1995 es Corden, W. Max Corden, W. Max Una zona de libre comercio en el Hemisferio Occidental: posibles implicancias para América Latina En: La liberalización del comercio en el Hemisferio Occidental - Washington, DC : BID/CEPAL, 1995 - p. 13-40 2014-01-02T14:51:16Z hdl:11362/37644 CELADE, Population Division of ECLAC Number 5 - 2013 Turning Points in Colombia’s Ageing Future 2030: The end of the youth society 2013 16 12 End of Youth Society, 0-19 no longer largest age group 8 4 0 1950 1975 2034: Colombia becomes an aged economy 2000 2025 2050 2075 2100 2013 Children (0-19) 2040 Consumption by Children and Seniors 50 Percent of aggregate consumption Colombia is expected to become an aged economy in 2034. In that year, for the first time in the history of the country, older persons will consume more (of all good and services, both public and private) than youth2. Japan became the world’s first aged economy in 1996. Currently, there are 19 aged economies, all European economies with the exception of Japan. According to the latest projections based on NTA, in 2040 there will be 73 aged economies, among them Brazil, Costa Rica, Chile, Cuba, and Uruguay. By the end of this century, most of the world’s economies will be aged economies, leading to an increased demand for health care and other programs and services for older persons. This will put pressure on governments, as many of these programs are provided by the public sector, and on families caring for older family members. 2040 Population by Age Group 20 Millions During the last century, young people have dominated Colombia’s demographic scene during the last century. At its peak in 2012, people under age 20 accounted for 37% of the population. But this percentage is projected to decline, and the largest cohort of Colombians has already been born, around 2007. The year 2030 will mark the end of the youth society in Colombia: young people will no longer be the largest demographic group1. A large wave is moving through Colombia’s population age structure as the large cohorts born when high fertility was the norm advance through their life cycle and move from youth to adulthood to old age. The size of the working age groups will peak in 2033 for ages 20-39 and in 2056 for ages 40-59. The population of older persons will increase rapidly throughout this century reaching a peak in 2090 at around 20 million people and then begin to decline gradually as the large birth cohorts of the early 21st century are replaced by successively smaller ones. 40 Seniors (60+) 30 Beginning of Aged Economy, age 60+ consumes more than 0-19 20 10 0 1950 1975 2000 2025 2050 2075 2100 2024: Most productive population Population age distribution concentrated at ages of highest labor productivity 1.0 2040 2013 Support Ratio: Producers / Consumers 1.1 Relative to 2013 using 1996 NTA weights The age structure of a population affects the economy by changing the distribution of people in ages of high labour productivity relative to their consumption. If the current age patterns of production and consumption persist, the age distribution will continue to favour producers in relation to consumers during the coming decades reflected in the increase of the economic support ratio3 until 2024. This situation represents a potential “demographic dividend” – a surplus generated by the economy that, if invested in health, education, and infrastructure, can move the economy permanently to a path of higher production, consumption and living standards. However, beginning in 2024, it is projected that the economic support ratio will decline steadily as the percentage of older persons in the population increases. This new situation will pose increasing economic challenges for Colombia. No net change in the support ratio 0.9 0.8 0.7 1950 1975 2000 2025 2050 2075 2100 2007: Fiscally-strongest population Fiscal Support Ratio: Taxpayers / Beneficiaries 2040 2013 1.1 Relative to 2013 using 1996 NTA weights Over the past decades, Colombia’s demography has contributed favourably to its fiscal outlook. However, this situation is now changing. Population ageing will generate an increase in the number of beneficiaries of public programmes relative to the number of taxpayers. The fiscal support ratio, the ratio of taxpayers to beneficiaries, summarizes this trend4. This ratio reached its peak in 2007 when the age structure most strongly favoured taxpayers relative to beneficiaries. The fiscal support ratio is projected to decline continuously over the coming decades, falling by 10% by 2040 and dropping below 0.8 taxpayers per beneficiary around 2075, relative to a value of 1 in 2013. Demographic trends in the coming decades will significantly contribute to the fiscal challenges Colombia will face. Population age distribution favors taxpayers over beneficiaries 1.0 0.9 Fiscal support ratio declines by 10% 0.8 0.7 1950 1975 2000 2025 2050 2075 2100 About the National Transfer Account (NTA) Network The NTA Network brings together researchers from different regions of the world using a new methodology: National Transfer Accounts. NTAs provide a new vision of economic relationships between groups in a national economy: between young and old, between men and women, between rich and poor. For the first time, we can measure the complete set of economic flows between these population groups and determine the roles played by the market (via labour and financial markets), the state (via taxes and benefits), and the family (via transfers within and between households) in defining these economic relationships. The NTAs represent a disaggregation of National Accounts by age, gender, and socioeconomic status. Applying the same NTA framework in all the countries in the NTA network allows for international comparisons of consumption, labour earnings, taxation, savings and other economic flows by age, gender and socioeconomic status. CELADE – the Population Division of ECLAC is responsible for the regional coordination of the NTA Network in Latin America and the Caribbean. See [online] www.cepal.org/celade/NTA for more information about this document and the NTA network in the region, and www. ntaccounts.org to learn about the global project. Policy options for the ageing future Although policy interventions aimed at delaying population ageing by promoting immigration or increasing fertility can have some effect, their impact tends to be very limited. In order to effectively confront the economic challenges of population ageing, policies should focus mainly on economic and social factors. Three illustrative scenarios that examine policy options for Colombia’s ageing future are presented in this section. The first reviews the impact of extending working lives, the second explores closing the gender gap in labour earnings, and the fiscal support ratio. They assume no changes in the levels of coverage and benefits of public services. Each scenario evaluates one policy option. Logically, countries have an array of different policy options available to them. These options are not mutually exclusive and usually a mix of options form the basis of national policy. The estimates generated in the context of the NTA project which examine economic activity by age, gender, and socioeconomic status provide a rich source of information for further analysis of these and other national policy options. the third examines raising taxes. The scenarios are all population-driven in that they reflect policies adopted to respond to changes in population age structure. Once the age structure of the population completes its transformation from a child-dominated population to a senior-dominated population (towards the end of the this century), the economic impacts of these policy options also end. The scenarios are based on several simplifying assumptions in order to assess the sustainability of current policies and practices as measured by the economic support ratio and Delay retirement to maintain productivity 2013 8 2040 Years of Retirement Delay Years of retirement delay to maintain 2013 support ratio One way to counteract the effects of population ageing on productivity is to induce people to extend their working lives and delay retirement. In Colombia’s case, the short-run forecast for productivity is positive and under the assumptions of this exercise, the economic support ratio will hardly change at all through 2040 – and a modest delay of 0.5 years would maintain productivity at its 2013 level5. Looking at a longer-term horizon, however, the impact of population strengthens and greater delays in retirement would be needed to counteract the impact of population ageing. The option to extend working lives may be reasonable in a context of increasing healthy life expectancy and social protection policies aimed at supporting those for whom the delay in retirement would be an undue hardship. If this were the only policy option used, it would require about 7 years of additional working years to maintain population productivity at current levels. Over this same period, life expectancy at birth is projected to increase by about 10 years. 6 Only a half year delay in average retirement age to maintain 2013 productivity until 2040 4 2 By 2097, raise retirement age by an average of 7 years to maintain 2013 productivity 0 2000 2025 2050 2075 2100 75 2040 Labor Income Gender Gap 2013 In Colombia, women in the most productive working ages (between 30 and 49) only bring home 59% of what men earn. This gap reflects lower labour force participation of women, fewer hours of work per week, and lower wages per hour worked. Many women specialize in home production, performing unpaid work that benefits the family and the productivity of other workers in the family. From the perspective of the national economy, however, overall productivity would increase if women’s participation in the formal labour market were closer to that of men. Reducing the 2013 gender gap in labour earnings by increasing labour earnings of women from 59% to 74% of what men earn would completely counteract the negative impact of population ageing on economic productivity during this century6. Measures to close the gender gap, such as (1) investing in women and girls’ education, (2) instituting family leave policies that support working mothers, and (3) fighting gender discrimination in the workplace are a key set of policy options to maintain the support ratio in the face of population ageing. Female income as a percentage of male to maintain 2013 fiscal support ratio Close the gender gap to maintain productivity 70 Gender convergence in income not necessary to maintain the 2013 support ratio until 2040 65 Bringing womens income to 74% of mens eliminates the productivity impact of population aging 60 55 2000 2025 2050 2075 2100 Increase taxes to maintain fiscal balance 2040 2013 Percent increase in taxes relative to 2013 to maintain 2013 fiscal support ratio The fiscal support ratio forecast showed that, based on current tax and benefit programs, population ageing will quickly strain Colombia’s public finances. One way to solve this problem is to raise taxes to meet the growing demand for public programs, such as pensions and health care programs for older persons. If the tax increase were the only policy change implemented, a tax increase of 10% would be needed to maintain the current fiscal balance through 20407. In the longer term, the tax increase necessary to offset the full impact of populating ageing on government budgets rises to 30%. Tax Increase 30 Raise taxes by 10.5% to maintain 2013 fiscal balance until 2040 20 Ultimately, taxes would have to rise by 30% relative to 2013 to support public services for the aged 10 0 2000 2025 2050 2075 2100 Notes on Data and Methods: 1 2 3 4 5 6 7 Data for the analysis were taken from B. Piedad Urdinola and Jorge Tovar, “NTA Data for Colombia, 2006”, National Transfer Accounts Project, 2012. For detailed methodological information, see Gretchen Donehower (2013), “Methods used for estimations for Ageing Futures Series”, NTA Project, [online] www.cepal.org/celade/NTA. Population estimates and projections were obtained from United Nations, World Population Prospects: The 2010 Revision, [online] http://esa.un.org/unpd/wpp/Excel-Data/ population.htm. We estimate and project aggregate consumption (public and private goods and services) by multiplying the NTA estimate of average consumption by age for 2006 by the population age structure in each year over the period 1950-2100. Details on the NTA estimates for Colombia in 2006 are available in B. Piedad Urdinola and Jorge Tovar (2012), “Technical report to CELADE on NTA estimates for Colombia 2006”. The economic support ratio is the ratio of the sum of the population by age, weighting each age by average labour earnings estimated from the NTA, and the sum of the population by age, weighting each age by average consumption estimated from the NTA. The calculation assumes that the patterns of labour income and consumption by age remain fixed at their 2006 levels, and that only the size and age distribution of the population changes. The fiscal support ratio is calculated in the same way as the economic support ratio (see note 3), but the numerator is weighted by average taxes paid by age and the denominator is weighted by average benefits received by age. This is a useful and easy to calculate indicator. Using data derived from the NTA, it is possible to obtain more realistic long-term budget forecasts. The analysis is based on calculating the economic support ratio. If the support ratio falls below the 2013 level, the labour income schedule by age is shifted to the right, from the point of peak labour income, representing a delay in average retirement by one year, until the support ratio is at or above the 2013 level. The gender gap is measured using data on labour force participation, hours worked and average wage by gender from Socio-Economic Database for Latin America and the Caribbean (CEDLAS and The World Bank), (see [online] http:// sedlac.econo.unlp.edu.ar/eng/statistics-by-gender.php access in December 2012). The analysis involves calculating the reduction in the gender gap necessary to maintain the economic support ratio at its 2013 level. The tax rate increase necessary to maintain the fiscal support ratio at 2013 levels is the inverse of the fiscal support ratio. This document was prepared by Gretchen Donehower, consultant for the Latin American and Caribbean Demographic Centre (CELADE) – Population Division of the Economic Commission for Latin America and the Caribbean (ECLAC), under the supervision of Paulo Saad, Chief of the Population and Development Section, and Tim Miller, Population Affairs Officer of the same division. The study was developed as part of the project on “Population aging and development: National Transfer Accounts in Latin America and the Caribbean”, funded by the International Research Centre (IDRC) of Canada. Additional funding was provided by the Centre for Economics and Demography Aging, University of California, Berkeley. The opinions expressed in this document, which has been reproduced without formal editing, are solely the responsibility of the authors and do not necessarily reflect those of the Organization.