Monday, March 23, 2009

Ways of how the government is trying to deal with this issue

Raising the retirement
Increase the size of the working-age population by raising the retirement age. Since Europeans tend to retire before the official state-pension age . This would actually allow the senior citzens to work and earn income rather than staying at home.

Influence birth rates
The second area is policies to influence birth rates. There might be reason for women not giving birth to babies example ,are they are heavily tax, excessively penalised for
having children.

What is the effect of an ageing population on Italy?

Slower economic growth
When a large part of the population starts to move from the pre-retirement to the postretirement age group, the effect of that is to slow down the growth of the working-age population. Other things equal (that is, assuming given participation rates and productivity growth), this is going to mean lower growth in per capita incomes and lower growth in the total economy.
Strain on government budgets
One way this will arise is through government pension commitments, especially where
governments run defined-benefit systems that are effectively funded on a pay-as-you-go basis. This is borne out by official projections for the US social security pension system, for example, which show that it will soon turn cash-flow negative and eventually will run out of funds.
Effects on financial markets
Population ageing means we are entering a world where, in relative terms, labour will become more scarce and capital more abundant. As a result of that, economic modellers generally predict that real wages will rise and returns to capital will fall. It is interesting to note that this change in relative prices will actually make it harder to prepare for population ageing purely by saving more, because the returns on saving will be lower. This means that what will be needed is some combination of increased saving and greater workforce participation, which is what higher real wages should help to bring about

Why is Italy facing the issue of ageing population

Better healthcare
People were driven by improved hygiene, better medical
care and better nutrition – all things that accompany human progress. It will cause the old people to have longer life span and there will be low birth rate.

Low birth rate
Another reason is that European women have fewer children. In both America and Europe, the post-war baby boom gave way to a bust in the 1970s, and fertility fell below the replacement rate of just over two per woman. Populations age when people live longer and have fewer children. Life expectancy is rising at roughly the same pace in most rich countries—So it is low fertility that explains why Europe's population is ageing faster than America‘s In Italy, it will reach 50 as early as 2025.

Saturday, March 21, 2009


''We've had four babies this year. In the same period we've had 14 funerals''
-Mayor of Cersosimo

''The fact is, children cost too much''
-Rafaele Lofiego

Answering The Required Questions

Reasons for ageing population
Fertility decline (1.2 children per woman)
Highest life expectancy gains. (75 and 81.2 years respectively for men and woman).
Hence Italy’s population will be projected to stagnant and decrease with the highest pace and intensity within the European context.

The Italian population will decrease by around 28% over the next 50 years. 0-14 age group will fall by 40%; the working age population (15-64) will decrease by 44%, while only the older cohorts will increase, by 50%.

Consequences of an ageing population.
1. Low labour force
--- ----An ageing population will cause less people to be of working age. Therefore, the working population will have to support an increasing burden in the coming decades, as there will be more old people to support.

2. Poor economic growth.
---With a small workforce, this will result in poor economic growth of the country and will negatively affect the prosperity of the country. Also negatively affect the stability of the country.

3. Financial burden on the growing old ages
----The possibility to support the financial burden of an "aged society" is very likely. Unable to sustain the country

4. Other small implications of population decline.

Coping with an ageing population.
1. Increasing age limit of labour market.
--- By increasing the span of the labour market, this will reduce the number of retirees and at the same time increase the number of workers. Hence, this measure has double the advantage.

2. Improve fertility rates.
---- Method no. 1 is not really effective in preventing ageing population in the long run. Hence the long-term solution is to raise the fertility rates. Government can also help in encouraging higher birth rates.

3. Migration.
-------Migration has an immediate and relatively strong impact on the working age population, as fertility rates among immigrant women are often relatively high. Hence, this can also raise fertility level. In Italy, migration is particularly beneficial for the labour demand, particularly for blue-collar workers.

Friday, March 20, 2009

Italy's fertility rate falls as women reject childbearing by Lucinda Evans

The size of the Italian family has shrunk dramatically, according to government statistics. The definitive version of Italy's 1991 census, recently published by the National Institute of Statistics, shows that the average family fell to 2.8 members compared with 3.4 in 1971. Most families have either only one child or none.
Underlying the drop is a fall in fertility that has put Italy on course for zero population growth. In the 10 years before the census was taken, Italy's population grew by just 221000. Italy has a population of 57500000.
By 1991, the traditional view of the Italian family was rapidly disintegrating. Children aged under 6 years formed 5.8% of the population, while people aged over 65 years made up 15.3%. There was roughly only one grandchild for every three grandparents.
The decrease in fertility started in the middle of the 1960s and accelerated in the 1970s. The reasons.

Population Ageing: Facing The Challenges

Ageing will make it hard for governments to deal with mounting financial pressures. It may be time to rethink our policies towards work.
Jean-Philippe Cotis
Chief Economist, OECD (Organisation for Economic Co-operation and Development)

Population ageing is set to affect all OECD countries over coming decades. Demographic projections are uncertain, but on middle-of-the-road assumptions, the ratio of people over 65 to those between 20 and 64 could double between now and the middle of the century. And in some countries, such as Japan, Italy and Spain, this ageing will be much stronger.

These developments will be challenging for public budgets and pension systems. Indeed, the falling share of the population at traditionally productive ages means relatively fewer people will pay taxes and social contributions at a time when the rising share of older persons implies that more people will receive pensions and costly health services, etc.

To cope with mounting financial pressures, governments have to make hard choices. In particular, to avoid increasing the tax burden or impoverishing pensioners, they are now looking at ways of inducing more people to enter or stay in work. As is often the case, these testing times may be a blessing in disguise because they provide OECD countries with a golden opportunity to break away from the mistaken policies of the past – policies that sought unsuccessfully to reduce unemployment by withdrawing workers from the labour force through a variety of misguided incentives and restrictions.

Across the OECD, the share of the population over the age of 15 that is active in the labour market varies tremendously – from around 50% in Italy to more than 70% in some Nordic countries in 2000 (see graph). There is also a strong presumption that those countries which achieved high labour force participation also had the best policy framework. The time has come for many OECD countries to implement a new set of policies conducive to stronger growth, higher employment and sounder pension systems.

These policies will have to be tailored to meet the specific needs of the various groups that make up the active population. One group in the labour market almost fully employed in all OECD countries is that of prime-age males (25-54), whose labour-force participation rate generally exceeds 90%. By contrast, there is wide variation in the extent to which women, as well as young and older persons, participate in the labour market. Those groups are most likely to be influenced by government policies, for better or worse.

As for women, their participation has been rising in all countries for several decades. Each new generation of women has had a stronger attachment to the labour market than the previous one. There are probably important cultural reasons for this, but the increase has also been enabled by technical progress, allowing housework to be done more easily, while higher educational attainment has also played a role in luring women into the job market.

Policies have also affected this trend and appear to play an important role in explaining cross-country differences in female participation. Taxation is one such policy. Married women are widely considered as the second earner in a couple and when their income is taxed jointly with that of their husband, the marginal tax rate can be very high. This is unfortunate since women’s participation reacts more to tax changes than that of men. Most countries have moved towards taxing each earner in the couple separately, but joint taxation still exists in a number of countries, including France and Germany.

Better participation can also be achieved by subsidising childcare, either directly or through the tax system. Most Nordic countries have gone pretty far in this respect and also have high female labour force participation. Childcare support may be seen more as a subsidy to female full-time work than to part-time work, and indeed, the share of part-time work in Nordic countries has declined. But the money to pay for childcare subsidies obviously has to come from taxes, and higher taxes in general reduce people’s desire to work, so there are limits to how far this policy can go. Other countries, such as the United States, manage however to achieve high female participation without large-scale subsidisation of childcare. In this case, because of a wide dispersion of wages, many households can afford to meet the costs of childcare by themselves.

In contrast to women, older men have reduced their labour force participation in all countries over the past three decades – in some cases sharply. It may seem ironic that effective retirement ages have fallen at the same time as people are living longer and healthier lives. This fall may reflect a stronger appetite for leisure as real incomes have gone up. But it also owes a lot to policies.

Early retirement, invalidity and unemployment benefit schemes in many countries provide people in their 50s with strong incentives to retire. These often misguided policies led to a sharp drop in participation in the 1970s and 1980s. There has been some moderate roll-back since then, but most of these policies remain in place in many continental European countries, with detrimental consequences for employment.

Old-age pension schemes also stack the cards in favour of people retiring early. If people postpone their retirement by a year, this is rarely reflected in correspondingly higher pensions later on, despite their extra contributions. This is already problematic at ages between 60 and 65, but after 65 the disincentives to work become almost prohibitive in some countries. In our society where people are fitter for a lot longer, we should be free to engage in “active ageing”.

A policy package that could work would include the following steps: eliminate early retirement schemes; make old-age pension schemes actuarially neutral so that pensions fully reflect time spent at work; raise standard retirement ages; increase childcare subsidies; eliminate tax discrimination against female participation; and enhance the role of part-time work. All of this would be strengthened by measures to make the school-to-work transition more effective.
This is obviously a radical policy package, but it sends an important message: in a context of rapid population ageing, it will take very strong policy action to stabilise the share of the working age population and start reversing the trend.
These strong recommendations come, however, with a note of caution. It is obviously not enough for policy reforms to bring people out onto the labour market. Looking for a job is an important prerequisite but finding one is what ultimately matters.

Measures could well be needed to ensure the full employment of more people coming onto the job market. Indeed, many of these measures have been dealt with extensively in the OECD Jobs Strategy. But while they demand our attention, it is reassuring to note that those countries which have promoted active labour force participation also benefit from high employment. Given time, it seems that employers have been able to create the jobs needed to match a more abundant supply of labour.

©OECD Observer No. 239, September 2003