EUROPEAN PAPERS ON THE NEW WELFARE

Abstract
1. Demographic trends
2. Impact of population ageing on public spending
3. Employment perspectives and problems
4. Welfare system and competitiveness
The Czech economy faces increasingly tough international competition. The economy must bounce back. Our social security systems must stay functional and economically viable in an ageing society without placing impossible burdens on the next generation. The labour market must be made more flexible and obstacles to employment must be removed. Non-wage labour costs must remain at acceptable levels for both business and employees.
Action has to be taken as the basis for ensuring that our social security systems remain sustainable for boosting the economy and for creating the potential for the accelerating of future economic growth. The aim is to modernize the welfare system or social-market economic system.

1. Demographic trends

The demographic position of the Czech Republic is expected to change dramatically over the next few decades. A demographic projection of the Czech Statistical Office (2003)¹ highlights negative trends of an ageing population, i.e. reduction of the share of the young generation due to the past and present low birth rates and a growing number of seniors thanks to the extending average life expectancy.
From the static point of view, the current demographic situation is obviously the most favourable over the entire course of history backed up with demographic data. Under a new projection, the reaching of record level of the share of population in the age group 20-59 has been postponed to 2005 (see Table 1). This category includes numerically strong age groups born immediately after World War II as well as strong generations of the seventies and eighties. On the other hand, the numbers of young people are falling and numbers of 60-plus seniors are increasing.

Table 1 – Age distribution of the population in the Czech Republic (in per cent of total)

a Estimate
b Medium variant of projection: 2005-2050
Sources:
Demographic projection of the Czech Republic, published on June 11, 2004, Czech statistical Office, Prague. Czech Republic Macroeconomic Forecast, Ministry of Finance of the Czech Republic, July 2004, Prague.

From the dynamic point of view, we witness a beginning of population-ageing process, which will escalate at the end of this decade. The share of young-age categories will go on reducing. This results from the past and present extremely low birth rates related not only to a change in lifestyle but also to a very poor availability of housing for young families. On the other hand, the number and share of seniors in the population will grow thanks to the extending average life expectancy. Unfavourable development can be partly mediated but not solved by international migration with the Czech Republic becoming a target country. Demographic development represents a risk for the economy’s development in the medium and long run.
The population profile over time depends on assumptions about fertility, mortality and net immigration flows. In 2002, the Czech Republic reported a fertility rate of 1.17, the lowest among the OECD countries. Fertility is assumed to increase from 1.17 to 1.62 by 2050. Fertility rates lower than 2.0 imply a long-run decline in the total population³.
Life expectancy at birth, reflecting mortality over the whole lifespan of a particular cohort, is expected to increase for both males and females, but the increase is smaller for women than for men. Life expectancy for males is assumed to rise from 72.1 to 78.9 years and for females from 78.5 to 84.5 years.
Net immigration is difficult to predict, since it depends on the economic situation of the country, the situation on the labour market and immigration policy. The projection medium variant is based on the assumption of an active migration balance. Net immigration will add roughly 25,000 persons to the Czech population yearly during the entire period of medium variant of projection.

Karel Zeman: Institute of Integration of the Czech Republic into European and World Economy
baloun@vse.cz

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