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BRUSSELS, March 10, 2015─With their populations aging faster than their neighbors in the rest of the European Union, the countries of Central Europe and the Baltics would benefit from a focus on promoting active, healthy, and productive aging, according to the World Bank’s new report What’s Next in Aging Europe: Aging with Growth in Central Europe and the Baltics. 

Europe’s population is growing older, and people are living longer and healthier lives. However, according to the report, within the European Union (EU), the Central Europe and the Baltic countries have seen fertility fall to lower levels than those in the EU-15, and significant outward migration of younger populations, both of which are considerably accelerating the aging process and resulting in shrinking populations. Life expectancy in these countries remains significantly below that of the EU-15.  

Launched today at the Center for European Policy Studies (CEPS), Uldis Augulis, Minister for Welfare of the Republic of Latvia, Laura Tuck, World Bank Vice President for Europe and Central Asia, and Elsa Fornero, Professor of Economics, Università di Torino and former Italian Minister of Labor, Social Policies, and Gender Equality discussed the economic and social consequences of aging for Central Europe and the Baltic countries, and policy recommendations to address the aging challenge.

“The countries in Central Europe and the Baltics are aging faster than those in the rest of the EU, and for different reasons,” said Laura Tuck, World Bank Vice President for Europe and Central Asia. “Given that the decline in fertility and the high level of outmigration are the strongest contributors to this demographic phenomenon, countries could benefit from addressing the economic and social factors causing the drop in younger cohort size.  This could entail greater investment in human capital – in the health and education of individuals – so as to promote active aging. These are what we call ‘smart solutions’ as they work on both the personal and the macroeconomic levels.”

According to the report, wealthier European Union countries have enjoyed near-universal access to health care and have benefited from public health promotion campaigns, both of which have contributed to the reduction in morbidity and mortality due to heart disease. As a result, EU-15 countries enjoy an average life expectancy of 81 years. Many challenges still remain for these countries, but the process of adjustment to the new demographic realities is well under way. The countries of Central Europe and the Baltics, on the other hand, are aging differently and face quite different challenges.

“In most of the Central Europe and the Baltics countries, fertility has fallen to lower levels than in the EU-15, in case of some it is as low as 1.3 or 1.4 children per woman,” explains Emily Sinnott, World Bank Senior Economics and lead author of the report. “Average life expectancy is below EU-15 – for most countries, the gap is between four and seven years. Much of the lower longevity is explained by the higher mortality amongst the poor. In addition, the significant outward migration of younger populations is considerably accelerating the aging process and has resulted in a fall in populations in some countries.”

As a result of shrinking younger populations, countries in Central Europe and the Baltics will face several economic and social challenges, such as:

• reductions in the size of the labor force, which could present risks to economic growth;
• fiscal pressures that could strain countries’ efforts to provide adequate services as well as income security to their aging populations; and
• challenges to further productivity growth if firms fail to adapt to an aging workforce.

To effectively address these challenges and continue to realize gains in economic output and converge to EU-15 income levels, Central European and Baltic countries could benefit from early and coordinated policy initiatives covering labor markets, healthcare, education, pensions, long-term care, migration, and family policy:

• Active aging:  Providing more flexible work arrangements, such as increased part-time work for workers transitioning to retirement and parents of young children, can promote employment and longer working lives for an aging workforce. Older workers are also more likely to remain in the labor force when early retirement options are limited. Creating affordable childcare and eldercare options can help women stay in work. The Czech Republic, Estonia, and Latvia already have achieved high labor force participation among older adults.

• Healthy aging: A greater focus in countries’ health systems on tackling non-communicable diseases through disease prevention, detection, and treatment will be important to ensuring healthy aging. Individuals, especially men, struggle with making lifestyle changes to reduce risky behaviors such as smoking and alcohol use. Slovenia performs well in terms of raising longevity to EU-15 levels.

• Productive Aging: Enhancing the productivity of the aging labor force will be important to sustaining growth. While flexibility is a concern as older workers are less likely to move across firms, sectors, and geographic space, firm-level changes in production techniques have been shown to yield dividends for enhancing the productivity of older workers. Investing in skills for longer and more productive working lives is also critical. The smaller cohort of younger people entering the school system creates opportunities to improve the quality of education. Young people in Estonia and Poland have performed strongly in the OECD’s Program for International Student Assessment.

• Welfare and pensions: Middle-aged and older people in Central Europe and the Baltics have not managed to accumulate significant wealth and rely on labor and pension income. Future projections are for pension coverage and adequacy to fall substantially in some countries, leading to increased vulnerability to poverty for older people. Policies to expand minimum income schemes are likely to form part of the solution for older age groups, along with measures to encourage increased household savings for younger people.

• Managing age-related spending pressures: Ensuring adequate services in aging societies will add to countries’ fiscal pressures. As a result, prioritizing, increasing efficiency and making trade-offs in public spending will be necessary to control aging-related spending, such as in pensions and long-term care.

• A return to balanced demographics: Ultimately, the countries of Central Europe and the Baltics will need to achieve sustainable levels of fertility and net migration to return to a more balanced age structure. Some Western European countries have been able to restore fertility rates, and the key to this success seems to be a reconciliation of family and career goals for women.

Countries in Central Europe and the Baltics have made significant progress in many of the areas identified above.  But more can be done. This Report is part of the ongoing analytical work program at the World Bank on the topic of population aging. Within the EU, the World Bank is partnering with governments on aging-related policy research projects in Bulgaria, Hungary, Poland, Romania, and Latvia. Outside the EU, the World Bank is engaged actively in work on this issue in Europe and Central Asia, Latin America, and East Asia.

For an online copy of the report, please visit:

www.worldbank.org/content/dam/Worldbank/Publications/ECA/aging europe.pdf

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