NTA2020 Kelin

Global Meeting on Population and the Generational Economy, August 2020

Presentation: Ema Kelin, Tanja Iatenic, Joze Sambt, Future Total Income and Consumption Levels according to Educational Level in EU Countries

Abstract

Population ageing will put a strain on the ratio between producers and consumers. In this paper, we project total labour income and total consumption up to the year 2060 for selected EU countries. Using the National Transfer Account (NTA) methodology we decompose income and consumption components by age and educational levels – basic, higher and tertiary. We apply obtained age patterns of labour income and consumption for three educational groups on population projections decomposed by age and educational level provided by Wittgenstein centre. Conventionally, the population projections and the NTA approach focus only on the age dimension. However, education is often seen as a “quality” dimension that could (at least partially) offset the future economic challenges of population ageing. We comprehensively assess the impact of education on future economic sustainability, considering the strong increase in educational level that is projected for the future. Our results show that improved educational level of individuals will have a substantial positive impact on labour production in future four decades – around 15% by 2060 on average for all included countries. However, more educated individuals not only produce more but they also consume more. Therefore, higher production does not fully translate into improved economic sustainability (measured by the ratio between labour income and consumption). The net effect is still positive and amounts to about half of that 15%. In calculations, we use the assumption that relative differences in labour income among educational levels will remain unchanged. Also, we assume that age patterns of production and consumption will not change over time. Given the limitation, our results should not be interpreted as forecasts but as an information of how education improves economic sustainability. Fostering education is a powerful channel to cope with the negative impact of population ageing on economic growth and sustainability. 

File: NTA2020 Kelin

Paper: NTA2020 paper Kelin

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