Currently, population aged 65 and over comprises only 12% of the Korean population, but is projected to grow rapidly and reach 40% in 2050. With increased life expectancy and decreased fertility rates, population ageing imposes a great fiscal burden, decreasing fiscal revenues (labor income tax, consumption tax and social security revenues) and increasing fiscal expenditure (welfare and social security costs).
The purpose of this study is i) to verify that Korea experiences healthy ageing, ii) to conduct empirical analysis on whether improved health of older workers increases their labor supply, and iii) to estimate fiscal impacts of employing more older workers. First, this study shows that increases in life expectancy and national income lead to increasing healthy life expectancy (disability-adjusted life expectancy). Second, using probit and IV probit models, we find that improved health of older workers (50-64 year olds) does increase their labor force participation by 60%. Lastly, this study presents that the extension of legal retirement age up to 60 years is estimated to increase fiscal revenues by 250 billion KRW (0.02% of GDP). To implement employment policies for older workers, however, direct and indirect costs (government expenditure and crowding-out of youth employment) can occur.
In order to alleviate the fiscal burden of an ageing population, this study suggests demand and supply side policies to increase labor force participation of older workers. To give incentives for employers to hire more older workers, many countries provide subsidies and reduce social security contributions imposed on employers. For older workers, developed countries provide more financial benefits and focus on disease prevention and workplace health promotion.
- 고령인구 고용이 재정에 미치는 영향(Fiscal impacts of healthy aging and labor market participation of older workers)
고령인구 고용이 재정에 미치는 영향(Fiscal impacts of healthy aging and labor market participation of older workers)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy
Social Development < Employment