Impact of Demographic Changes on the Ukrainian Pension System

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Impact of Demographic Changes on the Ukrainian Pension System

Journal Title: Демографія та соціальна економіка - Year 2014, Vol 21, Issue

Abstract

The classical theory of demographic transition involves four stages, at the last of which the population number, mortality and fertility rates stabilize, and set constant age structure, i.e. must stop the ageing process. However, the current demographic reality gives grounds to say that the demographic transition consists of not four, but five or six steps. In the final stages fertility is so low, that despite the increase in life expectancy, the number of deaths exceeds the number of births, and the inflow of migrants is not able to compensate for depopulation. Following this demographic transition interpretation, at the final stage the population does not stabilize and continues to decline and the ageing process can progress indefinitely. In this regard, analytical studies are increasingly using the term «demographic changes», which does not imply achieving the final point of the demographic transition. A feature of the demographic development of the post-socialist countries of Europe, including Ukraine, is the rapid pace of ageing on the background of decreasing working age population. In any plausible scenario of demographic development of Ukraine in the long term the level of ageing will grow, and the potential support ratio, which the elderly can count on – will decline. By the mid-2050s pensioners will be 30–45%, according to the extreme version with a high birth rate and low life expectancy – 10% more than the contributors. Direct consequence of ageing is the increase in pension expenditure, not only in absolute monetary units but also in relation to GDP. If the pension system will not undergo any new reforms, the projected growth of pension expenditure may reach, depending on the scenario of demographic development, up to 21–31% of GDP in the 2050s (in 2013, according to preliminary data – 17.3% of GDP). An effective solution of the financial sustainability problems of the pension system in the context of rapid ageing is to reexamine the threshold between working and retirement age. The gradual increase in the retirement age for women, which begun in Ukraine in October 2011, helps maintaining the parity between the number of pensioners and contributors and restrain the growth of pension expenditure to GDP ratio for the period up to 2021, but even today it is necessary to adopt a decision on increasing retirement age to 65 for today’s young generations.

Authors and Affiliations

L. G. Tkachenko

Keywords

demographic transition demographic change ageing population demographic forecast potential support ratio old age pensions pension system

EP ID EP287178
DOI 10.15407/dse2014.01.097
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