Industrial Alliance Research Chair on the Economics of Demographic - - PowerPoint PPT Presentation
Industrial Alliance Research Chair on the Economics of Demographic Change Population Aging: Issues and Outlooks for the Rgime de rentes du Qubec (Qubec Pension Board) Pierre-Carl Michaud Professor of economics, ESG UQAM CIRANO and RAND
Population Aging: Issues and Outlooks for the Régime de rentes du Québec (Québec Pension Board)
Pierre-Carl Michaud Professor of economics, ESG UQAM CIRANO and RAND
Industrial Alliance Research Chair on the Economics of Demographic Change
Demographics difficult to forecast over the long term Recent labour market trends Employment projections for 2050 Major issues
Productivity Patterns of household consumption
Long-term outlooks for the Régime
The ISQ’s new projections (2014) are much more
population Despite a forecasted decline in increases in life expectancy The 20-64 age group will decrease between 2015 and 2030 to return to the 2015 level by 2050 Without an increase in employment rates, loss of a significant driver of economic growth and RRQ contributions
20 40 60 80 100 1976 1981 1986 1991 1996 2001 2006 2011
Participation rate (%) Years Âge: 50-54 Âge: 55-59 Âge: 60-64 Âge: 65-69 Age: 65-69 Age: 60-64 Age: 55-59 Source: Statistics Canada, Labour Force Survey Age: 50-54
20 40 60 80 100 1976 1981 1986 1991 1996 2001 2006 2011
Participation rate (%) Years Âge: 50-54 Âge: 55-59 Âge: 60-64 Âge: 65-69 Age: 50-54 Age: 55-59 Source: Statistics Canada, Labour Force Survey Age: 60-64 Age: 65-69
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0
Iceland New Zealand Sweden Norway Switzerland Japan Korea Israel Australia United States Germany Chile Denmark Canada Estonia Finland United Kingdom Netherlands OECD Quebec Mexico Ireland Portugal Czech Republic Spain Austria France Slovak Republic Greece Luxembourg Belgium Italy Poland Hungary Turkey
Employment rates: 55-64 age group (%) Source: OECD
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Iceland New Zealand Sweden Korea Norway Israel Japan Chile Switzerland United States Mexico Australia Estonia Ireland Canada Denmark Germany OECD United Kingdom Finland Quebec Netherlands Spain Portugal Czech Republic Greece Turkey Slovak Republic Italy France Hungary Austria Belgium Luxembourg Poland (Employment rate of 55-64 age group) (Employment rate of 25-54 age group)
Source: OECD
Supply
Changing composition of labour force in terms of education level Changes in women’s work Increasing life expectancy
Demand
Changing nature of work, less physically demanding Pension plans moving from DB to DC plans
Source: Lefebvre, P., P.-C. Michaud and P. Merrigan (2012). ”L’évolution récente des comportements de retraite au Canada”, in Le vieillissement démographique : de nombreux enjeux à déchiffrer, Institut de la statistique du Québec
Trends in reasons for retirement in retirees
General Social Survey 1994-2007, 68 years and older
Men Women
Health Mandatory ret. Early ret. Technology Unemployed
Portion Portion
Source: Lefebvre, P., P.-C. Michaud and P. Merrigan (2012). “L’évolution récente des comportements de retraite au Canada”, in Le vieillissement démographique : de nombreux enjeux à déchiffrer, Institut de la statistique du Québec
Men Women
Portion of responders working after retirement
General Social Survey 1994-2007
55-60 yrs 61-65 yrs +65 yrs
Portion Portion
Source: Lefebvre, P., P.-C. Michaud and P. Merrigan (2012). “L’évolution récente des comportements de retraite au Canada”, in Le vieillissement démographique : de nombreux enjeux à déchiffrer, Institut de la statistique du Québec
Men Women
Trends in reasons for working after retirement
General Social Survey 1994-2007
Financial Caregiver Health Job offered Don’t like ret.
Portion Portion
10 20 30 40 50 60 70 80 90 100 Portion of age 60 population (%) Year during which cohort turned 60 70 69 67 66 65 64 63 62 61 60 Source: Régie des rentes du Québec (Québec Pension Board)
Sustained increase in participation of men aged 55 and over Increase in participation by women of all ages Reasons for retiring are changing Increasingly important phenomenon: going back to work after retiring, for a variety of reasons
10 20 30 40 50 60 70 80 90 100 20 25 30 35 40 45 50 55 60 65 70 75 80 Employment rate (%) Taux d'emploi 2015 Taux d'emploi 2030 Taux d'emploi 2050
Employment rate 2015 Employment rate 2030 Employment rate 2050
Age Source: Régie des rentes du Québec Source: Régie des rentes du Québec (Québec Pension Board)
Use of Chair’s SIMUL microsimulation model
Population projections at the individual level Characteristics highly heterogeneous Dynamic employment models (based on LISA – Canadian tax files)
Three alternative scenarios
No increase in employment or education rates Increase in employment rates only Increase in education level only
0.95 0.97 0.99 1.01 1.03 1.05 1.07 1.09 1.11 1.13 2015 2020 2025 2030 2035 2040 2045 2050 Number of jobs (2015 = 1) Year Référence RRQ Référence SIMUL Aucune hausse Hausse des taux d'emploi Hausse du niveau d'éducation
RRQ Reference No increase Increase in education level Increase in employment rate SIMUL Reference
In 2050, our scenario involves an employment rate for the 55-64 age group that is comparable to Norway’s in 2015
Scenario 2015-2025 2025-2035 2035-2050 Without increases in education or employment rate
0.14
With increase in employment rate
0.14 0.32
With increase in education
0.01 0.03 0.20
RRQ reference
0.04 0.28 0.16
SIMUL reference
0.19 0.27 0.41 Note: Average annual growth rate (AAGR). The AAGR for the 2000-2015 reference period was 0.64.
Productivity and patterns of consumption
The increase in labour productivity in Quebec has been around 1.1% per year over the past 20 years (Centre for Productivity and Prosperity, 2014) What impact has aging had on productivity if the latter depends on
Age? Education level (human capital)?
The findings from economics research are ambiguous in terms of the relationship between age and productivity:
Skirbekk (2003), Dostie (2011, Canada), Aubert and Crépon (2006, France), van Ours and Stoeldraijer (2011, Netherlands)
The relationship between education and labour productivity is quite strong
Armstrong et al. (2002): 1981-1995 ~50%, 1995-2000 ~20%
If the population is aging but has a higher level of education, what is the impact on aggregate productivity growth?
Without a university degree With a university degree Men < Age 35 1 1.438 Age 35-55 1.167 1.513 > Age 55 1.137 1.344 Women < Age 35 0.851 1.142 Age 35-55 0.991 1.226 > Age 55 1.034 1.309
Source: Dostie (2011). “Wages, Productivity and Aging”, De Economist 159(2)
0.99 1 1.01 1.02 1.03 1.04 1.05 1.06 1.07 2015 2020 2025 2030 2035 2040 2045 2050 Level of productivity (2015 =1) Projection year Référence SIMUL Sans amélioration éducation
Without improvement in education SIMUL reference
Scenario 2015-2025 2025-2035 2035-2050 SIMUL reference 0.25 0.18 0.09 No increase in education 0.01 0.12 0.09
Note : Average annual growth rate (AAGR).
Economic activity and employment at the industry level could be significantly affected by aging:
Total household consumption decreases after a certain age Composition of household spending varies considerably with age
10,000 20,000 30,000 40,000 50,000 60,000 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Household spending (2009 $) Respondent’s age Éducation Loisir Santé Transport Vêtements Dép. cour. & Ameublement Logement Nourriture
Leisure Health
Transportation Clothing Household ops. and furnishings Housing Food
Source : Statistics Canada, 2010 Survey of Household Spending
Education
We can take average spending by age and category (Statistics Canada’s 2010 Survey of Household Spending) and then Apply to it the population structure projected by SIMUL to Obtain a projection of aggregate patterns of consumption for 2015-2050
1 1.05 1.1 1.15 1.2 1.25 1.3 1.35 1.4 2015 2020 2025 2030 2035 2040 2045 2050 Level of spending (2015 constant$ = 1) Projection year
Santé Logement Éducation Vêtements Dép. cour. & Ameublement Nourriture Transport Loisir
Education Food Housing Household ops. and furnishings Leisure Health Clothes Transportation
Category 2015-2025 2025-2035 2035-2050
Health
1.17 0.91 0.56
Accommodation
0.82 0.77 0.59
Education
0.38 0.98 0.67
Clothing
0.69 0.66 0.53
Household ops. & Furnishings
0.66 0.56 0.47
Food
0.59 0.51 0.37
Transportation
0.65 0.43 0.36
Recreation
0.51 0.45 0.35
Note : Actual spending (in constant $). Average annual growth rate (AAGR).
From a demographic and economic point of view, two major forces:
Rise in life expectancy Enhancement of human capital and its effects on labour and productivity
The composition of the population will change
It is important to take these composition effects into account
In contrast with the Régime, most governmental social programs – health, long-term care, old- age pensions – are funded on a pay-as-you-go basis The pressure on workers’ disposable income could slow progress in employment and productivity How important is it to take these risks into account?
Luc Bissonnette, Jean-Yves Duclos and Steeve Marchand (Université Laval) David Boisclair and François Laliberté-Auger (UQAM)