Academic journal article Demographic Research

Labor Force Projections Up to 2053 for 26 EU Countries, by Age, Sex, and Highest Level of Educational Attainment

Academic journal article Demographic Research

Labor Force Projections Up to 2053 for 26 EU Countries, by Age, Sex, and Highest Level of Educational Attainment

Article excerpt

(ProQuest: ... denotes formulae omitted.)

1. Introduction

A significant amount of research has been published on the potential economic consequences of population aging in developed economies (Börsch-Supan 2003; Burniaux, Duval, and Jaumotte 2004; Leibfritz and Roeger 2008; Lee and Mason 2010; Bloom, Canning, and Fink 2011). One topic that has received repeated attention is the expected shrinkage in absolute and relative terms of the working population between the ages 15 and 65. Concurrently, the share of people above the age of 65 is projected to increase significantly in all European countries. If patterns of economic activity stay at current levels, the ratio of the number of people who are not economically active to the number of people that are - i.e., the labor force - is going to increase, which is traditionally seen as a threat to the sustainability of social welfare systems and economic growth.

The majority of existing long-term labor force projections are based on explicit assumptions about the future development of age- and sex-specific participation rates, which are then applied to age- and sex-specific population projections. This allows estimating the absolute future size of the labor force as well as its composition by age and sex. However, the absolute and relative size of the labor force is only one aspect when it comes to estimating the consequences for future total output and economic growth. The fact that a smaller but more productive labor force might be able to alleviate some or all of the expected financial consequences of population aging is another aspect that is increasingly recognized and quantified (Fougere et al. 2009; Lee and Mason 2010; Leibfritz and Roeger 2008; Ludwig, Schelkle, and Vogel 2012; Striessnig and Lutz 2014). The positive relationship between level of educational attainment and productivity, measured mostly by looking at the returns to education, has been shown in many contexts and for countries of various stages of development - see overviews in Psacharopoulos and Patrinos (2004), Gunderson and Oreopoulos (2010), and Patrinos and Psacharopoulos (2010). In their review of the returns to education in developed countries, Gunderson and Oreopoulos (2010) find an increase in returns of around 10% for each additional year of schooling. On the macro level, Razzak and Timmins (2007) estimate that a 10% increase in the share of workers with a university degree entails an increase in GDP between 0.5% and 1% in New Zealand.

Börsch-Supan shows for Germany that higher capital intensity is unlikely to be able to compensate for the expected productivity decline due to the relative decline in the labor force and argues that "more education and training to speed up human capital formation" is needed (Börsch-Supan 2003: 5). Ludwig, Schelkle, and Vogel (2012) and Fougere et al. (2009) demonstrate that the endogenous increase of future young generations in the investment in human capital - due to expected higher returns to education - can lead to a generally better skilled and more productive labor force: "[...] increased investments in human capital may substantially mitigate the macroeconomic impact of demographic change, with profound implications for individual welfare " (Ludwig, Schelkle, and Vogel 2012: 106). Recent evidence for the US shows that the interaction between skill levels of workers and technology might be more complex than previously estimated, stressing once again the important role of human capital in the past and for future economic growth (Acemoglu and Autor 2012).

National statistical offices, international organizations, and researchers have been publishing labor force projections for a single country or a whole group of countries for several decades, e.g., Flaim and Fullerton (1978) and Toossi (2009) for the US, BörschSupan and Wilke (2009) for Germany, ILO Department of Statistics (1971) for 168 countries in 1971 to 191 countries in 2011 (ILO Department of Statistics 2011), Burniaux, Duval, and Jaumotte (2004) for 30 OECD countries, McDonald and Kippen (2001) for 16 developed countries, Carone (2005) for 25 European countries, updated in 2011 (European Commission 2011), Bijak et al. …

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