Working away at the cost of ageing: the labour market adjusted dependency ratio

Working away at the cost of ageing: the labour market adjusted dependency ratio, EPC Issue Paper No.64. April 2011. By Benedetta Guerzoni and Fabian Zuleeg

  • “In 2050, nearly one in three European citizens will be 65 or older. Demographic change and population ageing is one of the greatest challenges that will affect the structure of the EU economy over the next couple of decades, through its impacts on labour markets, pensions systems and public finances. The policy implications of this demographic evolution are profound: the proportion of people of working age in the EU will shrink at the same time as the number of those who potentially need support mechanisms, such as retirement benefits and public healthcare, expands. European societies will need to respond and adapt to this change. The challenge varies considerably across Europe, since EU member states are at different starting points, both concerning their demographic outlook and also their labour market performance. Assessing the relative position of EU countries according to the old-age dependency ratio – a demographic indicator that measures the proportion of people over 65 over the working-age population – shows that the best performing countries are Ireland, Slovakia, Cyprus and Poland. Old-age dependency ratio is often used to estimate the impact of demographic trends on welfare systems and, according to Eurostat projections, the average ratio in the EU is forecast to grow from 25.9% in 2010 up to 50.4% in 2050.”
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