Coping with the effects of population ageing on public finances in the European Union and China

Heikki Oksanen

Economic and Political Studies, 2016, vol. 4, issue 4, 368-396

Abstract: The population age structure is changing fast both in the European welfare states and in China, as fertility remains low and longevity continues to increase. The pressure on public pensions, health care and long-term care expenditures is receiving increased attention. Sound public finances in the Euro area call for pension reforms, especially for raising the retirement age. Although the challenges are qualitatively similar in the EU and China, the quantitative picture is different: GDP per capita in China is about 30% of that in the more advanced states of the EU, and the ageing-related public expenditures as a percentage of GDP is currently one quarter of this ratio in the EU. A particular factor in China is migration of workers to the cities and factories from rural areas. For a harmonious society, their rights to social security, including pensions and their children’s access to education, require modernisation of government institutions. The retirement age in practically all EU countries and in China is currently low, lagging behind the increase in longevity. Increasing the ratio of participating in working life to the average years of retirement is a key to moderating the pressures on public finances.

Date: 2016
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DOI: 10.1080/20954816.2016.1251727

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