Active Ageing and Pension Policies in the Context of the European Employment Strategy

1. Introduction

Europe is ageing and the european workforce is ageing too. Between 1950 and 2000 the percentage of people over 65 years of age in the EU25 increased from 9.1% to 15.7%. By 2025 this group will represent 22.7% of the entire population. Between 2010 and 2030 in the EU25 the EC expects a drop in the number of (Source: Demographic Green Paper of the EC of 2005):
• children (0-14): by 8.9%
• young people (15-24): by 12.3%
• young adults (25-39): by 16%
• adults (40-54): by 10%
and an increase in the number of
• older workers (55-64): by 15.5%
• elderly people (65-79): by 37.4%

The Reasons for these demographic shifts are known:
1. continuing low birth rates.
according to the Demographic Green Paper of the EC of 2005 the low fertility rate in the EU is the result of: late access to employment, job instability, expensive housing and lack of incentives (family benefits, parental leave, child care, equal pay).
2. Continuing increase in longevity.
important gains in life expectancy have been realised in the EU between 1960 and 2002: life expectancy for males at the age of 60 increased from around 16 to around 19 years; for females from around 18 to around 24 years. The most recent Eurostat projections see life expectancy in the EU25 at 65 to increase by another four years from 2004 to 2050 (4.4 years for men and 3.9 years for women).

Table 1: Evolution of life expectancy at birth in some EU-countries

Source: Eurostat.

While these demographic shifts were taking place, we noted a fall in the average effective retirement age in the EU in the 1970s and 1980s, a trend which ran contrary to the significant rise in life expectancy for the same period.
This drop in effective retirement age was mainly due to the development of pre- and early retirement systems in an effort to combat youth unemployment — a strategy that did not subsequently prove effective. In this way the number of contribution years decreased while the number of years in receipt of pension benefits was growing. This of course created a huge pressure on the pension systems and made reforms unavoidable.

Table 2: Average exit age from the labour force
Source: Eurostat, European Commission, OECD — * 2004.

Table 3: Average exit age from the labour force
Source: AXA.

Table 4: Support Ratio: number of contributors relative to the number of pensioners in public pension schemes
(click to enlarge)
Source: E.C., European Economy, Special Report n° 1/2006, The impact of ageing on public expenditure. Projections for EU-25 Member States on pensions and health care.

The ETUC believes that the challenges resulting from these demographic changes must be taken seriously because they could cause a dramatic fall in annual economic growth rates in Europe from 2 — 2.25% today to 1.25% in 2040. This reduction in economic growth could affect the sustainability of our social systems in general and of the pension and health systems in particular. Since the 1990s EU governments have followed a two-track approach: reforms of the pension systems went hand-in-hand with policies intended to push up the employment rates of older workers (55-64 years). These two policy fields are strongly interlinked.
The Lisbon Strategy, based on four pillars — growth, employment, social cohesion and sustainable development —, is highly relevant and extremely useful in the discussion on demographic change because it gives responses to these challenges.

Martin Hutsebaut: Secretary to the Directors’ Committee of the ETUI-REHS, Brussels.

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