Leibfritz, Willi --- "Adjusting welfare systems to ageing populations – challenges and experiences in OECD countries" [2003] ELECD 113; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Structural Challenges for Europe" (Edward Elgar Publishing, 2003)

Book Title: Structural Challenges for Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843764748

Section: Chapter 13

Section Title: Adjusting welfare systems to ageing populations – challenges and experiences in OECD countries

Author(s): Leibfritz, Willi

Number of pages: 31

Extract:

13. Adjusting welfare systems to
ageing populations ­ challenges
and experiences in OECD
countries
Willi Leibfritz1

INTRODUCTION

As is well known, the ageing of populations could pose major challenges
for welfare systems. Age-related public spending, in particular old-age pen-
sions and health care spending are projected to increase rapidly in the
coming decades. This could threaten fiscal sustainability. Without adequate
reforms the fiscal costs of ageing populations would finally have to be
financed by higher taxes, which could reduce labour supply and thus erode
the base for financing welfare systems.
Countries have started to adjust their welfare systems, in particular
pension systems, better to cope with ageing. This chapter first looks at pro-
jections of age-related spending in OECD countries. It then discusses the
direction in which social security reforms are going. Generally, reforms are
aiming to deal with the fiscal consequences of ageing and, at the same time,
improving the efficiency of social systems and labour participation. The
success of these reforms depends on how the necessary macro-budgetary
controls are accompanied by micro reforms, which improve system effi-
ciency and the incentive structure of the economy. Of particular impor-
tance is how these reforms affect labour supply. As the share of older
workers in the working-age population will increase with ageing popula-
tions, policies should aim at reducing labour supply disincentives for older
workers. This chapter discusses policies to reduce such disincentives
implicit in various social programmes. It finds that significant disincentives
exist even after ...