Sunday, February 26, 2006

Demographic Challenges and The Lisbon Strategy

by Edward Hugh

Well, while linking the Vienna Institute of Demography Site, I've just noticed that Wolfgang Lutz doesn't take much time out for rest these days. He has just given a presentation entitled: Demographic Challenges and The Lisbon Strategy. I'm too tired to say much about this right now. I'll probably put something longer up on A Fistful of Euros during the next week.

I do very much agree with his orientation though. Particularly the following:

When considering pension expenditure, the key variable is not the demographic support ratio, but rather the balance between economically active and inactive persons.

The negative impact of demographic trends on this balance can be partially offset, if more persons of working age participate in the labour market.


Important open question

Will a higher proportion of elderly workers lead to lower productivity growth and less innovation?

Evidence that older people are less educated, less healthy and demand more transfers.

Open question whether older workers are less willing to adopt new technologies.

Unclear whether innovation and new firm entry hampered, if there are fewer young workers?

These are the issues.


Many skills decline with age – Experience increases with age

There is also the fear that in a globalizing world more investments will be made in dynamic markets rather than in those expected to stagnate.


• Population Ageing is a powerful force that will shape Europe’s society and economy in the future.

• Much is predetermined in the current age structure shaped by past trends, but there is certain room for policies to influence future fertility and migration levels that will moderate the speed and extent of ageing.

• Since this is a new experience in human history and Europe is at the forefront of this process, the social and economic implications are hard to predict.

• Ageing is a challenge rather than a crisis: It is like a current affecting a boat that has means to counteract it (by rowing or engine). The Lisbon strategy could be such an engine.

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