Ag­ing work­force poses chal­lenge

Study points to ris­ing pen­sion costs as a re­sult of de­mo­graphic shifts caused by aus­ter­ity

Kathimerini English - - Insurance Special - BY ROULA SALOUROU

The gov­ern­ment – the La­bor Min­istry in par­tic­u­lar – will soon need to counter one of the big­gest chal­lenges of the 21st cen­tury: an ag­ing work­force.

The de­mo­graphic time bomb is set to go off in the com­ing years and is ex­pected to have a dra­matic im­pact on the lo­cal econ­omy and the so­cial se­cu­rity sys­tem. It is es­ti­mated that the rise in life ex­pectancy alone will put an ad­di­tional bur­den of 37.3 bil­lion eu­ros on the sys­tem in cur­rent prices. This amounts to an es­ti­mated 1.3 bil­lion eu­ros an­nu­ally be­tween 2017-2057 or a re­duc­tion of pay­ments to ben­e­fi­cia­ries and pen­sion­ers by an equal vol­ume.

A re­cent study car­ried out by Pan­teion Univer­sity Pro­fes­sor Savas Robo­lis and PhD can­di­date Vas­silis Bet­sis ex­poses the con­nec­tion be­tween de­mo­graphic changes in the work­force and changes to the so­cial se­cu­rity sys­tem as part of Greece’s bailout and post-bailout com­mit­ments.

Among other find­ings, the re­port high­lights how an ag­ing work­force will hold back growth rates in the com­ing years. In fact, the ag­ing la­bor force and the im­pact on the GDP rate will in turn have an ad­verse ef­fect on the so­cial se­cu­rity sys­tem.

Based on the find­ings, Greece will in the com­ing years see a de­cline of its pop­u­la­tion, an in­crease of its work­force and a drop in the growth rate of its work­ing age pop­u­la­tion (peo­ple aged 15-64).

Robo­lis and Bet­sis ar­gue that forth­com­ing changes in the makeup of the pop­u­la­tion, in the work­force and em­ploy­ment can be ex­plained by the aus­ter­ity poli­cies of re­cent years, most im­por­tantly the in­crease of the re­tire­ment age.

The aver­age re­tire­ment age rose from 59 in 2010 to 63 in 2017. It is ex­pected to reach 65 by 2022. Fur­ther in­creases are in the pipe­line as a law rat­i­fied in 2016 stip­u­lates that the re­tire­ment age should be ad­justed ev­ery 10 years in line with in­creases in life ex­pectancy. The next re­view is sched­uled for 2020.

Ac­cord­ing to a re­cent Euro­pean Com­mis­sion re­port on the sus­tain­abil­ity of Greece’s so­cial se­cu­rity sys­tem, the coun­try’s re­tire­ment age will rise to 71 by 2060.

This hike in the re­tire­ment age will re­sult in an ex­pan­sion of the la­bor force, es­pe­cially of women, and the age­ing of the work­force. At the same time, this will lead to a re­duc­tion in the num­ber of young work­ers due to lower birth rate and longer work­ing life. This, in turn, can be ex­pected to af­fect pro­duc­tiv­ity: an aged work­force is less pro­duc­tive than a young one.

The re­searchers point out that while Greece aims for an­nual GDP growth of 2 per­cent, the im­pact of de­mo­graph­ics will cre­ate the need for a growth rate of 4 per­cent.

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