Population Ageing and Work in Later Adulthood in Georgia

Transcription

1 Population Ageing and Work in Later Adulthood in Georgia Shorena Tsiklauri Ilia State University, Tbilisi, Georgia Abstract Population aging, one of the most visible effects of demographic transition, had taken place in all industrialized world over the past century and it has evolved into a global phenomenon, affecting more and more newly developed and developing countries. With the population of Georgia trending grayer, the decision of when to retire has become increasingly salient. What influences the decisions people make has fallen under increased scrutiny in recent years, as the size of the labor force has declined and individuals face the challenge of ensuring they have enough income to last throughout their ever - lengthening lives. This paper aims to discuss what factors lead people to retire or remain in the work force, which influence the decision to transit from active life to quiescence in Georgia? Kay words: Ageing, Georgia, Retirement

2 Introduction The world population getting older and this process taken place in all industrialized and part of the developing countries (Bengtsson & Scott, 2010). That is the result of low birth and wide gain in term of life expectancy at all ages. Number and percentage of persons aged 60 is growing faster, according to UN estimates 12 per cent of the global population is people aged 60 and over and it is growing by 3.26 per cent per year (UN, 2015). Globally, the number of persons aged 60 and above is expected to more than double by 2050 and more than triple by 2100, increasing from 901 million in 2015 to 2.1 billion in 2050 and 3.2 billion in 2100 (UN, 2015). This process is contributing to a radical change in the socio-economic structure and quality of the life. The population aging process underway in the world has recently become a matter of active discussion by the scholars. While defining the country s economic and social priorities the government faces the necessity to take into account sharp democratic changes underway in the population s structure, as a result of which the ratio between the able-bodied and unable-to-work segments of population changes drastically. In fact, the retirement period will become longer because of the ongoing improvements in life expectancy, and the pension income might not be enough. This could be particularly true whether the increasing burden on the pension system depress the replacement rate. The coming generation of elderly will need to build up saving to preserve high standard living. Elderly are likely to ask for more health and leisure, and less education (Lührmann, 2005) and the increasing share of older population will modify the aggregate demand for goods and services (Börsch- Supan, 2003). Accordingly, it will lead to a change in aggregate supply, thus determining a change both in output and in employment at sector level and any government should pay more attention on these aspects because it could be one of the keys to manage population ageing. Factors influencing the retirement transition not only include people's life histories and present context but also what they expect to occur in the future. As a result, scholars have developed models of retirement expectations because they find that the expectations individuals create are associated with the decisions they make later. In fact, research indicates that people are reasonably competent at forming relatively accurate expectations about the timing of retirement (Bernheim, 1987). One area of interest is what individual characteristics are related to retirement expectations. A number of individual characteristics influence retirement expectations, including education, gender, market resources, work environment, and health status. Over time, more people from all levels of education expect to continue working full-time after age 60, but those with college degrees are most likely. The objective of this work is to study conditions, characteristics and factors, which influence the decision to transit from active life to quiescence in Georgia? For our research we are going to use Official data which provided by National Statistical Office of Georgia and UN estimates. 2

3 Results and Discussion Population Ageing In Georgia Mortality and fertility declines are two fundamental forces of population aging. The life expectancy of the world population has more than doubled during the past two centuries (Vaupel & Oeppen, 2002) and the fertility decline is exclusively responsible for the population aging over the first half of the last century (Coale, 1957). The life expectancy in Georgia had reached 77.2 years for female and 68.6 for male by The total fertility rate has been below replacement level since the early 1990s, so that the pyramid below shows a significant narrowing in the cohorts born since then. From a level of 2.2 children per woman, the fertility rate declined to 1.5 in 1995 reaching its lowest level of 1.4 in It then increased again to 1.86 in 2009, gradually declining to today s level of 2.2 (2014). Georgia has a population of 3.7 million in 2015 and 47.7 per cent was male and 52.3 per cent was female. In 2015, 6.9 per cent of Georgia s population was under age 5, 17.4 per cent was under age 15, more than 19 per cent was 60 or over and 3.1 per cent was 80 and older. Figure 1: Sex and age structure of the population of Georgia (thousands), 2015 Source: National Statistics Office of Georgia (GeoStat) According to the United Nations Population Division data, the share of the population aged 60 years and above is expected to grow from 19 per cent in 2015 to 33 per cent in The share of those aged 80 years and above will increase from 3.6 per cent to 7.5 per cent (World Population Prospects: The 2015 Revision, 2015). According to the United Nations Population Division, the population of Georgia will decrease under all three projection scenarios - with high, constant and low fertility rates. 3

4 Figure 2: Population projections for Georgia, Source: United Nations Population Division, Population Estimates and Projections Section The ageing of population is often measured by increases in the percentage of elderly people of retirement ages (Encyclopedia of Population, 2002). The median age that is, the age at which exactly half the population is older and another half is younger (Encyclopedia of Population, 2002), is an indicator of population ageing. Population ageing occurs when the median age of a country rises. Georgia today has faced population ageing, with median age of 37.5 years in 2015, which is expected to reach 45 years in 2050 (World Population Prospects: The 2015 Revision, 2015). Since the study of population ageing is often driven by a concern over its burdening of retirement systems, old age dependency ratio is used as a related measure of population ageing. Some authors used an over-lapping generational model to examine the demographic impact on economy, in which, he asserted that population growth induces prosperity and welfare (Samuelson, 1975). This is because the growing population expands the tax base, and, in turn, accelerates the accumulation of capital transferable to retirees. Such economic benefit taken from the population growth is so called demographic dividend. Nonetheless, on the opposite of his hypothesis, once the population growth is in the era of stagnation, which subsequently leads to a declining ratio of workers to retirees, namely support ratio, the demographic dividend will then, sooner or later, be exhausted. This is exactly the case for contemporary Georgia, where economic welfare will be enforced into a trap given by population ageing. This figure illustrates the evolvement of the old age dependency ratio from 1950 to The ratio here is defined as the total population aged 65 above in relation to aged between 20 and 65. The figure depicts a continuous rising pattern of the dependency ratio over time, which increased from 19% in 1950 to 24% in 2015, and will keep growing up to over 53% by

5 Figure 3: Old age dependency ratio (population aged 65+ over age 20-64) in Georgia Source: Own calculations based on age-specific population from United Nations Population Division, Population Estimates and Projections Section In demographic point of view, decreasing emigration and increasing fertility or immigration could be the solution to the threat of ageing as they are capable to extend the tax base and labor supply. It seems that that model takes long time to faced positive effect and it will caused additional problems, e.g. integration of immigrants to labor market and increasing burden on health care and pension. Hence, only demographic solutions seem insufficient to overcome such challenges, economic and policy adjustments are therefore needed. The aim of the Georgian law on state pension is to guarantee that the older population receives a state pension. The retirement age is set at 65 years for men and 60 years for women. The pension is paid on a monthly basis and is a flat-rate benefit. State pension expenditures are funded by the tax revenues and there is no contribution mechanism. The amount of the pension is set in the state budget for the respective year and does not depend on years of service. The pension is not indexed. Elderly in labor market According to the official statistics Unemployment rate was 12.4 per cent and Economic activity rate was 66.5 per cent and of that in employment, about 60 per cent were reported as selfemployed in Analysts suggest that the actual unemployment rate may be much higher, estimates going up to 30 per cent,1 with significant numbers of unemployed being hidden under the self-employment category (Gutbrod, 2013)

6 Figure 4: Distribution of employed population by Employed status and age groups (%), 2014 Source: Integrated Household Survey, GeoStat The official statistics reports that 43 per cent of population 65 years old and above were economically active in The share of self-employment among older employed is extremely high (83 per cent) for 65 years old and above as compared to self-employed among the prime working age group (25-54 years old). The major reason for such a significant difference is that subsistence farmers and most of older people are among them - are considered to be selfemployed2, even though being self-employed in the agricultural sector does not mean that one will have sufficient means to finance their needs even with the pension income added. Sociodemographic surveys conducted in Georgia shows that population aged 60 or above are pensioners. Figure 5: Distribution of population in age 60+ by Employed status Source: Generations and Gender Survey in Georgia, II wave

7 It is well known that pensioners in Georgia are not sufficiently provided for by the state pensions and they are very much economically depending on their household members. Hence, pensioners who are living alone are a high poverty risk group, more than 80 per cent experience economic problems. Figure 6: Proportional distribution of elderly persons living alone by subjective measures of well-being (household is able to make ends ) Source: Generations and Gender Survey in Georgia, II wave 2009 Population of Georgia has faced ageing, according to UN estimates share of elderly in the total population continuously rising. Today s, pension system cannot fully satisfy the requirements and often they are depend on their household members or are under high poverty risk. Most of them are involved in the informal employment sector, mainly engaged in agricultural activities. 7

8 Bibliography Badurashvili, I., Kapanadze, E., & Tsiklauri, S. (2011). Generations and Gender Survey in Georgia II wave. Tbilisi: UNFPA-Georgia and Georgian Centre of Population Research. Bengtsson, T., & Scott, K. (2010). The Ageing Population. The Case of Sweden. Springer. Bernheim, B. D. (1987). The Timing of Retirement: A Comparison of Expectations and Realizations. Cambridge, MA. Börsch-Supan, A. (2003). Labour Market Effects of Population Aging. Labour, 17 (special issue). Coale, A. J. (1957). How the Age Distribution of a Human Population is Determined. Cold Spring Harb Symp Quant Biol, pp Encyclopedia of Population. (2002). Gutbrod, H. (2013). Correcting Unemployment Numbers A Call for Government Action. Lührmann, M. (2005). Population Aging and the Demand for Goods & Services. MEA Discussion Paper Samuelson, P. A. (1975). The Optimum Growth Rate for Population. International Economic Review, vol. 16(3), pp Tsiklauri, S. (2013). Socio-demographic aspects of population ageing in Georgia. BOLD, Vol. 23 No. 3, pp UN. (2015). World Population Prospects: The 2015 Revision, Key Findings and Advance Tables. Working Paper No. ESA/P/WP.241. New York: United Nations, Department of Economic and Social Affairs, Population Division. Vaupel, J. W., & Oeppen, J. (2002). Broken Limits to Life Expectancy. SCIENCE, (2015). World Population Prospects: The 2015 Revision. NY, DVD Edition: United Nations, Department of Economic and Social Affairs, Population Division. 8