SVb Seguridad pa Aruba su comunidad Without migration theres no - - PowerPoint PPT Presentation

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SVb Seguridad pa Aruba su comunidad Without migration theres no - - PowerPoint PPT Presentation

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SVb Seguridad pa Aruba su comunidad Without migration theres no future The challenge of a sustainable social security system in Aruba SYMPOSIUM MIGRATION AND SOCIOECONOMIC DEVELOPMENT Edwin M. Jacobs Curaao, May 2019 Content 1.

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SVb

Edwin M. Jacobs Curaçao, May 2019

SYMPOSIUM MIGRATION AND SOCIOECONOMIC DEVELOPMENT Seguridad pa Aruba su comunidad

Without migration there’s no future

The challenge of a sustainable social security system in Aruba

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Content

1. Introduction: Social Security Aruba 2. Challenges for the Social Security in Aruba 3. Demographic transition 4. Epidemioligical transition 5. The challenge of sustainability 6. Conclusion

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  • 1. Introduction: Social Security Aruba

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  • 1. Introduction: Social Security Aruba

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“Social security is the protection that a society provides to individuals and households to ensure access to health care and to guarantee income security, particularly in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner.” International Labour Organization (ILO)

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  • 1. Introduction: Social Security Aruba

The Social Security system of Aruba comprises of the following programs:

  • A. Programs of universal coverage
  • 1. Old age pension (AOV)
  • 2. Widow and orphan pension (AWW)
  • 3. Health care cost (AZV)
  • B. Social insurances
  • 1. Sickness insurance(ZV)
  • 2. Labour accident insurance (OV)
  • 3. Lost job compensation (Cessantia)

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  • 2. Challenges for the Social Security in Aruba

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  • 2. Challenges for the Social Security in Aruba

Two mayor developments are distinguished to excercise great pressure on the cost of Social Security:

  • 1. Demographic transition
  • 2. Epidemiological transition.

Three factors are distinguished to restrict the income of the Social Security system:

  • Economic growth
  • Public finance/debt
  • Tax burden/pressure

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  • 3. Demographic transition

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3.1 What is demographic transition?

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Basic definition: The transition from high birth and death rates to lower birth and death rates. Demographic transition results in the ageing of the population. Ageing: the relative portion of the population 60+ increase in time.

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3.2 What causes ageing?

Two main developments result in ageing: 1. Lowering of the Total Fertility Rate:

  • TFR: the average children for every female in the age of 14

to 49.

  • TFR of Aruba in 2015 was 1.8. It felt below the replacement

rate of 2.1. 2. Increase in life expectancy (LE):

  • People are living longer
  • LE of Aruba in 2015 was 80.7.

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3.3 Ageing of the Aruban population

21,001 21,663 22,931 27,094 30,190 20,448 25,579 30,594 33,934 35,746

  • 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Projection of the Aruban population of 60+ and the amount of pensioners in the period 2015-2040

Pensionado SVb Poblacion 60+ Pensioner Population 60+

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3.3 Ageing of the Aruban population

101,918 110,108 2028; 113,658 111,102 105,377

96,000 98,000 100,000 102,000 104,000 106,000 108,000 110,000 112,000 114,000 116,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050

Population projection of Aruba, without migration in the period 2010-2050, illustrating the effect of the TFR below replacement rate

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3.4 Impacts of ageing

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  • The amount of pensioners will increase drastically,

resulting in increase of the old age pension cost.

  • The production capacity of the population will

decrease, which will impose economic challenges.

  • Increase of the segment of the population with a

high consumption of health care, resulting in an increase of the health care cost.

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3.5 Impacts of ageing on Old Age Pension Fund

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  • 50.0

100.0 150.0 200.0 250.0 300.0 350.0 400.0 In millions of florins of 2015 Year

Cost projection of the Old Age Pension Fund in real terms during 2015-2035

Important assumption:

  • The pension maintains its buying power during projection period.

Average yearly growth:

  • 2015-2025: 0,9%
  • 2025-2035: 2,6%
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  • 4. Epidemiological transition

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4.1 What is epidemiological transition?

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“As life expectancy increases, the major causes of death and disability in general shift from communicable, maternal and perinatal causes to chronic, non communicable ones.” World Health Organisation Additionally, non communicable diseases (NCD’s) will appear at younger ages.

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4.2 Non communicable deseases (NCD) in Aruba

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At least, 58% of deaths were caused by NCD’s in the period 2000-2010

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4.3 Projection of NCD in Aruba 2015-2035

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Prevalence rate of NCD amoung the Aruban male population in 2015

0.61687

  • 0.10000

0.20000 0.30000 0.40000 0.50000 0.60000 0.70000 0.80000

Prevalence rate Age category cu prevalencia di MCV y diabetes cu prevalencia otro MNT Total

Total

CVD = cardio vascular diseases NCD = non communicable diseases Other NCD = cancer, blood disease, rheumatism, pulmonary diseases and HIV*

Source: Database AZV Own elaboration Prevalence of CVD and diabetes Prevalence of other NCD

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4.3 Projection of NCD in Aruba 2015-2035

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Porjection of the Aruban population with prevalence for CVD and diabetes in the period 2015-2035, assuming no migration.

16,872 17,017 15,580 14,486 12,961 12,472 17,068 21,161 24,247 24,697

  • 5,000

10,000 15,000 20,000 25,000 30,000 2015 2020 2025 2030 2035 Amount Year edad 0-59 edad 60+

Source: own projections Age 0-59 Age 60+

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4.4 Impact of NCD’s

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  • Labour force with NCD’s will increase, resulting in

more sick-leave and an increase in the cost of the sickness insurance.

  • The population with NCD’s will increase, along the

use of health care too, resulting in an increase of the health care cost.

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4.5 Impact of NCD’s and ageing on health care cost

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  • 2,000

4,000 6,000 8,000 10,000 12,000 Average cost in florins of 2015 Age category promedio gasto medico cu prevalencia promedio gasto medico sin prevalencia

Average health care cost for prevalence NCD’s Average health care cost for no prevalence NCD’s

Average cost profile of the female population in florins of 2015 by age category

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4.5 Impact of NCD’s and ageing on healt care cost

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Source: own projections

  • 100.0

200.0 300.0 400.0 500.0 600.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 In millions of florins in 2015 Year

Projection of the health care cost in real term in the period 2015-205

Average yearly growth:

  • 2015-2025: 2,4%
  • 2025-2035: 1,6%
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  • 5. The challenge of sustainability

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5.1 Definition sustainability

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Sustainablity is assessed by confronting projected cost with income. van Ewijk et al: Sustainability requires that present policies can be maintained without incurring financial problems in the (distant) future. When assessing the sustainability we have to seek an answer for the following question: Does Aruba have the capacity to generate the necessary income to finance the projected cost of the Social Security?

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The sources of income of the Social Security are:

  • 1. Premiums of the contributors
  • 2. Assigned tax
  • 3. Government contribution

At the end, the increase of the income of the Social Security depends on the tax pressure and the performance of the economy.

5.1 Definition sustainability

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5.2 Assessing the potential of the Aruban economy

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Can the Aruban economy in the future generate sufficient income throug premiums and taxes to:

  • To cover the cost of Social Security projected to grow an

average of 1,9% yearly in real term? Does the Aruban population have the potential to deliver the necessary labour force to the economy?

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73,699 73,104 70,840 67,200 65,171

  • 10,000

20,000 30,000 40,000 50,000 60,000 70,000 80,000 2015 2020 2025 2030 2035 population

year

Projection of the population with potential to become economic active (age 15-64) without migration in the period 2015-2035, based on the population of 2015

Homber Muher Poblacion

The population with potential to become economic active will decrease with 12% during the projecting period 2015-2035, asuming there will be no migration.

5.2 Assessing the potential of the Aruban economy

Male Female Total

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The projection shows an increase in GDP till 2020. Afterwards the economy will shrink in nominal terms reaching in 2035 a level below that of 2015. In real term, the shrinkage will be greater. Conclusion: the population of 2015 does not have the productive potential to expand the economy in the future.

  • 1,000

2,000 3,000 4,000 5,000 6,000 Millions of florins year

Projection of the GDP in nominal term between 2015-2035, assuming there will be no migration.

5.2 Assessing the potential of the Aruban economy

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5.3 Assessing the need for migration

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Conclusion former sheet: Only through migration can the economy grow the coming years. Migration is needed for: a. Replacement of workers going with pension b. Expanding the economy c. Household work and care In our study three main kind of migration is distinguished based on their purpose:

  • Labour
  • Family reunification
  • Household work/elderly care

Two economic scenarios has been used to project the need for migration: 1. An average nominal growth of 2,5% yearly (0,4% real) 2. An average nominal growth of 3,0% yearly (0,9% real) Reminder: Social Security costs are projected to grow on an average of 1,9% real yearly.

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5.3 Assessing the need for migration

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Projected shortage of labour, asuming no migration in projection period:

Economic scenario 2020 2025 2030 2035 2,5% nominal 993 5,534 10,657 15,679 3,0% nominal 1,324 6,545 12,540 18,665

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In order to grow the economy with 2,5% nominal (0,4% real) the following amount of migration is needed:

5.3 Assessing the need for migration

Kind of migration 2015- 2020 2020- 2025 2025- 2030 2030- 2035 Total Labour 432 3,929 3,481 2,897 10,740 Reunification 503 4,581 4,058 3,378 12,519 Household 561 529 488 467 2,045 Total 1,496 9,039 8,027 6,742 25,304

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In order to grow the economy with 3,0% nominal (0,9% real) the following amout of migration is needed:

5.3 Assessing the need for migration

Kind of migration 2015- 2020 2020- 2025 2025- 2030 2030- 2035 Total Labour 763 4,547 4,121 3,680 13,112 Reunification 890 5,300 4,804 4,290 15,284 Household 561 529 488 467 2,045 Total 2,214 10,377 9,413 8,438 30,441

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  • 6. Conclusion

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  • 6. Conclusionnan

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  • 1. The demographic and epidemiological transitions will have

great impact on the cost of the Social Security system of Aruba.

  • 2. The Social Security depends heavily on economic growth in
  • rder to attend its sustainability issue.
  • 3. The population of 2015 does not have the potential to

increase economic production in the future.

  • 4. Migration is indispensable in seeking sustainability of the

Social Security system of Aruba.

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Danki pa e atencion

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