by Andr és Rodríguez-Pose London School of Economics Oxford University Press ISBN 0-19-874286-X

1. THE EUROPEAN UNION: ECONOMY, SOCIETY, AND POLITY by Andrés Rodríguez-Pose London School of Economics Oxford University Press ISBN 0-19-874286-X

2. Part II SOCIETY

3. Chapter 3 Ageing

4. Introduction • Western Europe is ageing • As a consequence of: • Higher life expectancy • Falling birth and fertility rates • Ageing is likely to become a serious economic, social, and political problem once the baby boomers start retiring • Pressure on the already well-developed European welfare systems • Consequences for the economic potential of the EU • Countries are setting policies in motion in order to curb ageing

5. Demographic change in the EU (I) • The EU is still the most populous among the major world economic powers. • 375 million vs 278 in the US and 117 in Japan • But the US has been catching up rapidly with the EU (57% of the population in 1960, 74% in 2000) • Low rates of population growth during the second half of the 20th century • Since 1960 the population of Europe never rose by more than 1% in a single year • In contrast, this rate was achieved 18 times in the US and 8 in Japan • Population growth in Europe has been declining steadily

6. Average annual population growth in the EU, Japan and the USA

7. Demographic change in the EU (II) • Prospects are bleak: • According to the UN report on Replacement Migration will peak in 2005 • By 2050 the EU will have 44 million less than in 2000 (a loss of 12%) • It will have 18 million less than the US • Twelve out of the fifteen current member states will lose population (exceptions: Ireland, Luxembourg, and France) • Population loss in Italy, Spain, and Greece will be in excess of 20%

8. The decline in birth rates (I) • The second demographic transition: • Fall in birth rates • Lower number of marriages and marriages later in life • Unstable marriages and growing divorce rates • Increase in cohabitation • Increase in the number of children born out of wedlock

9. The decline in birth rates (II) • Three types of demographic patterns: • ‘Population growth’ (France, the Netherlands, Ireland, US): • Early decline in birth rates, but births have stabilized and remain above the number of deaths • Still natural growth • ‘Early zero growth’ (Austria, Denmark, Sweden, UK): • Early decline in birth rates without stabilization • Negative growth rates which caused a reaction and a rebound of birth rates • ‘Late zero growth’ (Italy, Greece, Spain, Portugal, Japan): • Late, but sharp decline in birth rates • Zero growth since the early 1990s

10. Evolution of birth and death rates in selected European countries, the US, and Japan 1960-97

11. The decline in birth rates (III) • National demographic patterns hide important intranational differences: • Significant internal contrasts in birth rates in: • Italy (North/South division) • Germany (East/West division) • and, to a lesser extent, in other EU countries

12. Regional crude birth rate in the EU, 1997

13. The decline in fertility rates • Women (and families) are deciding to have less children than ever before: • Total fertility rates in the EU are the lowest in the world, bar some countries in Eastern Europe and Japan • Fertility decline started in the mid 1960s • Early declines in the North (Denmark, Finland, Germany, Luxembourg and Sweden): Demographic core/periphery divide • Subsequent and more dramatic decline in the Mediterranean countries (Italy and Spain now with some of the lowest TFR in the world) • Short-lived rebound of fertility rates in Sweden and other Scandinavian countries in the early 1990s

14. Evolution of fertility rates

15. Evolution of total fertility rates in selected European countries

16. The ageing of the EU’s population (I) • The decline in birth and fertility rates is profoundly altering Europe’s age structure • Younger population cohorts are becoming smaller than older ones • The population cohort of those aged between 30 and 34 is 50% larger than those aged between 0 and 4 • There are more 55 to 59 year olds than children between 0 and 4 • Life expectancy is increasing • Women in most countries of the EU can now expect to live until the age of 80 • Male life expectancy in all countries – bar Portugal – above 72

17. Life expectancy at birth, 1970-1997 Source: World Bank World Development Indicators (2000).

18. The ageing of the EU’s population (II) • Europe is ageing • There are now 41.5 people million more over 70 than in 1980 (an increase of 40%) • The percentage of the elderly has risen considerably everywhere, bar Ireland • In Greece, Finland and Portugal the percentage of the population aged 65 and above doubled between 1960 and 1997 • Italy and Spain were not far behind • Population projections predict that the process of ageing is far from over • According to the UN the over 65 will rise to 95.6 million in 2050 (29% of the population)

19. Population aged 65 and above (% of total)

20. Predicted evolution of the total and elderly population in selected European countries, the EU and the US 2000-50 Source: Own elaboration with United Nations Population Division data. Medium variant.

21. Regional share of senior citizens, 1998

22. The factors behind the ageing process (I) • Causes for higher life expectancy • Advancement of medicine and health: • Eradication of many infectious and contagious diseases • Advancement in the treatment of degenerative diseases • Nutritional and health improvements • Social factors: • Relative wealth of European societies • Reduction in the number of hours worked during life

23. The factors behind the ageing process (II) • Causes behind the decline in fertility • Advances and greater availability of contraceptive methods (M. Murphy) (although for some this is not a cause) • Economic factors: • Pecuniary and time cost of having children • Children cannot longer be regarded as sources for future family support • Opportunity costs of having children in societies with a high female participation in the labour market. This has become more evident recently: • Decline in job stability in Europe (relying on one salary is not enough!)

24. The factors behind the ageing process (III) • Sociological factors: • The gap in educational attainment between men and women in western Europe has disappeared • Female employment has increased dramatically • Female employment is regarded as the main determinant in the fall of fertility rates • The opportunity cost of having a child increases • Especially, and despite some changes in male attitudes, since the burden of child-bearing still greatly falls on women • The opportunity cost of having a child increases as women’s wages rise • However this argument is found wanting when we notice that the countries with the lowest fertility rates also have the lowest female employment

25. Evolution of female employment, 1970-1997 Source: World Bank World Development Indicators (2000).

26. Family policies (I) • European governments have adopted different policies to tackle declining fertility: • Very high support in Sweden (and Denmark and Finland): • Generous child benefit package • Generous public childcare provision • Lengthy maternity and paternity leaves • Austria and Germany • Generous policies • Greatest support for mothers who stay at home to look after children

27. Family policies (II) • France (and Belgium and Luxembourg) • Horizontal and vertical redistribution of resources to families with children (especially for families with three children) • UK • Means testing and tackling child policy • Low-income mothers benefit the most from support meassures • Lower support in the Netherlands, Ireland, and Mediterranean countries

28. Family policies (III) • Have family policies contributed to redress the decline in fertility? • Some claim that the impact has been weak (Gauthier; Hoem) • Others suggest that family policies have had an impact • The actual evidence is inconclusive • Lack of adequate family policies may have contributed to the decline in fertility in southern Europe • Some countries with more generous family policies (Sweden, Finland, Denmark, France, the UK) tend to have slightly higher fertility rates • But countries with similar family policy regimes differ in their fertility rates

29. Social policies for old age • The process of ageing is putting European social services under considerable stress: • Social policies for old age have become one of the most important areas of public policy • Old age expenditure (as a % of GDP) has risen significantly since the 1980s and remained stable during much of the 1990s • Old age expenditure represents two fifths of all social expenditure (highest incidence in Italy, Greece, and Spain)

30. Old age expenditure in the EU

31. Conclusion • Ageing poses a serious challenge for the future of European societies: • Society may become more conservative and risk-averse, less open to innovation and foreign influences, and less dynamic and able to compete • Ageing represents a challenge for public finances • More and better targeted policies may be needed… • Even if the perception of an aged society as a less dynamic society may be rather reductionist.