The budgetary dilemmas of an ageing workforce: a scenario study of the public sector in the Netherlands
Van Imhoff, E.; Henkens, K.
European Journal of Population 14(1): 39-59
1998
ISSN/ISBN: 0168-6577 PMID: 12293880 DOI: 10.1023/a:1005945211215Document Number: 277493
This study examined the budgetary consequences of alternative policies on aging in the public sector in the Netherlands. Budgetary consequences include salaried employee costs, the benefit costs of the inactive population aged under 65 years, and the implicit costs of not replacing retired workers. Data were obtained from the largest pension fund (ABP). Public sector includes all sectors covered by the ABP and includes all civil servants, educational workers, and noncommercial services, excluding health care. The authors construct a flow-model of public sector workers in 1993, with varying age specific rates of change in inflow, outflow, and position. Scenarios answer questions about the impact of aging on labor productivity and demand for new workers, and the effects of redistributing labor, changing early retirement schemes (ERS), and retiring part-time. It is assumed that labor productivity per hour is the same regardless of age. Salary increases with age, but scenarios assume a constant age-salary profile. Participation in senior worker schemes and/or use of inactivity schemes by restricting eligibility criteria will not generate substantial savings in public spending. ERS cutbacks will pass expenses on to other agencies and not reduce total public spending. Increased part-time retirement produces limited budgetary benefits. Costs increase with age and are reflected in ERS and unemployment schemes. Alternatives will reflect disability costs, salary costs of active workers, or unemployment benefits to young people who cannot find jobs because older workers are retiring too slowly. Aging societies are expensive.