Transcript No Slide Title

Mr. Massimo M Beber
Fellow in Economics
Sidney Sussex College
Cambridge CB2 3HU
[email protected]
www.cus.cam.ac.uk/~mb65/mpes
European Economics
Lecture 2
Population and the Labour Force:
Demography, Skills, and Mobility
(Provisional Version: last updated 14st October 2007)
M.Phil. in Contemporary European Studies 2007/8
©Massimo M Beber 2007
Objectives of Lecture 2
• Demographic structure and demographic trends
• Investing in People
– Human Capital
– Social Capital
• The European Welfare State
– Child Support
– Education
– National Insurance: Sickness, Unemployment, Old Age
Key Statistics
• EU 27 (490m) largest population bloc
• Population growth 1990-2004 (1.1-1.4%) comparable
to that in high immigration countries such as Canada
and US
• Average life expectancy at birth (2004) 77-82,
comparable to other OECD’s
• International mobility dominates demographic trends
• Ageing creates major inter-generational and intersectoral distribution issues
Source: Sapir, Andre (2003) An Agenda for a Growing Europe. Making the Eu System Deliver. Report of an Independent High-Level Study
Group Established on the Initiative of the President of the European Commission, Brussels: p. 127.
Population Growth
World Main Regions
EU Polation Growth
Proximate Determinants 1960-1997
EU15 Population Structure
Labour in the Production Process
• Resource Stocks
– Labour
– Non-produced Resources: Land, Air, Water
– Produced Resources: Capital Assets
• Flows of Productive Services
– Employment
– Resource Depletion
– Capital Depreciation
Europe’s Workforce and Ageing
• the EU's working-age population will be in
decline by 2011
• a third of the bloc's population will be over 65
by 2050.
• 2005 reproduction rate 1.5, well below the 2.1
required for demographic steady state.
Migration
• 4% of EU population (18.5m) are resident
aliens
• 5% of immigrants are classified as “skilled”
(but 55% in the USA)
Labour and the Sources of Growth
• Capital accumulation traditional concern of
growth theory
• The empirical puzzle of the “residual”
• Labour central to the “new growth theories”:
– Human Capital
– Social Capital
The European Welfare State
• Welfare spending 25-35% of GDP
• Enhanced income security
• Higher consumption of (public) personal
services in childcare, health care, education
• Reduced income inequality
• Virtuous aggregate and personal wealth
dynamics?
Dimensions of Welfare
• Objectives
– Income Security
– Personal Services
– Redistribution
• Condition of entitlement
– Universal benefits through citizenship
– Means-tested benefits for the poor
– Occupational benefits conditional upon employment
• Unit of analysis
– Individual
– Household
Source: data and charting software from Eurostat’s Structural Indicators website (January 2007)
Source: Commission of the European Union (2003) Second Progress Report on Economic and Social Cohesion.
Communication from the Commission, Brussels, Commission of the European Union: COMM (2003) 34 Final)..
A Crisis of the Welfare State?
• Financially vulnerable to shocks (demography,
productivity, cyclical instability);
• Likely to induce distortions in the behavioural
responses of individuals, whether to the provision of
welfare services, or to their financing;
• Likely to create its own (excess) demand through
moral hazard and cheating;
• Rendered obsolete by social changes
Welfare I: Birth and Childhood
• Not always a vote-winner
• Transfers to child-rearing families through
–
–
–
–
Subsidized health care for mother and baby
Subzidized parental leave
Subsidized health care for the growing child
Subzidized child care and education
Welfare II: Sickness Pay
• An intrinsically inefficient market?
• Universal, government-mandated sickness pay
and health care insurance
• Negative externalities alleviated by
–
–
–
–
Experience-rated sick insurance fees
Aligned incentives: waiting days, co-insurance…
Tighter administrative controls on self-certification
More active rehabilitation measures
Welfare III: Health Care
• Two basic models
– Mandatory health care insurance
– Tax finances “free-at-point-of-use” health care
• Two basic problems:
– Cost control
– Rationing
• Two open issues:
– From illness to health-damaging life-styles
– From national health service to the single market in health
care
Welfare IV: Income and Care in Old Age
• More market failure?
• Fundamental dimensions of pension provision
– Funded vs. pay-as-you-go
– Defined benefit/final salary vs defined contribution
• National pension reforms
– Tinkering (with retirement age, contribution rates, marginal benefits)
– PAYG, defined contribution (DC) systems
– DC, funded systems
• Old age care
– Increasing demand through social changes, and higher prices (Baumol’s
Law
– Cost control through competition: vouchers and regulation
European Welfare: Overview
• Intimate connection between economic integration and welfare
provision
• Historically, and possibly functionally, the welfare state is a
national state
• Economic integration, however, has increasingly constrained
national freedom of choice
• But national governments have not accepted the pooled
sovereignty necessary to compensate for their reduced autonomy
• As a result, the current situation is one of weakened welfare
service provision within Europe
European Welfare: Development
• Positive integration
– Commission, expert committees, UNICE, ETUC
– “old” and “new” equality; health and safety; Corporatism and Social
Charter
• Negative integration
– ECJ, Commission, national governments;
– Labour mobility, freedom of service provision, “competition regime”
• Adaptation
– Private sector, national governments;
– welfare services for non-nationals, privatized insurance services,
privatized utilities, convergence of educational standards
European Welfare: Open Issues
•
•
•
•
•
•
Race to the bottom (in finance, hence services)
Cheating
Welfare tourism
Portability of pension entitlements
Portability of benefit entitlements
The limits of standardisation
– Inefficient in the context of otherwise different national institutions
– Reduces the scope for experimentation, which is crucial
– ICT will increasingly make individual choices more effective in driving
the standard of welfare services.
Source: De Groot, Nuhis and Tang (2004)
Social Models in the Round
Social Well-Being, circa 2000
U
K
U
SA
Neo-liberal
Fr
an
ce
G
er
m
an
y
Corporatism
N
et
he
rl.
Sw
N
or
w
ay
ed
en
Social Democracy
GDP per Head (PPP, US$)
Ratio of shares in total income: top 10%
to bottom 10%
Gini Index of Income Inequality
Population below poverty line as
percentage of total
Probability at birth of dying before 60th
burthay (% of cohort)
Obesity (% of those 15 and above)
Lack of basic literacy skills (% of those
aged 15-65)
Economic (employment and income)
Security Index
Corruption Perception Index (10= little or
no corruption)
Social Trust (% of those who "trust most
people)
Prison population per 100,000 (Excl.
foreigners)
Overall Rank, excluding GDP per head.
26,750
37,670
29,371
27,756
27,677
27,174
37,562
6.2
6.1
9.2
6.9
9.1
13.8
15.9
25
25.8
30.9
28.3
32.7
36
40.8
6.5
6.4
7.3
8.3
8
12.5
17
7.2
8.4
8.7
8.8
9.8
8.7
11.8
10.4
8.3
10
12.9
9.4
22.4
30.6
7.5
8.9
10.5
14.4 N.A.
21.8
20
0.98
0.93
0.86
0.79
0.83
0.74
0.61
9.2
8.9
8.7
8.1
7.1
8.6
7.5
76
75
60
36
23
30
36
61
53
82
76
72
126
667
1
1
3
4
5
6
7
Source: Panic, M. (2007) 'Does Europe Need Neoliberal Reforms', Cambridge Journal of Economics , Vol. 31 no 1
(January), 145-169.