Labour market participation rate in the euro area: performance and outlook, a long-term view

Transcription

1 ECONOMIC BULLETIN 1/218 ANALYTICAL ARTICLES Labour marke paricipaion rae in he euro area: performance and oulook, a long-erm view Crisina Fernández and David Marínez Turégano 11 January 218 This aricle analyses he rajecory and he main explanaory facors of changes in he labour marke paricipaion rae in he euro area in recen decades. Firs, hese changes are compared wih he Unied Saes, highlighing he exraordinary convergence ha has aken place beween he wo areas owing o he momenum in he European labour marke and he declining secular rend on he oher side of he Alanic. Second, he increase in paricipaion in he euro area was led by females, paricularly as a resul of he higher probabiliy of new cohors joining he labour marke agains a background of significan socio-educaional changes. In any even, in view of he demographic ageing in progress and he progressive exhausion of he above-menioned changes, he focus is on he need for specific policies aiming o raise labour paricipaion of such populaion groups where here is sill room o do so, i.e. older workers, in general, and women in counries where he gender gap is sill large.

2 LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW The auhors of his aricle are Crisina Fernández of Sepblac and David Marínez Turégano. Inroducion The paricipaion rae of an economy measures he proporion of he working-age populaion ha paricipaes acively in he labour marke, wheher working or acively seeking work. Accordingly, his variable reflecs he labour suly available for producion of goods and services. In he medium erm, decisions relaing o labour marke paricipaion are a key driver of he economy s poenial growh, along wih he accumulaion of physical and echnological capial. Also, in he field of moneary policy, paricipaion rae changes are a key variable wih which o measure he degree of slack in he labour marke and underlying wage pressures. The differen behaviour of he paricipaion rae in he Unied Saes and he euro area has raised increasing ineres in academic debae and in economic policy managemen. Since he 199s he labour paricipaion rae in he Unied Saes has been on a downward rend, 1 which affeced mos of he age groups and inensified during he Grea Recession (see Char 1). This process has been horoughly analysed in he economic lieraure and mos sudies sugges ha a leas % of he fall in he paricipaion rae in he Unied Saes would be accouned for by demographic facors; specifically, by he effec of populaion ageing basically as a resul of he reiremen of cohors of baby-boomers. 2 In parallel, a change has been idenified in he behaviour of he younger cohors who, for he firs ime, are showing lower paricipaion raes han heir predecessors. 3 By conras, he paricipaion rae in he euro are which in he 198s was close o 1 lower han ha of he Unied Saes, has followed an upward pah (including he recen recessions), exceeding he Unied Saes levels in boh he male and female populaions. This increase in he paricipaion rae became one of he main drivers of growh in aciviy and employmen in he euro area during he period and coninued o conribue posiively during he period (see Char 2). This aricle idenifies firs he srucural facors which deermine he performance of he paricipaion rae in he euro area and in he Unied Saes from 1992, he firs year for which here is disaggregaed informaion a he level of educaion and age group, 4 o 2. The resuls reveal ha convergence of he female paricipaion rae in he euro area wih ha of he Unied Saes has been he facor which has conribued he mos o his uneven performance, owing o boh he improvemen in educaional levels and a higher propensiy o paricipae among new cohors. Second, i analyses he behaviour of he paricipaion 1 From he 196s in he case of male paricipaion. 2 See S. Fujia (214), On he Causes of Declines in he Labor Force Paricipaion Rae, Federal Reserve Bank of Philadelphi Special Repor, 6 February; CEA (214), The Labor Force Paricipaion Rae since 27: Causes and Economic Implicaions ; and R. Balakrishnan e al. (2), Recen US Labor Force Dynamics: reversible or no? IMF Working Paper /76. 3 See R. Balakrishnan e al. (2). 4 Mos of he sudies for he Unied Saes use a broad measure of paricipaion ha includes he populaion segmen aged 6 and over. This would be he mos advisable definiion for economic growh consideraions given he higher sensiiviy o he ageing process of hese individuals. However, his aricle focuses on analysing populaion segmens more direcly linked o he labour marke, i.e. he so-called working-age populaion, wihou affecing in any case he general rends on boh sides of he Alanic. Addiionally, he - o 64-year-old group is used for he general comparison beween he euro area and he Unied Saes and, condiioned by he daa available, he - o 64-year-old group is used for he deailed analysis by age and educaional level. BANCO DE ESPAÑA 1 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

3 PARTICIPATION RATES IN THE EU AND THE UNITED STATES: HISTORICAL PERSPECTIVE BY GENDER (196-2) CHART 1 9 Labour force as percenage of populaion aged TOTAL EU MEN-EU WOMEN-EU TOTAL USA MEN-USA WOMEN-USA SOURCE: OECD. AVERAGE ANNUAL CONTRIBUTION TO THE RATE OF CHANGE OF REAL GDP IN THE EURO AREA (a) CHART 2 1 FACTORS DRIVING GROWTH 2 EMPLOYMENT COMPONENTS (p) (p) TOTAL FACTOR PRODUCTIVITY CAPITAL STOCK EMPLOYMENT GDP EMPLOYMENT RATE PARTICIPATION RATE POPULATION AGED -64 YEARS SOURCE: European Commission. a Assuming a producion funcion where GDP = oal facor produciviy * employmen^(2/3) + capial sock^(1/3). rae in a group of counries in he euro area (Belgium, he Neherlands, Germany, Spain, Ialy, Greece, France and Porugal) for which here is sufficien informaion. A comparison of hese differen economies reveals he exisence of common rends, bu also marked heerogeneiy in erms of scale. Thus, for example, he iniial gap in he paricipaion rae beween genders and educaional levels deermines he magniude of he convergence process observed for he female populaion. Addiionally, he differences in demographic processes also condiion he differen counries paricipaion raes, alhough o a lesser degree. Finally, in order o anicipae possible fuure developmens in he paricipaion rae, a prospecive exercise has been carried ou based on Eurosa s demographic projecions. The resuls sugges ha he paricipaion rae in he euro area could decrease in coming years as a resul of he negaive conribuion of demography and he exhausion of he posiive impac of he improvemen in educaional levels. In order o moderae or even reverse his rend i is a prioriy o encourage an increase in he propensiy o paricipae in he labour marke among cerain populaion groups where here is sill room o do so, such BANCO DE ESPAÑA 2 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

4 DEMOGRAPHY CHART 3 1 POPULATION BY GENDER AND AGE GROUP IN THE EURO AREA (199, 2 and forecas for 23) 2 POPULATION BY GENDER AND AGE GROUP IN THE UNITED STATES (199 and 2) % of oal populaion Women Men % of oal populaion Women Men (a) (a) SOURCES: Eurosa and Unied Naions. a Baseline scenario from Eurosa (213) and Unied Naions forecass. as he female segmen and he older female and male segmen for cerain counries. More generally, in he curren demographic conex of he euro are economic policies ha foser an increase in labour paricipaion gain significance as a means of boosing growh poenial in he area and encouraging he resrucuring of public finances and ensuring he susainabiliy of pension schemes. Closing he paricipaion gap on boh sides of he Alanic This secion analyses he facors underlying he uneven behaviour of he paricipaion rae on each side of he Alanic. Char 1 shows ha he paricipaion rae in he Unied Saes has been decreasing progressively since he lae 199s, while a rising rend is seen in he euro area. This difference in performance was even more pronounced during he laes crisis. The male paricipaion rae in he Unied Saes, which used o be he highes among OECD counries, sood in recen years 1 below ha of he euro area for boh genders. This convergence was much more pronounced in he case of women, since he saring poin was a negaive gap wih he Unied Saes of in he early 198s. In principle, here are many reasons ha could have conribued o his difference in performance. Firsly, a comparison of Chars 3.1 and 3.2 showing he populaion pyramids for he wo areas a differen poins in ime reveals ha he baby boom occurred earlier and was more pronounced in he Unied Saes. Accordingly, in recen years he US economy has recorded a relaively higher increase in he older populaion, which usually has a lower labour marke paricipaion rae. A second facor (see Char 4) relaes o he fac ha female paricipaion of he new cohors in he euro area increased coninuously in he pas wo decades, boh for younger women ( o 44 years old) and for hose closer o reiremen. This higher propensiy o paricipae may According o Unied Naions da he feriliy rae peaked in he Unied Saes in he 19s (around 3. birhs per woman) and in Europe in he early 196s a a lower level (2.7 birhs per woman). BANCO DE ESPAÑA 3 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

5 DEMOGRAPHY (a) CHART 4 1 PARTICIPATION RATE BY GENDER, AGE GROUP AND COHORT IN THE EURO AREA: PARTICIPATION RATE BY GENDER, AGE GROUP AND COHORT IN THE UNITED STATES: % labour force / oal populaion in each segmen balance. However, in he Unied Saes his process had already reached is ceiling in he mid Men Women % labour force / oal populaion in each segmen Men Women SOURCE: OECD. a Each line represens a cohor (covering five years) and, in he case of he EU, he maximum is ha of he counry wih he highes paricipaion rae in each age group. be due o boh decisions regarding moherhood and o improvemens in he work/family life 198s and significan changes are only seen for he older female populaion. Finally, a hird facor behind he convergence of he paricipaion rae on boh sides of he Alanic has been he gradual increase in he European populaion s level of educaional aainmen. According o he Barro and Lee (2) daabase, he proporion of individuals beween 3 and 34 years old wih a universiy educaion (who radiionally have a greaer propensiy o paricipae in he labour marke) has changed from being lower han 1% on average in Europe 6 in he early 198s o nearly 3% in 21, levels where he Unied Saes already sood a he beginning of his period. In order o quanify he weigh of hese hree facors on changes in he paricipaion rae a decomposiion analysis was performed, breaking down he paricipaion rae using he shif-share mehodology. Four age groups (-34, -44, 4-4 and -64) and hree levels of educaion were considered in his analysis (primary, secondary and eriary educaion). This enables changes in paricipaion o be idenified ha are due o developmens in he srucure by populaion age (demographic-age), changes in he disribuion by educaional level (demographic-educaion) and changes arising from inrinsic variaions in he probabiliy of paricipaion of each of he age and educaional level groups considered (referred o here as he pure cohor effec ). 7 6 The European average was calculaed on he basis of daa published for Belgium, Spain, he Neherlands, Ialy, Greece, Germany, France and Porugal. 7 The shif-share mehodology allows he change in he aggregae paricipaion rae o be broken down as follows: Paricipaion rae 4 3 a 1 e a 1 e 1 α α β β e, e, PR e, e, 4 3 a 1 PR IT e 1 α β e, PR e, Where he firs addend makes reference o he demographic-age effec described in he main ex, he second addend refers o he demographic-educaion effec, while he hird one quanifies he pure cohor effec, i.e. regardless of changes in he composiion of he populaion. Finally, IT is he ineracion erm beween changes in he hree foregoing componens, which is usually residual in erms of scale. BANCO DE ESPAÑA 4 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

6 CUMULATIVE CHANGE IN PARTICIPATION RATE: CONTRIBUTION OF EACH EXPLANATORY FACTOR (1992-2) CHART 1 EURO AREA MEN WOMEN UNITED STATES MEN WOMEN DEMOGRAPHIC-AGE DEMOGRAPHIC-EDUCATION PURE COHORT EFFECT TOTAL CHANGE SOURCE: Banco de España calculaions based on OECD daa. Char shows he conribuion over ime of changes in he weighs of each age and educaional aainmen group, which are sub-caegories of he broad demographics caegory, and he aggregae conribuion of changes in he probabiliy of paricipaing in he labour marke for each age and educaional aainmen group (pure cohor effec). Firsly, i is seen ha in he case of he euro are he change in he disribuion by populaion age has sared o conribue negaively in recen years, whereas in he Unied Saes his rend had already sared in early 2, alhough he impac has been relaively limied in boh cases. 8 The changes in populaion srucure by educaional level are more significan. Specifically, he increase in educaional aainmen has conribued posiively o boos susained and long-lasing female labour paricipaion in he euro area and, o a lesser exen, in he Unied Saes. 9 Finally, as regards he pure cohor effec, Char shows ha he sign of he conribuion of his facor varies grealy depending on wheher i relaes o men (negaive) or women (posiive) and on he economic area considered, which plays a key role in he dynamics of he female paricipaion rae in he euro are as explained below. 8 The resuls for he Unied Saes are compaible wih he sudies menioned, which analyse a broader populaion group including persons 6 and older who have a much lower paricipaion rae han he working-age populaion used here (wheher or o 64 years old). 9 The ECB (217) noes ha changes in educaional composiion are one of he key facors deermining he increase in female paricipaion in recen years and is convergence wih he male populaion. BANCO DE ESPAÑA ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

7 CUMULATIVE CHANGE IN PARTICIPATION RATE BY AGE GROUP: CONTRIBUTION OF EXPLANATORY FACTORS CHART 6 1 EURO AREA MEN WOMEN UNITED STATES MEN WOMEN PURE COHORT EFFECT-TERTIARY PURE COHORT EFFECT-SECONDARY PURE COHORT EFFECT-PRIMARY DEMOGRAPHIC-EDUCATION TOTAL SOURCE: Banco de España calculaions based on OECD daa. Char 6 provides a more deailed breakdown for each of he four age groups considered beween and 64 years in order o differeniae he conribuion o changes in he paricipaion rae of changes in he educaional composiion as compared wih changes in he inrinsic probabiliy of paricipaion of each cohor (in he laer case, regardless of he conribuion of educaional level). The breakdown by gender in Char 6 shows how he female labour force paricipaion rae in he euro area has risen across he board in all age groups, whereas in he Unied Saes his increase is only aaren among women aged over and is much less pronounced. Rising female paricipaion in all age groups in he euro area has accompanied he populaion s shif owards higher educaional levels, which are associaed wih higher paricipaion raes. Moreover, among he older female populaion, a posiive pure cohor effec is observed a all levels of educaional aainmen, paricularly in he segmens wih primary and secondary educaion. This is likely o be a resul of he ageing of cohors ha enered he labour marke in he 198s and 9s, when here was a marked rise in female paricipaion a hese educaional levels, hen he prevalen levels among he populaion, as already noed. By conras, among he younger cohors i.e. hose currenly aged under 4 years he increases in he paricipaion rae are smaller and largely due o incremens in levels of educaional aainmen raher han he propensiy o paricipae, which has remained relaively sable since he lae 199s. BANCO DE ESPAÑA 6 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

8 In addiion o he changes in he female paricipaion rae, here has been a marked increase in he paricipaion rae among older populaion groups (beween and 64 years), regardless of gender or geographical area. Neverheless, he increase is much more inense in he European case, reflecing he more cenral role of he pure cohor effec han changes in educaional composiion, which is he main facor in he Unied Saes. This facor may have inensified in recen years as a resul of legislaive changes seeking o delay he legal and effecive reiremen age and as a resul of he loss of wealh during he crisis by groups closes o reiremen. Finally, i is worh highlighing he groups in which he conribuion of he pure cohor effec was negaive in he reference period. Oosing rends are aaren here in each of he geographical areas, given ha in he Unied Saes he bigges drop in he inrinsic probabiliy of paricipaion is seen among individuals wih secondary educaion in he case of boh men and women, whereas in he euro area i is among hose wih primary educaion. In shor, he differences beween he labour marke paricipaion dynamics in he euro area and he Unied Saes reflec he sronger across-he-board increase in female paricipaion, and a bigger rise in paricipaion among cohors closer o reiremen age. Moreover, in he euro are he populaion s shif owards higher educaional levels which generally have higher paricipaion raes has offse he negaive impac of populaion ageing. 1 Differences in paricipaion rae rends across euro area counries Changes in he paricipaion rae in he euro area have exhibied similar rends, alhough here are some noeworhy differences beween Member Saes. Among women, he increase in he paricipaion rae in all counries is due o an inrinsic increase in he probabiliy of paricipaion (pure cohor effec), which, as can be seen in Char 7, is paricularly srong in Spain, Greece, he Neherlands, Belgium and Porugal. The pure cohor effec is relaively small in Ialy s case, despie he sill low levels of female paricipaion observed relaive o oher euro area economies. Moreover, whereas Spain and Porugal show across-he-board increases in female paricipaion, in France and he Neherlands he changes are more pronounced wih age. Meanwhile, across a group of counries including Germany, Belgium and Ialy, he increases in female paricipaion are concenraed in he older segmens, whereas in Greece here was a sronger rise among he o 34 age group. In erms of educaional levels in general, he probabiliy of labour marke paricipaion has increased paricularly among women wih primary and secondary educaion, hus narrowing he gap by which hey lag behind women wih higher levels of educaional aainmen. This was paricularly he case in Spain and Porugal, whereas in Germany, France and Greece he level of paricipaion rose relaively uniformly across all educaional levels. Men s paricipaion raes changed relaively lile, excep in he Neherlands. However, his aggregae performance conceals significan differences beween age groups, as while paricipaion droed among younger individuals (beween and 34 years), paricularly in Ialy, Porugal and Belgium, incremens were observed among older groups (see Char 8). The increase in he paricipaion rae among older men was paricularly marked in he Neherlands, followed by Germany, France, Ialy and Belgium. In any even, cohor effecs 1 The IMF (217) also documened he effec of ageing on he aggregae paricipaion rae in Box 1.1 Labor Force Paricipaion Raes in Advanced Economies. BANCO DE ESPAÑA 7 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

9 CUMULATIVE CHANGE IN PARTICIPATION RATE BY GENDER: CONTRIBUTION OF EXPLANATORY FACTORS (a) CHART M W M W M W M W M W M W M W M W Germany France Ialy Spain Neherlands Belgium Porugal Greece DEMOGRAPHIC-AGE DEMOGRAPHIC-EDUCATION PURE COHORT EFFECT TOTAL CHANGE SOURCE: Banco de España calculaions based on Eurosa daa. a On he horizonal axis: M = men, W = women. CUMULATIVE CHANGE IN MALE PARTICIPATION RATE BY AGE GROUP: CONTRIBUTION OF EXPLANATORY FACTORS CHART Germany France Ialy Spain Neherlands Belgium Porugal Greece DEMOGRAPHIC-EDUCATION PURE COHORT EFFECT-PRIMARY PURE COHORT EFFECT-SECONDARY PURE COHORT EFFECT-TERTIARY TOTAL SOURCE: Banco de España calculaions based on Eurosa daa. explain mos of his increase, alhough higher levels of educaional aainmen also make a posiive conribuion. By conras, in Greece s case, paricipaion droed in all segmens of he male populaion. Finally, i is worh menioning developmens in he wo facors associaed wih changes in he populaion s composiion: age and level of educaional aainmen (see Char 7). Firsly, changes in he educaional srucure of he working-age populaion have had a significan posiive impac on aggregae paricipaion in some counries, such as Belgium, Greece, Spain and paricularly Ialy. In oher words, irrespecive of changes in he likelihood of paricipaing in he labour marke, he growing share of he populaion wih higher levels of educaional aainmen a process ha has progressed more srongly in he case of women has had a posiive effec on paricipaion raes. By conras, changes in he age disribuion of he working-age populaion have had a negaive impac in mos European counries, wih he excepion, so far, of he souhern European Member Saes, such as BANCO DE ESPAÑA 8 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

10 PROJECTION OF PARTICIPATION RATE BY GENDER: CONTRIBUTION OF THE CHANGE IN THE DEMOGRAPHIC FACTOR (a) (b) CHART AGES TO M W M W M W M W M W M W M W M W Belgium Neherlands Germany France Ialy Porugal Spain Greece AGE EDUCATION TOTAL SOURCE: Banco de España calculaions based on Eurosa daa. a For he age facor we used Eurosa demographic projecions (2); for he educaion facor we assumed ha he composiion of he populaion by educaional level remained consan for each gender wih he ageing of he cohor, remaining consan for he younges age group (-34); he paricipaion rae by gender-age educaion remained unchanged. b On he horizonal axis: M = men, W = women. Ialy, Spain and Greece. On average, his process was slighly more pronounced in Belgium and he Neherlands, whereas i barely had any effec in Germany. How is he euro area paricipaion rae likely o develop in he fuure? As menioned a he sar of his aricle, he increase in he labour marke paricipaion rae has been one of he mos sable facors driving he euro area s growh in recen decades. For his reason, i is worh analysing he facors underlying is coninued rise as se ou in previous secions as well as evaluaing he susainabiliy of his rend, considering in paricular ha levels of paricipaion seem o have converged wih hose of he Unied Saes, which was he iniial poin of reference. This secion herefore seeks o infer he course of he paricipaion rae in he euro area over he nex few years based on cerain assumpions (see Char 9). 11 In an iniial sep, fuure developmens due solely o he demographic-age facor were simulaed. Eurosa s projecions by age group and gender were used for his purpose, wih he assumpion ha he paricipaion rae remains consan in each of hese segmens. This exercise 12 highlighed some significan differences beween euro area counries. Thus, he souhern counries in he sample look likely o sar o experience sligh downward pressure on he paricipaion rae due o heir larger share of older working age populaion segmens. This rend looks se o coninue over he nex 1- years, paricularly in Greece and Spain. This effec will be more limied, however, in cenral European counries which, as menioned above, had already begun o experience he effecs of ageing some years earlier, alhough he effec may be more persisen in Germany s case. In a second sep, he fuure impac of he changes observed in he educaional composiion of he successive cohors was also considered, hus compleely simulaing he 11 The European Commission makes paricipaion rae projecions in is annual repor on agein and also includes an esimae of he effecs of pension sysem reforms. 12 See Banco de España (216) for a similar exercise in he case of Spain. BANCO DE ESPAÑA 9 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW

11 demographic facor. Here, he improvemen in levels of educaional aainmen could offse he negaive impac of he progressive ageing of he working-age populaion, alhough o a lesser exen han observed in he pas. 13 This posiive effec is likely o be paricularly inense in he case of women in all he Member Saes considered, poenially offseing he negaive impac of pure changes in he age composiion in mos counries, wih he excepions of Greece and Spain, where he process of ageing will be more pronounced, as menioned above. In shor, according o hese simulaions, ageing will coninue o exer downward pressure on he euro area s paricipaion rae in he immediae fuure, while he posiive impac of he improvemen o he educaional level of he new cohors will ail off and, a bes, help offse he effec of ageing. The scope for promoing labour marke paricipaion herefore lies in he pure cohor facor. In his regard, he comparison wih hose counries wih higher average raes (i.e. Germany and he Neherlands) indicaes ha here is sill scope for an increase in paricipaion by women and he older working-age populaion in many euro area counries. This is paricularly he case of Belgium, Greece and Ialy and, o a lesser exen, of France, Spain and Porugal. Fuure analysis should aim o elucidae why paricipaion raes remain low among cerain populaion groups, so ha specific policy recommendaions can be made o improve hem. Among ohers, he explanaory facors mos ofen cied in he lieraure include socioculural facors, he ax sysem, he ypes of jobs available, how widespread parime employmen or family and maerniy/paerniy suor policies are, in he case of he female populaion, 14 and healh saus, pension replacemen raes and life expecancy, in he case of he gap beween legal and effecive reiremen raes among older workers. Finally, in he curren demographic conex in he euro area economies, he role of migraory flows and heir composiion in he performance of paricipaion raes also need o be aken ino accoun The exercise assumes ha he educaional composiion of new cohors does no change from ha of he curren cohor of - o 34 -year olds. Obviously, his means ha addiional incremens in he educaional level of new younger cohors would boos he posiive effec on he paricipaion rae. 14 See he empirical analysis in O. Thévenon (213). The OECD (217) repors he posiive impac of good healh condiions and longer life expecancy on exending working lives. BANCO DE ESPAÑA 1 ECONOMIC BULLETIN LABOUR MARKET PARTICIPATION RATE IN THE EURO AREA: PERFORMANCE AND OUTLOOK, A LONG-TERM VIEW