Demographic and Labour Force Participation Trends in Europe and their Implications for Social Protection Expenditure (LABOUR)

Activities

  • International Workshops
  • Conferences
  • Exchange visits

Workshop on Savings and Pensions
Venice-Padua, Italy, 24-25 September 1999

Joint TMR - ESF Conference on Savings, Pensions and Portfolio Choice
Deidesheim, Germany, 6-9 April 2000

International Conference on Economic Applications of Quantile Regressions
University of Konstanz, Germany, 2-4 June 2000

Workshop on Opting out of Social Security: Scope, Limits and Welfare Implications
Turin, Italy, 5 June 2000
2000, Istanbul, Turkey

Conference: A Proposal for a Longitudinal Survey of Health, Ageing and Retirement in Europe (HARE)
8-10 February 2001, Venice, Italy
 Consult the Programme and the Template for Presentations

Seminar: Socio-demographic Factors and the Future of the Welfare State in Italy
16-17 March 2001, Villa Mondragone Frascati, Rome, Italy

More about the Network

Expenditure on social protection has increased more rapidly in relation to GDP than any other sector of public finance in most European countries, leading to concern that this cannot be sustained long into the next Millennium. Indeed, predicted increases in life expectancy coupled with other trends such as rising youth unemployment suggest that the current rate of increase is unsustainable unless the whole structure of social security finance is changed. In order to determine what kind of model will work best, however, more data and improved methods of analysis are needed, as well as assessment of the relative merits of different existing schemes within Europe. This Network is conducting the analysis required to help determine what may be the best European social protection model for the future.

The unfunded public pension schemes which are in place today in most European countries are, it rebus sic stantibus, destined to become fiscally and therefore politically untenable in 15 to 25 years time. This fate is due to a number of concurrent factors: (a) demographic trends which are rapidly increasing the old-age dependency ratio; (b) reduction in male labour force participation, and persistently high unemployment rates of both men and women; (c) increases in real pensions aimed at transferring to pensioners any increase in average labour productivity; (d) increasing incentives to early retirement from the labour force.

Only the first factor may be regarded as truly exogenous and scarcely modifiable by policy. All the others are the direct outcome of political choices, probably aimed at maximizing short run electoral success, and completely unrelated to the purposes and functioning of unfunded pension systems.

Although reversing these choices may help in reducing to more manageable terms the future increase in the pension burden, a new sustainable model of social security is clearly needed. In order to develop this model it is necessary to sharpen our theoretical and empirical knowledge and improve the quality of data, and this is the main purpose of this Network. There are four pri

  • To provide a qualitative assessment of the main differences between European countries in the current and anticipated demographic composition of the population, basic labour market indicators, and patterns of social protection expenditure. To examine the issue of convergence in social protection institutions and expenditure patterns within the EU. It is particularly important to assess whether such convergence assists or hampers associated convergence of the labour market.
  • To study the extent to which differences between countries may be related to observable divergence in demographic structure, labour market conditions, and income levels. What is left unexplained may then be separated further into two components, one being systematic differences arising from variations in taste, institutional arrangements and other similar factors, and the other being non systematic differences across countries.
  • To re-examine the normative reasons to maintain unfunded public pension systems. The traditional justifications (overaccumulation of capital, lack of annuity markets, moral hazard) look theoretically unconvincing and empirically unsupported. We would like to suggest instead the following line of thought. The impossibility of establishing efficient private markets for financing investment in human capital by the young may induce large inefficiencies. Such inefficiencies can be overcome if the working generation finds it advantageous to "lend" to the young. The joint establishment of publicly financed education and unfunded public pension systems financed by a payroll tax may provide for such an efficiency-enhancing social contract. We believe that important insights into the nature and relevance of unfunded social security and public education systems can be obtained from this line of research. Our preliminary theoretical and empirical studies indeed suggest that this "social contract" approach may help provide a positive theory of how old-age social insurance has evolved, as well as a unified framework for a quantitative assessment of the efficiency gains or losses it generates.

In reaching for these objectives, the Network is staging two workshops in each of its three years of operation, 1999 to 2001, with each workshop devoted to a specific topic. There will also be two conferences along with three- or four-week long exchange visits each year to foster co-operation between Network participants. There is also a Web site containing a detailed description of the Network’s activities and working papers.

This Network was approved by the ESF Executive Council
in September 1998 for a three-year period.