Daily Management Review

IMF: Active labor policy can ease aging of the population


06/27/2018


Only an active state policy on the labor market is capable to partially compensate for the negative trends associated with population aging and production automation in developed countries, the IMF's working report says. In practice, fight for employment should mean both an additional investment in the education and social support of workers, as well as stimulation of a later retirement. However, this increase in employment does not ensure t growth of labor productivity, according to new data from the OECD.



The growth of the population of developed countries is slowing down, the life expectancy is growing, and so does the number of older people, the IMF analysts state. According to the UN forecasts, almost half of the developed countries will face a decline in population by the middle of the century, and for each person of working age (in its current sense) there will be twice as many elderly people as now. If the number of active participants in the labor market does not increase, the aging of population will begin hinder growth of the economy and undermine the current social security system. 

However, while employment in half of developed countries has been growing since the financial crisis, the figures vary significantly for different groups of workers, the IMF points out. So, against the background of widespread decline in employment among young men, the share of women in the labor market has increased, and the prolongation of active working life for older people coincided with a decline in the proportion of the youngest workers. In addition to the differences in the speed of technological progress, the determining factor here is social policy, which directly affects the willingness of citizens to work, the fund believes. Structural changes in labor legislation and education are the main reason for increasing the labor activity of young women and older workers, and the deepening of automation partly explains the decline in employment among young men. Simultaneously, expanding access to education and increasing its duration is the most obvious reason for the later entry into the labor market for young people, analysts of the IMF note.

States have enough leverage to influence the situation, adjusting the behavior of market participants with a variety of incentives, according to the fund. Not only investment in education, support of the labor market, as well as new markets, can stimulate citizens to work, but also mitigate for them the consequences of globalization and the technological process that displaces certain professions from the market. If the introduction of new technologies does not lead to a significant increase in labor productivity, developed countries will have to reconsider their immigration policies, as well as encourage later retirement for the older generation, the IMF concludes.

Meanwhile, employment growth in high-income countries is not accompanied by a corresponding increase in labor productivity, according to the Organization for Economic Cooperation and Development (OECD). Its latest report shows that economic growth only contributed to an increase in the number of workers in the countries of the organization. Yet. most new jobs (especially in Italy, Mexico, Spain, the United Kingdom and the United States) were created in low-productivity sectors, which reduced average salaries in economics. Thus, the fall in the level of real wages in 2010-2016 was noted in Portugal, Spain and the United Kingdom, and in Germany and the US their growth lagged behind productivity growth, contributing to the growth of inequality. Particularly relevant is the problem of weak productivity growth for industry - both for high-tech computer and electronics manufacturing and for traditional industries: it is likely that such a slowdown in productivity growth can be perceived as a temporary buffer that "protects" the labor market from shrinking. 

source: imf.org






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