By Thomascopenhagen harbor picture

The productive population.

I was inspired to check out the claim that the productive part of the population is shrinking. I’ve used figures for Denmark, as they were at hand. And the phenomenon is more or less general throughout the Western world.

The years 1990-2000-2010 are known. To prognosticate 2020 and 2030 I’ve used the latest mortality and fertility rates. The advantage not looking more than 20 years ahead is that the parents of the children to be born are already born. Those persons that are to die are still living – generally.

I might later deal with those assumptions later: Birth rates and mortality cannot be expected constant.

denmark demographics chart

What you can see on the figure above is the forward march of the large birth years after WW2 to the metallic age, you know: Silver hair, gold teeth, steel hips and lead in the butt.

The other thing is the continued low birth rate, that doesn’t give replacement in the work force. In Denmark: Partly because the 1980’ies and 1990’ies had particularly low births.

It is perhaps clearer illustrated, where the pre-productive years are under 20 and the post-productive 65 years and above. The productive years – as a part of the population has peaked with 65% around 2000. It is now in a steady decline back to where they were 20 years ago. At the moment every in the work ages have to provide for ½ a person beside him-/herself increasing to 2/3 of a person – either child or elderly.

people in denmark over 70

As you can see: It is in particular the “burden of the elderly” – that expression always bring up the image of a fat old man for my eyes. The number of post-employment persons seems to double in relation to the active part of the population.

But that is not all!

The death rate is falling – that is the risk of NOT experiencing your next birthday as a function of age!

That is the elderly do not die as timely, as they are “supposed” to.

The repercussions for the pensions are quite considerable!

A)     There are fewer to produce the goods and services the elderly demand.

B)      The elderly can expect to live longer than their parents did.

C)      The yield of the pension funds investments (with a sovereign bond rate of 0% p.a.) are actually shrinking.

In Denmark the pension funds have very little reserves – and the first funds have had to downgrade the pensions to a lower level. The savers have the right to sue; but the official legal stand is: “How will that help you? It won’t! The funds are – in relation to their guarantees – bankrupt in the sense, that they have no way of meeting their obligations – so pensioners will have to take a “haircut”.

death rate men vs women denmark

This is the true perspective behind the crisis in most of the PIIGS countries. People retire early – especially civil servants – and they have generous pensions. These obligations to the pensioners have to a large extend been picked up by the states and covered by sovereign bonds.

F.i. Italy’s public deficit is in no way frightening – it is the debt burden. There is only one place to get the money: Confiscate the pensions.