Linking Pension Reform to Labor and Financial Market Reforms
11
population aging and have to be understood when choosing among reform options. Subsequent sections take up recent international reform trends and lessons and underline key points concerning the labor market and financial market reforms needed to support pension reform. The chapter ends with some concluding remarks.
Population Aging and Fiscal Implications for Pension Schemes Population aging can be measured by indicators such as the change in average population age, the share of the elderly (age 65 and above) in the population, and the old-age dependency ratio (ODR), typically defined as the ratio of the population age 65 and above to the working population (age 15–64). The ODR is of particular relevance for fiscal considerations, as it traces closely the number of potential retirees in comparison with the number of contributors to a pension scheme. Figure 2.1 presents the old-age dependency ratio for the world and for its principal regions: the global North, including North America, Europe, Russia, China, and the rich nations of Asia and the Pacific; the global South; the 15 member countries of the European Union prior to Figure 2.1. Old-Age Dependency Ratios in Selected World Regions, 2000 and Projected to 2050 0.6
old-age dependency ratio
0.5
0.4
0.3 0.2
0.1 0 2000
2005 World
2010
2015
North
2020 South
2025
2030 EU15
2035
2040
2045
2050
Southeastern Europe
Source: United Nations 2007. Note: North includes North America, Europe, Russia, China, and high-income Asia and the Pacific. South refers to developing countries. The EU15 countries are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom.