Future population ageing and productivity in Finland under different education and fertility scenarios

Authors

• Guillaume Marois IIASA https://orcid.org/0000-0002-2701-6286
• Anna Rotkirch Population Research Institute, Väestöliitto https://orcid.org/0000-0002-9429-1499
• Wolfgang Lutz Wittgenstein Centre for Demography and Global Human Capital https://orcid.org/0000-0001-7975-8145

DOI: https://doi.org/10.23979/fypr.119666

Keywords:

population ageing, dependency ratio, education, fertility, scenarios

Abstract

This study projects different dependency ratios under various scenarios of future fertility and tertiary education in Finland to assess how the economic consequences of population aging depend on these trends. Applying a multidimensional demographic approach through a discrete-time microsimulation model, we project the newly introduced productivity-weighted labour force dependency ratio for Finnish scenarios until 2060 and compared it with the labour force dependency ratio and the traditional age dependency ratio.

Results show that population aging looks less daunting when considering labour force dependency ratios as compared to purely age-based ratios, yet all measures and scenarios show a deterioration of the dependency ratio. While the old age dependency ratio is projected to increase by 73 per cent, the labour force dependency ratio would increase by 32 per cent, and the productivity weighted labour force dependency ratio by 28 per cent. Provided a more rapid increase in educational attainment, the last indicator is expected to increase less, with 21 per cent until 2060. Should the stalled trend in educational achievement of the 2010s continue, there would be very modest future gains in the productivity-weighted ratio. In other words, the consequences of population ageing look less dramatic for economic productivity, were Finnish men to become as educated as Finnish women.

Of the three fertility scenarios considered, a total fertility rate of 2.0 is most advantageous and a low fertility of 1.2 least optimal for adult dependency ratios, but only after 2050.  Interestingly, a combination of recovered fertility to 1.6 with a more rapid educational expansion would be better for productivity than only raising fertility to 2.0. Boosting educational levels would hence mitigate the negative effects of a shrinking labour force more than increasing fertility within reasonable bounds.

Our results suggest that implementation of the current government goals for educational expansion, combined with a not unrealistic recovery of total fertility rates to around 1.6, would both clearly alleviate the worsening dependency ratio. We conclude that although there is no quick fix to the economic effects of population ageing, these can be proactively mitigated with different and complementing policies, and taking into account multidimensional population trends.