Work Long and Save--Redux

Africa and the Middle East may be dealing with high fertility and young populations, but Europe, North America, and East Asia, in particular, are facing aging populations and trying to figure out how to deal with that economically. As I have noted before, this dilemma is faced by both individuals and governments, and the answer (work long and save) seems obvious, but it is not always easy to implement. My thanks to Carl Schmertmann for pointing me to an article about Korea's somewhat upside down approach to this--offering loans to couples to encourage marriage and childbearing, which will then help to support the older population.

South Korea’s national pension service is considering lending money to singles who delay or are reluctant to tie the knot because of wedding costs as a way to promote marriage and help raise chronically low birth rates, officials said Sunday. 

South Korea is faced with mounting demographic problems as the ultra-low birth rate and the rapidly aging population are expected to seriously shrink the size of the labor force and depress economic growth. Such changes are also pressing on the pension operators who have to deal with increasing payments for the elderly while revenue drops.

This is not really all that different from recent attempts by Turkey and Iran to stimulate their birth rates by encouraging marriage and childbearing. And its impact will likely be small and too late in coming to have much effect. Keeping people in the labor force for as long as possible is, in my view, the key. A paper just out from Demographic Research (for which Carl Schmertmann serves as editor) offers a glimmer of hope on this score, at least for Europe. The author, Elke Loichinger from the University of Vienna, projects the European labor force into the future taking not just age and sex, but also education, into account.

Summing up, the labor force in Europe is likely to be older, contain a higher share of women, and will overall be composed of people that are on average higher educated than today. This result is robust in the sense that it holds for the overall labor force, irrespective of the scenario, and for the analyzed subgroups (men/women and broad age groups). Whether the labor force will be smaller depends on how participation of women and those aged 55+ years and older evolves.

Thus, the idea is that better educated people, including ever increasing fractions of women (don't waste that resource!), will generate higher, not lower, levels of economic productivity as they age, thus dampening the effect of the overall aging of the population. In other words, educating women is a better solution to the world's problems than encouraging them to leave university and have babies.