.1 87.3

Slovenia 1.32 1.52 74.7 83.7 81.9 88.8

Spain 1.39 1.56 77.4 84.9 83.9 89.6

Sweden 1.85 1.85 79.0 85.4 83.1 89.3

NTA profiles

NTA age profiles – assuming the shapes don’t change through time

Labor income age profile – labor income per capita relative to the average labor income 30-49 age group

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+

Labo

ur in

com

e p.

c. /

Avg

Lab

. Inc

(30

-49)

Age

Austria (2000)

Germany (2003)

Hungary (2005)

Slovenia (2004)

Spain (2000)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+

Labo

ur in

com

e p.

c. /

Avg

Lab.

Inc

(30

-49)

Age

Finland (2004)

France (2001)

Sweden (2003)

Consumption age profile – consumption per capita relative to the average labor income 30-49 age group

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+

Con

sum

ptio

n p.

c. /

Avg

Lab

. Inc

(30

-49)

Age

Austria (2000)

Germany (2003)

Hungary (2005)

Slovenia (2004)

Spain (2000)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+

Con

sum

ptio

n p.

c. /

Avg

Lab

. Inc

(30

-49)

Age

Finland (2004)

France (2001)

Sweden (2003)

Lifecycle deficit – life cycle deficit per capita relative to the average labor income in 30-49 age group

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+

Life

cycl

e de

ficit

p.c.

/ A

vg la

b. in

c (3

0-4

9)

Age

Austria (2000)

Germany (2003)

Hungary (2005)

Slovenia (2004)

Spain (2000)

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+

Life

cycl

e de

ficit

p.c.

/ A

vg la

b. in

c (3

0-4

9)

Age

Finland (2004)

France (2001)

Sweden (2003)

Germany: 31 years (age 27 to age 57)

Slovenia: 31 years (age 25 to age 55)

Sweden: 38 years (age 25 to age 62)

Support Ratio

Alternative 1: CON1 = i=1…99 Ni (unweighted)

Alternative 2: CON2 = i=1…99 Si Ni (needs weighted consumption measure)

Alternative 1: LF1 = i=20…64 Ni (unweighted)

Alternative 2: LF2 = i=15…80 w i PR i N i (adjusted for wages and labor force participation rates)

4 combinations: LF1/CON1, LF2/CON1, LF1/CON2, LF2/CON2

S … NTA consumption age profilew PR … NTA labor income age profile

Demographic Dividends

L = LF2N= CON2

First demographic dividend:

Second demographic dividend:

Calculation of the second demographic dividend is based on Lee & Mason NUPRI2006 paper

)t(N)t(L

)t(L)t(Y

)t(Y)t(C

)t(N)t(C

NL

YC

lcc

lcc

)t(N)t(L

)t(Y)t(C

)t(y)t(c

)t(N)t(L

)t(y)t(Y)t(C

)t(c

)t(N)t(L

)t(L)t(Y

)t(Y)t(C

)t(N)t(C

yy

yy

consumption index: “extend to which consumptionper equivalent consumer rises relative to productivity changes induced by technological change”

2nd demographic dividend: rate of growth of consumption relative to labor income

Results

Four alternative measures of support ratios (relative to 2000)

0.700.720.740.760.780.800.820.840.860.880.900.920.940.960.981.001.021.041.061.081.10

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060

Rat

io

Year

LF1/CON1

LF2/CON1

LF1/CON2

LF2/CON2

Austria Finland

France Germany

Four alternative measures of support ratios (relative to 2000)

Hungary Slovenia

Spain Sweden

First demographic dividend

-0.015

-0.010

-0.005

0.000

0.005

0.010

0.015

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060g(

L/N

)

Year

FinlandFranceSweden

-0.015

-0.010

-0.005

0.000

0.005

0.010

0.015

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060g(

L/N

)

Year

Hungary

Slovenia

Spain

-0.015

-0.010

-0.005

0.000

0.005

0.010

0.015

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060g(

L/N

)

Year

Austria

Germany

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Year

Austria

Finland

France

Germany

Hungary

Slovenia

Spain

Sweden

Second Deographic Dividend

Conclusions and Discussion There are considerable differences in the level and shape of the

support ratios among European NTA countries for 1950-2060 period.

In the future all European NTA countries are expected to face strong declines in support ratios. In some countries the support ratios are already substantially declining and in others they are just about to start to decline.

In all European NTA countries except Spain and Germany the second demographic dividend is expected to be small, assuming fixed age profiles through time. The opportunity of aging societies in form of a positive second demographic dividend is expected to be heavily dominated by the challenge of a negative first demographic dividend.

End