Book Review: Pensions in the European Union: Adapting to Economic and Social Change
| Published date | 01 June 2001 |
| Date | 01 June 2001 |
| DOI | 10.1023/A:1011938826152 |
| Author | Maria Augusztinovics |
| Subject Matter | Book Review |
168
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Gerard Hughes and Jim Stewart (eds) Pensions in the European Union: Adapting
to Economic and Social Change, The Hague, Kluwer Academic Publishers, 2000.
This is a highly valuable and timely book for the European reader, comprising revised
and updated versions of papers presented at a 1996 conference in Munster, Germany.
In recent years there has been considerable attention paid-in economic Iitera-
ture to the threat of an 'ageing crisis' and to frequently proposed general cures of
'private, funded mania', not without influence on some European governments.
Contributors to this book have tackled one by one the main arguments usually
voiced in favour of this 'mania' - some identical and some similar to the 'myths'
described by Orszag and Stiglitz (1999) - and shown them to be fallacious or lack-
ing in empirical evidence. The result is a balanced and appreciative view of the
diversity and potential
of
existing European pension systems. At the same time,
problems in these systems are highlighted, and ways and means
of
adapting to the
changing social and economic environment are considered.
The paper by Pierre Concialdi: 'Demography, the Labour Market and
Competiveness' poses at least two crucial questions. The first is whether or not the
demographic outlook is as frightening as it might seem. While it is true that the pop-
ulation
of
the European Union is ageing - the proportion of those aged over 65 is
expected to rise from 15.4 per cent in 1995 to 20.7 per cent by 2020 -the pace of this
trend is not necessarily and not everywhere accelerating. Indeed, it ' ... should not, on
the average, be any faster than it has been over the last 35 years' (p.16). Moreover, in
considering the overall 'burden' on the working-age population, children and young
people must also be taken into account, whose proportion
ofthe
population overall is
expected to decrease. The total demographic dependency ratio, therefore'... will be
no higher when the 'baby-boom' generation enters retirement than when they were at
school' (p.22). Such attention to the fine details of these trends is rare, and a great
merit ofConcialdi's excellent paper. He concludes that the economic impact offuture
demographic changes is usually considerably over-estimated.
The second question posed is whether or not demography will indeed be the
main factor determining the future of European pension systems. Concialdi answers
'no',
considering that in the past it has been changes affecting labour markets that
have had the major impact on the financing of social protection. Labour force par-
ticipation rates and levels of unemployment determine the economic - rather than
the demographic - dependency ratio. Since the mid-1970s this ratio has been sig-
nificantly higher than the decreasing demographic ratio in the European Union, in
sharp contrast with the US and Japan. In 1995, during a particularly benign demo-
graphic period (where baby-boomers and their children were all of working-age),
the economic dependency ratio in Europe was atthe same level as in 1975, when it
was practically equal to the demographic ratio. The conclusion to be drawn is that
the major challenge facing the European economy in the future is its potential to
absorb available labour rather than a relatively slight decrease in the number of
working-age people.
EUROPEAN JOURNAL OF SOCIAL SECURITY
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