This Issue Paper by Erik Türk, Josef Wöss and Fabian Zuleeg confirms that improving employment rates is the best strategy with which countries can prepare for population ageing. Against a background of a fast-increasing number of older people and a shrinking number of people of working age, decisive action to ensure the long-term sustainability of social security systems – and especially pensions – cannot be postponed.
But the results presented in this paper go much further: Europe’s budgetary situation would be significantly improved by achieving the employment target of the Europe 2020 strategy. The estimates presented in this paper suggest that a staggering €1000 billion by 2020 is at stake.
Of course, raising employment rates is not an easy process, especially in the current economic climate. Frequently, short-term investment from the public purse is required, with labour-market improvements only happening further down the line. But this paper suggests that the short-term public finance argument should not be over-emphasised. The scale of the positive mid-term impact of higher employment on both public budgets and the ageing challenge implies that finance ministries should look at labour-market policy differently: not as a social outlay, but as an investment in the future which will provide significant returns.
To download the PDF version of the working paper click here.