1. The First and Second Demographic Dividend in European NTA Countries Jože Sambt University of Ljubljana, Faculty of Economics Alexia Prskawetz Vienna University of Technology and Vienna Institute of Demography European NTA Workshop October 2010

2. Outline Data and methodology  Population projections (EUROPOP2008)  NTA profiles  Support ratios and demographic dividends Results  Support ratios and the first demographic dividend  Second demographic dividend

3. Data and methodology

4. Population Projections Latest EUROPOP2008 population projections from Eurostat for the 2008-2060 period, technically extended until the year 2300 (assuming mortality, fertility and migration from 2060) 1-year age groups

5. Assumptions about Fertility and Mortality in Eurostat’s EUROPOP2008 Population Projections TFR 2008 TFR 2060 e 0,m,2008 e 0,m,2060 e 0,f,2008 e 0,f,2060 Austria1.411.5777.484.982.989.2 Finland1.84 76.184.383.089.3 France1.981.9377.585.184.390.1 Germany1.341.5377.384.982.689.1 Hungary1.351.5369.781.978.187.3 Slovenia1.321.5274.783.781.988.8 Spain1.391.5677.484.983.989.6 Sweden1.85 79.085.483.189.3

6. NTA profiles NTA age profiles – assuming the shapes don’t change through time

7. Labor income age profile – labor income per capita relative to the average labor income 30-49 age group

8. Consumption age profile – consumption per capita relative to the average labor income 30-49 age group

9. Lifecycle deficit – life cycle deficit per capita relative to the average labor income in 30-49 age group Germany: 31 years (age 27 to age 57) Slovenia: 31 years (age 25 to age 55) Sweden: 38 years (age 25 to age 62)

10. Support Ratio Alternative 1: CON1 =  i=1…99 N i (unweighted) Alternative 2: CON2 =  i=1…99 S i N i (needs weighted consumption measure) Alternative 1: LF1 =  i=20…64 N i (unweighted) Alternative 2: LF2 =  i=15…80 w i PR i N i (adjusted for wages and labor force participation rates) 4 combinations: LF1/CON1, LF2/CON1, LF1/CON2, LF2/CON2 S …NTA consumption age profile w PR …NTA labor income age profile

11. Demographic Dividends L = LF2 N= CON2 First demographic dividend: Second demographic dividend: Calculation of the second demographic dividend is based on Lee & Mason NUPRI2006 paper

12. consumption index: “extend to which consumption per equivalent consumer rises relative to productivity changes induced by technological change” 2nd demographic dividend: rate of growth of consumption relative to labor income

13. Results

14. Four alternative measures of support ratios (relative to 2000) AustriaFinland France Germany

15. Four alternative measures of support ratios (relative to 2000) HungarySlovenia Spain Sweden

16. First demographic dividend

17. Second Deographic Dividend

18. Conclusions and Discussion There are considerable differences in the level and shape of the support ratios among European NTA countries for 1950- 2060 period. In the future all European NTA countries are expected to face strong declines in support ratios. In some countries the support ratios are already substantially declining and in others they are just about to start to decline. In all European NTA countries except Spain and Germany the second demographic dividend is expected to be small, assuming fixed age profiles through time. The opportunity of aging societies in form of a positive second demographic dividend is expected to be heavily dominated by the challenge of a negative first demographic dividend.

19. End