Pensions: The threat of the demographic problem

The complete collapse of the country’s insurance system is inevitable – in the current circumstances – under the weight of the ever-deteriorating data of the demographic problem. And this will happen – if the demographic problem is not solved – regardless of any measures to solve the factors affecting insurance problems.

In the aftermath of the conference entitled “Demographics – The Great Challenge”, which the Prime Minister also addressed, OT presents the research data that refer to the aspect of the problem that concerns the close connection of the demographic issue with the insurance problem.

According to an earlier survey, which was confirmed by recent OECD data, our country by 2035 will be forced to increase the retirement age by almost 1.5 years and by a total of 2.8 years by 2050, due to the deterioration of the data concerning the demographic problem.

This deterioration consists on the one hand in the expected increase of life expectancy, and on the other hand in the reduction of the working age population (20-64 years) that in Greece will reach 35% !!!

The OECD report reiterates that the coming years will be difficult. By 2050, the number of retirees corresponding to every 100 employees will double. That is, while in 1990 the ratio was 22.9 people over 65 per 100 employees, in 2020 the ratio was found at 37.8 and in 2050 it will reach 75.

A country of the elderly

Indicative are the data according to which – if the most acute national demographic problem is not solved – in the year 2070, each person over the age of 65 will correspond to one – perhaps less – person of working age, ie economically active.

Repeated reductions in pensions and increases in retirement thresholds become useless – in the long run – if no solution is found to the acute demographic problem. An important contribution to the collapse of the system is the explosive rise of flexible forms of employment that cause increased loss of revenue for the system.

Today’s official picture of the relationship of employed retirees shows that each retiree corresponds to 1.5 employees, while fifteen years ago this relationship was close to one retiree to two working persons.

Recently, the Minister of Labor, Mr. K. Hatzidakis, speaking in Parliament, defined this ratio at 1 to 1.7 at a time when the insurance system has been structured with the assumption that for every 4 wo there will be one retiree. In fact, he estimated that in 2030 Greece will have received from Italy an “undesirable first, that is, we will be the oldest country in Europe.”

The studies

Decreasing birth rates, a doubling of the number of elderly people and increasing life expectancy, which further exacerbate the elements of the already ticking demographic bomb and cast doubt on the future of the insurance system, play a key role in exacerbating the insurance problem, and undermine the possibility of providing guaranteed pensions.

According to a study by Mr. S. Robolis (Emeritus Professor of Panteion University) and V. Betsis (PhD at the same university) which presents the current data in the year 2070, during this year “the workforce will decrease compared to 2020 by 31%, while retirees will increase by 13% compared to 2020 “.

The population of our country, in addition to being reduced, also appears extremely old. The dependency ratio of the elderly from 34.6 in 2019 is estimated at 59.9 in 2070. “This fact significantly affects, among others, areas such as health care and social security,” the two researchers conclude.

The increase in pensions and health care costs is dramatic, while the reduction in the workforce creates further funding problems for the system.

In previous studies, the same researchers had estimated that “to cover the deficit caused by the demographic problem requires an additional reduction of pensions by 30%, just to keep the insurance system alive.”

The demographic study estimates that life expectancy will increase by 2065. It considers all other economic and demographic parameters to be stable. In this case, it is estimated that the social security system will be burdened by 49.4 billion euros, just because of the increase in life expectancy. That is, the actuarial liability of the social security system will increase by 49.4 billion euros. Therefore, in order to finance the burden on the system, due to the increase in life expectancy, additional additional resources of 0.5% of GDP will have to be found. Otherwise nightmarish measures are required such as the reduction of pensions by 30%, the increase of retirement age to 73 years by 2060 the increase of contributions for the main pension from the current 20% to 27% and for auxiliary contributions from 6% to 8.1% .