18 September 2020

Demographic paradoxes

About the aging of the population and the labor market

The aging of the population is not always a negative factor for labor relations. Older people in many ways bring more benefits to the economy than young people. The features of older workers, including in Russia, are described in a large study by a corresponding member of the Russian Academy of Sciences, chief Researcher of the IMEMO of the Russian Academy of Sciences.Primakov Rostislav Kapelyushnikov "The phenomenon of population aging: economic effects", published on the HSE website.

Some excerpts from this work:

– Unemployment among the elderly is much lower than among the young. For example, in Russia in 2017, the unemployment rates for groups 55-59 and 60-69 years old were only 5 and 4%, while for groups 20-24 and 25-29 years old – 18 and 16%. As a consequence, the aging of the population should lead to a decrease in the overall unemployment rate, and quite significantly. Thus, according to our estimates, from 2008 to 2015, due to shifts in the age composition of the labor force, unemployment in Russia decreased by at least 1.5 percentage points.

– At a certain historical stage, the decline in the birth rate was a factor contributing to an increase in the supply of labor. The decrease in the number of children opened up the possibility for women to enter the labor market and stimulated their participation in the labor force. Globally, the positive impact of declining fertility on employment and economic activity levels still persists. It is estimated that for the world population, every percentage point of a drop in the total fertility rate is accompanied by an increase in the level of labor force participation by 5-10 percentage points.

– As the experience of all countries of the world shows, people with higher education tend to leave the labor market later, maintaining employment even after reaching the official retirement age. So, in Russia in 2017, the employment rates for women with and without higher education aged 55-59 years were correlated as 67% versus 47%, and for men aged 60-69 years – as 41% versus 25%. Accordingly, an increase in the level of education of the population (first of all, a wider coverage of higher education) is a significant factor contributing to an increase in the supply of labor.

– The aging of the population can become a trigger for a significant intersectoral and interprofessional realocation of the workforce. Since the structure of consumer demand of the elderly is more biased in favor of services (in particular, related to healthcare, recreation, housing maintenance, etc.), it is natural to expect a large-scale redistribution of labor from industry to the service sector.

– The aging of the labor force has an extremely weak effect on the dynamics of labor productivity, almost without changing its average level. This conclusion is confirmed by our forward estimates for Russia. According to these estimates, changes in the age structure of employment projected for the period 2015-2030 will have virtually no effect on the average productivity of workers, increasing it by 0.1 percentage points.

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