Active Aging of the European Baby- Boomers
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1 MAX PLANCK INSTITUTE FOR SOCIAL LAW AND SOCIAL POLICY Active Aging of the European Baby- Boomers Prof. Axel Börsch-Supan, Ph.D. Munich Center for the Economics of Aging (MEA) at the Max-Planck-Institute for Social Law and Social Policy Population Europe Seminar Riding The Population Wave: Policy Options for the Ageing Baby-boomer Generation in Europe under the Honorary Patronage of the President of the Republic of Poland, Warsaw, 17. May 2012
2 MAX PLANCK INSTITUTE FOR SOCIAL LAW AND SOCIAL POLICY Active ageing: wishful thinking? Perception of an ageing Old Europe Real threats to pension and health care sustainability Real threats to living standards Reforms fail due to popular resistance Much of that due to myths: Demystify the implications of population ageing!
3 MAX-PLANCK-INSTITUT FÜR SOZIALRECHT UND SOZIALPOLITIK Pension Expenditures (% GDP) Austria Belgium Canada CzechRepublic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Luxembourg Netherlands Norw ay Poland Portugal SlovakRepublic Slovenia Spain Sw eden Sw itzerland UnitedKingdom UnitedStates EU
4 MAX-PLANCK-INSTITUT FÜR SOZIALRECHT UND SOZIALPOLITIK Pension expenditures and public debt explizit vs implicit debt [%GDP] 4
5 Simulation exercise: Alternative paths of living standards in Old Europe (=DE+FR+IT) 115.0% 110.0% 105.0% 100.0% 95.0% 90.0% 85.0% Remove SV-DK-EX labor supply restrict. FL-DK-EX Status quo SV-DK-EN FullyFL-DK-EN funded pensions SV-SQ-EX Flat PAYG pensions SV-SQ-EN FL-SQ-EX Endog. Behavioral FL-SQ-EN Hours reaction Fixed hours 80.0% Source: Börsch-Supan and Ludwig (2009)
6 MAX PLANCK INSTITUTE FOR SOCIAL LAW AND SOCIAL POLICY Myth #1: unhealthy, thus cannot age actively Myth #2: less productive, thus should not stay active Myth #3: retirement is bliss, thus do not want to age actively Myth #4: active ageing harms the young, thus must not stay active Myth #5: ageing is a tsunami, demography destiny, and active ageing just another public relation s gimmick Use scientific evidence to prove myths wrong!
7 Survey of Health, Ageing and Retirement in Europe Collect data to follow ageing: plus life histories Interdisciplinary breadth & depth: -Economics -Health -Health care -Social networks International: ~ respondents 50+ in 20 European countries plus global associates USA PT IE SP Mexico, Brazil, Argentina SE DK UK NL PL BE DE LU CZ FR CH AT SI HU IT EE GR Korea Japan China India IL
8 MAX PLANCK INSTITUTE FOR SOCIAL LAW AND SOCIAL POLICY Myth #1: Old folks are unhealthy, thus cannot age actively
9 Health is good! The foundation for active ageing Subjective: Health good, very good, or excellent Functional Limitations: Activies of daily living (ADL) SelfRated Subjektiv Limitation Funktional 10 Activities of Daily Living : 1. Walking 100 Meters 2. Sitting two hours 3. Getting up from chair 4. Climbing up one flight of stairs without break 5. Kneeling 6. Bending down 7. Extending arms above shoulder 8. Carrying a chair 9. Carrying weight of 5 kilo 10. Picking up a coin with fingers from table
10 Challenges of measuring health crossnationally comparably objective measures of health (e.g. grip strength) help distinguishing actual differences in health from different response styles
11 Health is good! The foundation for active ageing Mittelwert Median Linear (Mittelwert) Objektive: Grip strength
12 Opening conference for the European Year for Active Ageing and Solidarity between Generations 2012 Copenhagen, January 2012 Lessons: 1. Health is generally good 2. Decline much smaller than variation within each birth cohort 3. Older workers do not primarily retire because of old health
13 MAX PLANCK INSTITUTE FOR SOCIAL LAW AND SOCIAL POLICY Myth #2: Old folks are less productive, thus should not stay active
14 Myth 2: Older workers are less productive Age-mixed work teams Product and time standardized Productivity: No errors Some observations
15 Pure age effect Weighted number of errors (inverse productivity) if experience is held constant
16 Pure experience effect Weighted number of errors (inverse productivity) if age is held constant
17 Combined effect: age plus experience Weighted number of errors (inverse productivity) no increase in production errors = no decrease in shop floor productivity
18 Opening conference for the European Year for Active Ageing and Solidarity between Generations 2012 Copenhagen, January 2012 Lessons: 1. Older workers are not per se less productive in routine jobs 2. Productivity in a given job remains high: Do not fire older workers 3. Productivity in a new job is harder for the older: Need education efforts
19 MAX PLANCK INSTITUTE FOR SOCIAL LAW AND SOCIAL POLICY Myth #3: Old folks think retirement is bliss, thus do not want to age actively
20 Myth: Retirement is bliss Life satisfaction after early retirement Controlling for selection effects, thanks to measurement of earlier health!
21 Myth: Retirement is bliss Rohwedder and Willis 2010 Mental retirement
22 Myth: Retirement is bliss Impact on years of cognitive aging: Adam, S., É. Bonsang, S. Germain and S. Perelman. (2007). Retraite, activités non professionnelles et vieillissement cognitif. Une exploration à partir des données de SHARE. Économie et Statistique
23 Opening conference for the European Year for Active Ageing and Solidarity between Generations 2012 Copenhagen, January 2012 Lessons: 1. Retirement provides less social contacts 2. Retirement provides less cognitive stimulus 3. Actively ageing helps staying longer alert! 4. Implications for retirement age?
24 MAX PLANCK INSTITUTE FOR SOCIAL LAW AND SOCIAL POLICY Myth #4: Many believe that active ageing harms the young, thus must not stay active
25 Myth: Old workers take jobs away from the young Biggest obstacle to increasing 55+ employment! The old should make place Share of early retirees among males (in %) Share of year old males already retired Netherlands UK USA Sweden Japan Belgium France Canada Germany Italy Spain R 2 = 0, Unemployment rate (in rate%) for the young!
26 MAX PLANCK INSTITUTE FOR SOCIAL LAW AND SOCIAL POLICY Myth #1: unhealthy, thus cannot age actively Myth #2: less productive, thus should not stay active Myth #3: retirement is bliss, thus do not want to age actively Myth #4: old crowd out the young, thus must not stay active Myth #5: ageing is a tsunami, demography destiny, and active ageing just another EU public relation s gimmick
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