Intergenerational fairness & solidarity Katarina Jaksic Thematic Analysis Unit DG Employment, Social Affairs and Inclusion, European Commission

The storyline Inter-generational fairness today and in the future The demographic challenges and the cost of ageing Policy implications

Generational divide in the labour market Employment: stagnation for younger workers; major improvement for older ones Employment rates by age in the EU Own calculations based on EU-LFS

Younger workers are more exposed to non-standard work contracts Generational divide in the labour market Younger workers are more exposed to non-standard work contracts 2016 % involuntary temporary employees = 10% of 25-39 year-olds 5.3% of 40-64 year-olds Widespread use of temporary work may harm productivity growth Own calculations based on EU-LFS

Younger workers earn lower wages than older workers Ch. 3: Working lives Younger workers earn lower wages than older workers Average hourly wage of workers younger than 30 (relative to workers 60+)

Consequences of the generational divide Younger workers are losing income share; Prime-age & older workers are gaining Shares of labour income by age group, EU-28 Own calculations based on EU-SILC 2007-2014

EU-28 Employment will face its limits… +1.1% p.a. Working-age population HIGH activity scenario scenario LOW activity scenario HIGH activity Activity rate Active population LOW activity scenario Employment +1.1% p.a. Employment rate Own calculations based on Eurostat 2015 population projections, Eurostat LFS

Employment will decline sooner or later. For keeping GDP growth, we need to speed up productivity growth.

Employment rates 25-39, by educational level, EU-28 What to do? The role of education Education and skills are becoming even more important for employment Young people have more incentives to invest in training Impact of parental background on tertiary attainment still strong Employment rates 25-39, by educational level, EU-28  Investing in human capital and equal educational opportunities is key! Own calculations based on EU-LFS

The operational stock of robots in the EU has quadrupled since 1993. Source: International Federation of Robotics

Labour market policies can help 2. Model simulations presented in ESDE: Policies targeted to older workers Reforms in the pension system (FI): coupling pensionable age, pension level to life- expectancy Better labour market matching trough LM integration support (DE) Tax incentives (SE): payroll and income tax cuts Main transmission channels: Contain increase in the cost of social security. Invest in employability

SE Cut labour taxes – the Swedish way (esp. for older wokers) Labour demand: Payroll tax credit for 65+ (Lowering Employers' Social Sec Contributions from 26% to 10%) Labour supply: Earned Income tax cut Long-term effect compared to the reference (do nothing) scenario

Sweden Tax relief raises employment; different impact on wages Overall budgetary impact: -0.12% of GDP Age-group 55-69 Long-term effect relative to the reference (“do-nothing”) scenario

Conclusions Young people and future cohorts will need to speed up productivity – and bear the 'double burden' of demographic change. How to strengthen the EU's transformative capacity for better long-term resilience? Activate people on the labour market, fully using available human resources Invest in people's employability (skills, education) to enhance their productivity Engage in pension reforms: New forms of work may require rethinking of social security

Thank you for your attention!

Europe… Ageing is not occurring only in Europe … but the ageing pattern will be particular in Europe. Working-age population here: age group 20-64 Sources: UN World Population Prospects 2015 for the US, Eurostat 2015 population projection for the EU

EU-28 Employment will face its limits … Working-age Population (20-64) Activity rate Active population Employment Employment rate Own calculations based on Eurostat 2015 population projections, Eurostat LFS

EU-28 Employment will face its limits.. Working-age population HIGH activity scenario scenario LOW activity scenario HIGH activity Activity rate Active population LOW activity scenario Employment Employment rate Own calculations based on Eurostat 2015 population projections, Eurostat LFS

EU-28 Employment will face its limits… „Europe 2020“: 75% by 2020 Working-age population LOW activity scenario Activity rate Active population LOW activity scenario „Europe 2020“: 75% by 2020 Employment +1.1% p.a. Employment rate Own calculations based on Eurostat 2015 population projections, Eurostat LFS

With today's technologies, the share of automatable jobs could reach 70% of all jobs in some Member States. Source: Lordan and Josten (2017)

Typical tasks performed by platform workers often require skills. Task performed by … % of all platform workers in the sample (COLLEEM survey) % of all platform workers COLLEEM: Collaborative Economy research project (European Commission)

Pension contribution rate in the High Activity Scenario, pension level: 47% of wages

Pension contribution rate in the High Activity Scenario, pension level: 47% of wages