Sección o Parte de un Documento 1995 es 382.3 B584L(58739) Corden, W. Max Coediciones NAFTA AMERICA LATINA LIBERALIZACION DEL INTERCAMBIO NEGOCIACIONES COMERCIALES TRATADOS ZONAS DE LIBRE COMERCIO FREE TRADE AREAS LATIN AMERICA TRADE LIBERALIZATION TRADE NEGOTIATIONS TREATIES NAFTA Una zona de libre comercio en el Hemisferio Occidental: posibles implicancias para América Latina Incluye Bibliografía En: La liberalización del comercio en el Hemisferio Occidental - Washington, DC : BID/CEPAL, 1995 - p. 13-40 Proyecto Apoyo al Proceso de Liberalización Comercial en el Hemisferio Occidental http://hdl.handle.net/11362/1510 2014-01-02T14:51:16Z 2014-01-02T14:51:16Z Made available in DSpace on 2014-01-02T14:51:16Z (GMT). No. of bitstreams: 0 Previous issue date: 1995 POLÍTICA COMERCIAL Y ACUERDOS COMERCIALES TRADE NEGOTIATIONS COMERCIO INTERNACIONAL E INTEGRACIÓN INTERNATIONAL TRADE AND INTEGRATION Texto CELADE, Population Division of ECLAC Number 1 - 2013 Turning Points in Mexico’s Ageing Future 2027: The end of the youth society 2013 2040 Population by age group 50 40 Millions Young people have dominated Mexico’s demographic scene during the last century. They reached their peak size in 2010, when people under age 20 accounted for 39% of the population. But this percentage has been declining, and the largest cohort of Mexicans has already been born, around 1991. It is projected that in 2027 young people will no longer be the dominant demographic group and this will mark the end of the youth society in Mexico1. A large wave is moving through Mexico’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 2031 for ages 20-39 and in 2051 for ages 40-59. The population of older persons will increase rapidly until the end of the century and will peak at 48.3 million in 2085. 30 End of youth society (The age group 0 to 19 is no longer the largest group) 20 10 0 1950 1975 2000 2025 2050 2075 2100 2035: Mexico becomes an aged economy 2013 50 2040 Consumption by Youth and older persons Percent of aggregate consumption Mexico is expected to become an aged economy in 2035. 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. 40 Older Persons (ages 60+) 30 Beginning of the aged economy (persons ages 60+ consume more than persons ages 0-19) 20 Youth (ages 0-19) 10 0 1950 1975 2000 2025 2050 2075 2100 2033: Most productive population 2013 1.1 1.0 2040 Economic support ratio: producers/consumers Relative to 2013 using 2004 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 next two decades reflected in the increase of the economic support ratio3 until 2033. 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 2033, 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 Mexico. Population concentrated at ages of highest labour productivity 0.9 Support ratio increases by 3% 0.8 0.7 1950 1975 2000 2025 2050 2075 2100 2018: Fiscally-strongest population 2013 2040 Fiscal support ratio: taxpayers/beneficiaries Relative to 2013 using 2004 NTA weights During the last decades, changes in the age structure of the population have contributed positively to improve the fiscal situation of Mexico. However, this favourable outlook will soon end. The ageing population will mean growing fiscal pressures as the number of beneficiaries of public programmes increases relative to the number of taxpayers. The fiscal support ratio, the ratio of taxpayers to beneficiaries, summarizes this trend4. This ratio is expected to reach its peak in 2018 and then decline sharply. In the short term, it is expected that the fiscal support ratio will fall by 5% by 2040. In 2100, the ratio is projected to be approximately 0.76 taxpayers per beneficiary, relative to a value of 1 in 2013. Demographic trends after 2018 will increasingly contribute to the fiscal challenges Mexico will face. Population age distribution favours taxpayers over beneficiaries 1.0 0.9 Fiscal support ratio declines by 5% 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. 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 Mexico’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 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 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. Delay retirement to maintain productivity Years of retirement delay 2040 2013 5 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. We saw that in the case of Mexico, the short and medium run outlook for productivity is favourable. In fact, under the assumption considered in this exercise, the economic support ratio will be 3% larger in 2040 compared to 2013. However, in a long run perspective, delaying retirement would mitigate the effects of ageing on productivity5 while additionally generating increased tax revenue. 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, an additional 5 years of working life would be required to maintain productivity at its current level until the end of the century. Over this same period, life expectancy at birth is expected to increase by about 9 years. 4 3 It is not necessary to change retirement age in order to maintain productivity at 2013 level until 2040 2 1 By 2090, retirement age must be raised by an average of 5 years to maintain 2013 productivity 0 2000 2025 2050 2075 2100 2040 Gender gap in labour earnings 60 2013 In Mexico, women in the most productive working ages (between 30 and 49) only bring home 42% 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 42% to 54% 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 Female labour income as a percentage of male labour income necessary to maintain 2013 support ratio Close the gender gap to maintain productivity 55 Bringing womens income to 54% of mens eliminates the productivity impact of population ageing Gender convergence in labour income is not necessary to maintain 2013 support ratio through 2040 50 45 40 2000 2025 2050 2075 2100 of policy options to maintain the support ratio in the face of population ageing. Increase taxes to maintain fiscal balance 2040 2013 Percent increase in taxes relative to 2013 to maintain fiscal support ratio at its 2013 level The fiscal support ratio forecast showed that, based on current tax and benefit programs, population ageing will quickly strain Mexico’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, taxes would need to rise by only 5% to maintain the current fiscal balance through 20407. In the longer term, however, the tax increase necessary to offset the full impact of populating ageing on government budgets rises to 32%. Tax increase 30 20 Raise taxes by 5% to maintain 2013 fiscal balance until 2040 Ultimately, taxes would have to rise by 32% relative to 2013 to support public services for the aging population 10 0 2000 2025 2050 2075 2100 Notes on Data and Methods: Data for the analysis were taken from Iván Mejía-Guevara, “NTA Data for Mexico, 2004”, 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 2004 by the population age structure in each year over the period 1950-2100. Details on the NTA estimates for Mexico in 2004 are available in Iván Mejía-Guevara (2011), “The economic lifecycle and intergenerational redistribution in Mexico”, Population Aging and the Generational Economy: A Global Perspective, R. Lee and A. Mason, Cheltenham, Edward Elgar, p. 283-496. 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 2004 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. 1 2 3 4 5 6 7 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.