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The consequences of ageing in terms of public finance

Ageing in most industrialised countries, the researchers Nicole Fasquelle, Christophe Joyeux and Koen Hendrickx from the “Bureau Fédéral du Plan en Belgique” emphasise, raises numerous questions concerning the organisation of society, the relations between generations, economic growth, social security and public finance.

What are the perspectives between now and 2050, of the “grey revolution” in Belgium? In terms of fertility, the indicator of 1.6 children per woman in 2000 should have increased to 1.75 by 2050. A slight rise which remains significantly lower than the renewal rate set at 2.1. The extension of life expectancy, progressing via the reduction in the death rate at nearly all ages, will increase the average lifetime of men from 75 in 2000 to 84 in 2050. For women, this evolution will increase from 81 to 89 years. Finally, the migratory balance should reach 17,000 immigrants a year.

In general, the Belgian population should reach nearly 11 million people by 2050 but the age structure of this population will be completely overturned. The number of youngsters (0 to 14 years) will decrease, as will the working population (15 to 64 years old) while the proportion of elderly people (65 years and over) will increase considerably. Because the average age will increase from 40 to 45 between 2004 and 2050, Belgium will definitely be subject to ageing as from 2010. Indicators that raise many concerns regarding the financial sustainability of the Belgian social security system, with the elderly likely to receive a legal pension and likely to consume health care. And yet, in Belgium, the system requires social expenditure to be mainly financed by employee contributions. The legal age of retirement is currently set at 65 for men and 63 for women in Belgium (but should increase to 65 on 1st January 2009).

The authors draw several conclusions based on various forecasts. By 2050, the school population will have decreased, in proportion to the reduction of the younger population. The working population (workers and the unemployed), on the other hand, will not decrease as much as the reduction in the population of working age would lead us to believe, owing to an increase in activity rates. As for the number of pensioners, they are increasing considerably owing to an ever-older population and other factors, such as early retirement. The total number of pensioners who are 60 years and over, will go from 2 million in 2004 to 3.6 million in 2050.

The authors have therefore reached the following observation: the challenge for the Belgian public finances, owing to the increase in the “coefficient of demographic dependence of the elderly” (ratio between the 65s and over and those of working age, from 15 to 64 years), can be relativised. How? Through the progress of the employment rate on the one hand, and through the pension and benefit calculation parameters on the other. Nevertheless, they note, an excess in social spending is expected in the future, which could endanger the balance of public finances.

Divergences between Wallonia and Flanders

It is three decades since demographic ageing marked Belgian society and the process is set to increase, reveals the researcher André Lambert (Adrass Belgique research consultancy) in the work led by Serge Feld. Nevertheless, the impact on the working population and the volume of work are different for Flanders and Wallonia; the latter has higher death and fertility rates as well as a lower level of education. The Brussels-Capital region, which is comparable with a large metropolis, does not enter into the regional comparison drawn up by André Lambert.

If we take a closer look, we can see a higher presence of 80-year-olds in Flanders. There is also a higher level of ageing in the north, where issues concerning social burden and the volume of work will therefore become more pressing than in the south.

As regards employment, there are a number of observations: Belgian men are working less and less, contrary to women, and Flemish men still work more than their Walloon counterparts. Furthermore, since 1981, Flemish women have overtaken Walloon women in terms of employment rates. Finally, while the intensity of work has remained almost constant during the last thirty years in Flanders, it has decreased by 7.5 % in Wallonia.

In terms of education, knowing that a high level leads to increased economic activity, the author notes that whatever the region, the level of young women surpasses that of their male colleagues. At the same level of education, it turns out that people work less in Wallonia than in Flanders. Moreover, Wallonia is characterised by a higher proportion of people with a low level of education.

Based on these observations, the author has formulated ten demographic scenarios in order to measure the impact of migratory movements and the level of education on the rate of employment in Belgium. As André Lambert reveals, we know that ageing is inevitable and that the fertility rate of two children per woman, required to maintain population levels in the absence of migration, does not reach the required level anywhere in Belgium. As a result, is migration sufficient to counterbalance this virtual decline resulting from a low fertility rate? According to the researcher, it appears that it does not really combat demographic ageing and does not constitute an effective remedy.

Furthermore, whatever the migratory hypothesis, the situation in Flanders, owing to its high level of ageing, will undergo far more social modifications than the southern part of the country. But in the absolute, the Walloon social burden does however remain higher, notes the author, owing to the weakness of the “employment-education pair”. Which, he continues, confirms the difference in efficiency in terms of level of education between the two major Belgian regions.