Now, the World Bank has just published a very comprehensive report on the demographic future of Eastern Europe and Russia entitled From Red to Gray - The Third Transition of Ageing Populations in Eastern Europe and the former Soviet Union. In many ways, this publications implicitly responds to many of the critical points I levied towards the beforementioned World Bank report on migration. In fact, I would say that by combining the two reports you should a very good picture of the general situation in the region. I still have one small quibble though which is contained within the quote below from the lead economist at the World Bank, Gordon Betcherman. The important point is emphasised in bold.
If measures are taken to improve labor productivity, this would clearly outweigh the losses due to a smaller labor force. Output in aging countries can also receive a boost from increases in labor force participation through raising retirement ages and encouraging flexible forms of employment. And politics permitting, shortfalls in labor supply can be minimized by interregional migration.”
Once again as it was the case with the previous report on migration, this is an assumption I am very skeptical on. Perhaps some countries will be able to leverage intra-regional migration to mitigate the structural decline in the labour force but surely not all. Moreover, given the general and universal trajectory of the demographic transition as well as the steady net outward flow of labour from some countries towards the west this remains a very thin hypothesis and assumption I think.
Regarding the issue of intra regional migration and the prospect for countries to leverage this in the future this assumption in particular (from chapter 2 0f the report) is what I am skeptical of ...
The uneven aging patterns across countries mean that intraregional migration can play an important role in boosting labor supply in older countries. The flow of migrants—primarily from Central Asia to Central and Eastern Europe and to middle-income former Soviet countries—could be an important source of income for the sending countries while meeting the labor needs of the receiving ones. An effective framework for regulating both temporary and permanent migration will make this process more efficient and equitable.
Especially, the notion of 'uneven' is odd here I think since whilst this is no doubt true it is also true that almost all countries in the region is set to age rapidly over the next 20 years. In short; it is unclear I think whether in fact those countries who are supposed to supply migrants will want to/can shed the workers when push inevitably comes to shove.
Having said this however I do think that this WB report is much worth while and indicative of the issues at hand. Of particular note I think is in fact chapter 2 (PDF) which discusses the impact of demographic change on the labour market. Here is the general intro ...
Demographic trends can have direct implications for labor markets through three primary channels: labor supply, labor productivity, and labor demand (because of shifts in the structure of aggregate demand). This chapter focuses on the first two. The conventional wisdom is that aging societies will face difficult economic and social challenges because of what will inevitably happen in the labor market - that is, output will be reduced because the labor force will shrink as large numbers of workers retire and because older workforces cannot produce at the level of younger ones. These are legitimate concerns; however, the story is more complex and may be less demographically determined than conventional wisdom suggests.
Especially the outlook to raise what seems to be structurally low participation rates and early retirment age seems to represent a very sound general policy advice on a regionwide scale. Before I sign off I also want to note chapter 3 (PDF) which tackles the issue of ageing, financial markets and saving and thus also the inevitable and very complex question of just how the life cycle pattern of saving/consumption looks and will look in the region. Here is the intro ...
A common view is that aging societies can expect reduced levels of domestic savings because older people save less and that low savings will lead to lower capital accumulation, which, in turn, will depress investment and growth. Where aging is occurring in Eastern Europe and the former Soviet Union, will savings decline and thus constrain economic growth?
Different factors come into play in determining the specific financial consequences of aging in the region. Certainly, there are reasons to question whether the impacts expected under pessimistic scenarios in the older industrial countries will necessarily happen. In the first place, it is not clear how well the age-saving profiles that have emerged from research in those countries apply to transition countries. Not only is there very little analysis of this relationship in the region, but also it is far from clear whether the saving patterns of the past 15 years can be extrapolated into the future.
In the end and even though I have my reservations of the assumptions on the nature of future intra-regional migration this WB report is much worth while I would say so be sure to bookmark it for later reference.