The EU Working

Longer Agenda
Europes Ageing Demography
ILCUK event

hosted by The European Economic and Social Committe

74 rue de Trves, Brussels

Fritz von Nordheim

European Commission
DG EMPL D3: Social Protection
Social Europe

From Dividend to Deficit in Demographics

Social Europe

The demographic challenge

Year-onyear change
in the adult
population,
EU27

3.000.000
20-59

60+

60-69

2.000.000

1.000.000

0
1996

2006

2016

-1.000.000

-2.000.000
Social Europe

2026

2036

2046

2056

The power of longer working lives

EU-27 old-age dependency ratios, 2010-2060, under four exit
assumptions (working ages from 20 to 59 through 69)
20 to 59 / 60+

20 to 63 / 64+

20 to 66 / 67+

20 to 69 / 70+

0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2010

2020

2030

2040
Social Europe

2050

2060

Demographic vs economic
dependency ratios
EU-27 / 2010
demographic dependency ratio: 26%
Economic dependency ratio: 65%

EU-27 / 2050 (EU 2020plus scenario)

demographic dependency ratio: 50%
economic dependency ratio: 79%

Yellow: employed population

Red: unemployed, pensioners
Grey: other inactive

Source: Josef Wss / Erik Trk - Austrian Federal Chamber of Labour

Social Europe

Employment rates by gender,

EU15,1970 & 2005

100
90

% of age group population

80
70
60
50
40
30
20
10
0
15-19

20-24

Men 1970

25-29

30-34

35-39

Men 2008

40-44

45-49

50-54

Women 1970

Social Europe

55-59

60-64

Women 2008

65-69

70-74

75+

How we arrived here: The imbalancing of

years in work and retirement 1960-2000

Relative share of work in life / duration of working

life reduced through combination of:
4-5 years Later Entry (longer education & training)
4-5 years Earlier Exit (longer retirement)
5-6 years Longevity Growth (longer retirement)

Was it individual preferences or policy conditioning

that drove changes?
Social Europe

Where we are now: 15 years of improvements

Major reversal of retirement trends since 2000:
Exit ages rising
Empl rates 55-64 rising primarily 55-59
Empl rates of 65-69 rising
Holding up in crisis
Causes:
Key Helping hand: Changes in age, sector, gender
and educational level composition of older workers
Pension reforms closing of early exit routes
Changes in Age Management in work places & LMs
Social Europe

Employment rates

55-64, 2013

Social Europe

N/W->S/E gender bias in OW Empl rates

Social Europe

Gender bias in underemployment of 55-64

In 2011 total employment rates for workers aged 55-64 ranged from
31.2 in SK to 72.3 in SE, i.e. varying by more than a factor 2.

The rate for the EU-27 was 47.4.

Eight countries had rates below 40 (BE, EL, IT, LU, HU, MT, PL, SI).

For females the rate ranged from just 13.8 in MT to 68.9 in SE, i.e.
varying by a factor 5.
The rate for the EU-27 was 40.2.
Five countries had rates below 30 (EL, IT, MT, PL, SI).
Barriers to female older workers employment are found in
pension systems (e.g. lower pensionable age for women),
work-life balances (e.g. insufficient access to child & eldercare)
workplaces & labour markets (e.g. poor age & gender
management).
Social Europe

Gender employment gap of 55-64 reducing

2000 to 2010

Social Europe

52

Social Europe

SI***

PL

LU*

BE*

SK

MT

HU

FR

LT

CZ

2001

AT

IT

EU27

ES

DE

NL

EE

EL**

FI

DK

PT

UK

SE

CY

LV*

IE*

Exit ages 2001-2009

2009

66

64

62

60

58

56

54

Employment rates 55-64 rising - even in crisis

2013

2007

90
80
70
60
50
40
30
20
10
0

Source: Eurostat, labour force survey

Social Europe

10y N->S Gradient in Working Life Duration

Social Europe

Where we are heading: Scenarios 2010-2060

The double challenge:
structural longevity growth of +6-7 years
transition from baby-boomers to baby-busters
The end of the unique demographic dividend
Greying of the labour Market: only will 50+ grow
Demography not fate
But coping will depend on our ability to employ a
much larger share of 50-69 year olds
Social Europe

Reforms have improved pension sustainability

(change 2010-2060 in percentage points) - 2009 and 2012 AR
16
14
12
10

+2,3 p.p.
(2009 AR)

+1.5 p.p.
(2012 AR)

8
6
4

-2

LV
PL
EE
IT
DK
PT
FR
SE
EL
BG
UK
EU27
EA
AT
DE
CZ
HU
FI
LT
NL
ES
RO
IE
NO
SK
MT
BE
SI
CY
LU

-4

2009 AR
Social Europe

2012 AR

Decomposition of
in pension expenditure
Dep. effect

Empl. effect

the increase

Coverage effect

PensExp = Pop>65 x Pop (15-64) x

GDP
Pop(15-64)
EmplNo

PensNo
Pop>65

Benefit effect
x

PensExp/PensNo
GDP/EmplNo

(%) of GDP)

10.0
8.9

8.7

8.0

6.0
4.0
2.0

2.0

1.5

0.0
-1.0

-2.0
-2.6

-4.0
Dependency ratio

-0.6

-0.9

-2.7

-2.9

Coverage ratio

Employment effect

-2.8

Benefit ratio

EA
EU27
Social Europe

-0.6

Interaction effect

Total

Challenges
to future pension adequacy
25
15
5
-5
-15
-25

RO

SI

BG

CY

EE

UK

ES

IE

AT

NL

LU

LT

BE

LV

SK

HU

MT

FI

DE

EL

DK

CZ

IT

FR

PL

SE

-35
PT

Projected
change in
replacement
rates of
statutory and
supplementary
pension
schemes
between 2008
and 2048 (in
pp.)

Change in gross replacement rates between 2008-2048 owing to total Statutory pension schemes (percentage
points change)
Change in gross replacement rates between 2008-2048 owing to Occupational and other supplementary pension
schemes (percentage points change)

Social Europe

Balancing Adequacy & Sustainability

4th Key message of 2012 Pension Adequacy Report :

The greater sustainability of public pensions in most

Member States has, to a significant extent, been
achieved through reductions in future adequacy.
The challenge is therefore to devise means by which
people can recoup the decline in replacement rates.
EU policy Goals:
Early retirement actuarially punished,
Working longer sufficiently rewarded &
20
Cost-effective schemes for retirement savings available
Social Europe

The impact of working longer

Social Europe

Ageing or Exit Age problem?

Adult life spent in retirement EU27
Men

Wom en

2010

2060

2010

2060

Em ploym ent rate of older w orkers (55-64)

54.5

66.7

38.6

60.3

Average entry age

21.6

21.6

23.6

23.6

Average exit age

62.5

64.3

61.7

63.8

Life expectancy at the tim e of w ithdraw al

18.9

22.7

22.7

26.0

% of adult life spent in retirem ent

Requested exit postponem ent in years
(to keep % life spent in retirem ent
constant)

31.7

34.7

37.4

39.3

Social Europe

2.0

1.3

Interdependence of pension and

employment policies

Tax/benefit incentives affect late-career labour supply

With pensions increasingly based on career average

contributions, future pension adequacy will depend on the
ability of labour markets to provide opportunities for
longer and less interrupted contributory careers

The success of pension reforms that raise the pensionable

age and possibly link this or the benefit level to longevity
gains depends crucially on their underpinning through
work place and labour market measures that enable and
encourage women and men to work longer.
23
Social Europe

Pension adequacy depends on

longer & less broken working lives
There are clear limits to how much age management
practices at work can be influenced by incentive
structures in pensions.
Tackling the pension adequacy challenge will require
determined efforts to promote longer and healthier
working lives through employment and industrial
relations policies.
24
Social Europe

Linking the pensionable age to longevity

Benefit versus Age linking?
Retirement not resulting from individual decision
about income optimisation, consequence of complex
set of factors in work places and labour markets and
constrained by collective agreements
Adjusting pension norm with narrative: as we live
longer we work longer and reach a better balance
between years spent in work and retirement
Implicit: Working to higher ages becomes permanent
agenda for the labour market
Social Europe

Implicit agenda of linking

Collective pension norm: age moves w. longevity
Tabels turned: SP off-loading onto labour markets
Fixing pensions through longer working lives
Taking adjustments in duration of working life
Challenge moved to social partners in WPs & LMs
Required: Changes in age management in work
places and labour markets to encourage and enable
women and men to work to higher ages
Social Europe

Key challenge of longer working lives

Creating late-career labour markets the main challenge.
Nowhere in Europe a labour market for people aged 55+.
Longer working lives are fully possible through RETENTION
with the same employer.
But if people 55+ lose their job the chances of finding
another are so remote that longer working lives through
REHIRING almost is non-existent.
27
Social Europe

Scenarios for a Greying Labour Market

Pensionable age as Collective Norm or Individual
preference?

Pensions from social protection to income smoothing

(from collective to individual responsibility)?
Working to a certain Income more than a certain Age?
Or Auto-piloting as pension design ideal - not everyone
having to learn to navigate his own retirement plane!
New Collective norms of retirement and pensionable
ages: 'As we live longer we work longer' ??
Social Europe

Scenarios for a Greying Labour Market

A multi-tier structure in longer working lives: The
emergence of a labour market with End-ofCareer-Jobs

Retiring from 1st career at 60 or 65, but continuing in

2nd career until 70 or 75 with less responsibility/hours
Working Until & Working After the Pensionable Age

Social Europe

Scenarios for a Greying Labour Market

Overcoming paradoxes of protection / seniority pay: more

retention but no hiring of OW more pay but no jobs for 55+
From open ended to fixed term contracts; from seniority to
productivity based pay..?
Cannot manage work organisations without standard age, where
one retires from a career span retirement invented for reason:
Need new norms for when1st careers end and the pensionable age
begins, with both moving up with rise in life expectancy at 65.?

Social Europe

Thank you for your attention

Social Europe