Doc. 9615

31 october 2002

Challenges of social policy in our ageing societies

Report

Social, Health and Family Affairs Committee
Rapporteur: Mr Gyula Hegyi, Hungary, Socialist Group

Summary

As fertility continues to decline and life expectancy rises, Europe is currently at the forefront of the population ageing process in the world. Both the European context of population ageing and depopulation on the one hand, and the world context of accelerated population growth, on the other, represent considerable economic, social, cultural and environmental challenges and require concerted political action over the short, medium and long term.

The Assembly considers that the reforms necessary to respond to the challenges of ageing societies in Europe ought to be part of a wider political debate in order to: create conditions for active ageing in good health; make pension systems viable while maintaining standards that are enshrined in the legal instruments of the Council of Europe; reform healthcare services while guaranteeing access and quality of care; increase levels of employment of the working age population; improve working conditions in order to reconcile paid work with family life; achieve more equal sharing of paid and unpaid work between men and women; and finally reduce labour costs through a shift in taxation.

In the long term, the process of ageing will necessitate not only fiscal reforms, reforms in social welfare policies, and reforms in employment patterns, but also changes in attitude and redefinition of individual and societal values.

I.       Draft recommendation

1.       As fertility continues to decline and life expectancy rises, Europe is currently at the forefront of the population ageing process in the world. In the last two decades, fertility rates in Europe have declined dramatically to an average of 1.4 and are now below the replacement level of 2.1 in virtually all Council of Europe member countries. The population aged 60 or over constitutes today about 20% of the population in Europe and, by 2050, it will most likely account for 33%.

2.       Seen in a global perspective, however, the world population reached 6.1 billion people in 2000 and is currently growing at an annual rate of 1.2%. According to the United Nations population estimates (2000 Revision), the world population is expected to rise to 9.3 billion in 2050, which represents a population increase of 50%.

3.       Both the European context of population ageing and depopulation on the one hand, and the world context of accelerated population growth, on the other, represent considerable economic, social, cultural and environmental challenges and require concerted political action over the short, medium and long term. Education, family planning, and migration policies will require particular attention.

4.       The political debate in Europe is already under way. The Assembly particularly recalls its Recommendation 1428 (1999) on the future of senior citizens: protection, participation and promotion and Recommendation 1254 (1994) on the medical and welfare rights of the elderly: ethics and policies, and welcomes the reform initiatives undertaken by European governments as well as guidance and co-ordination provided by the International Labour Organisation (ILO), the World Health Organisation (WHO), the Organisation for Economic Co-operation and Development (OECD), the United Nations Economic Commission for Europe (UN ECE) and the European Union.

5.       The Assembly welcomes the Regional Implementation Strategy for the Madrid International Plan of Action on Ageing 2002 as adopted at the Ministerial Conference on Ageing, which was organised by UN ECE on 10 - 13 September 2002 in Berlin as a follow-up to the World Assembly on Ageing (Madrid, 8-12 April 2002). The Assembly fully supports member states in their endeavours to implement this strategy involving a range of policy areas and welcomes the initiatives of the Council of Europe in intergovernmental coordination and coordination between various international organisations.

6.       The Assembly considers that the reforms necessary to respond to the challenges of ageing societies ought to be part of a wider political debate. All European governments are currently faced with the difficult task of harmonising two relatively opposing trends: pressures of a globalised economy to contain public expenditure and reduce labour costs in order to remain competitive; and a justified demand by European citizens to strengthen the European social model as a basis for a stable and socially prosperous Europe.

7.       The time has come to rethink social policies in Europe in order to take up this challenge. While each country differs in its demographic structure and has specific cultural, social and economic traditions, the Assembly underlines a number of principles that it considers crucial to guide the reforms in Europe.

8.       In order to sustain pension schemes, healthcare systems and social protection in the future, one of the prime objectives of the reform is to contain or decrease the dependency ratio between the economically active population and the non-employed population (the unemployed, those in retirement, young people, men or women acting as family carers or those suffering long term illness).

9.       To achieve this objective diverse policies need to be in place, notably to enable people to work longer in healthy conditions; to ensure private and public investment in the qualification and re-qualification of workers in the labour market; to provide incentives especially for the employment of young people and the senior workforce; and finally, to encourage and negotiate real changes in enterprise culture in order to recognise changing family patterns and allow for greater compatibility between family life and work.

10.       Population ageing will lead to changing demands on healthcare systems. The medical cost of treating illnesses that occur at a very advanced age will grow exponentially as a result of scientific and technological advances in medicine. While ageing is not in itself a disease and old age should not be seen as equal to frailty and sickness, increasing demands on the health sector are inevitable.

11.       The Assembly underlines that the sustainability of pension schemes cannot be reduced to the financial dimension, but is subject to a multiple challenge: that of meeting their social aims, ensuring their viability, and responding to the changing needs of society and individuals. The minimum standards that pension systems have to meet are enshrined in the legal instruments of the Council of Europe: the European Social Charter, the revised European Social Charter, the European Code of Social Security, its Protocol, and the European Code of Social Security (Revised). The Assembly insists that these standards should be kept in mind when reforming pension systems.

12.       The threat of extreme poverty and loss of dignity for the elderly is a major concern. The Assembly therefore urges governments to maintain the basic system of solidarity through state pensions and by incorporating a basic pension scheme into their pension systems.

13.       Current models of pension system in member states include pay-as-you-go systems financed either by direct contributions or by taxation; or fully funded systems based on the capital market. Diversifying the financing of pension schemes may seem prudent, but on condition that existing rights are not endangered. Moreover, the “defined benefit” type of social security system can remain sustainable, providing it is adapted to the “defined contribution” system – as illustrated by the example of pension reform in Sweden. From the point of view of early retirement, the nature of work must be recognised through a higher contribution requirement.

14.       The Assembly welcomes the guidance provided by the OECD and the European Union in developing strategies for active ageing, creating financial incentives for late retirement, enabling ageing persons to remain socially and occupationally active, removing legal and fiscal barriers to gradual transition to retirement and regulating work in retirement. However, it considers that the later people retire, the more differentiated the retirement age should be, taking into account such differences as years of contribution and nature of work.

15.       The Assembly therefore encourages member states to engage a dialogue with socio-economic partners and actively campaign for late retirement. Various incentives for late retirement (for example, tax reductions) and disincentives to early retirement should be considered to support this process. Moreover, the Assembly considers it crucial that “flexible” types of employment (short term contracts, irregular employment, precarious types of self-employment, etc) should be regulated in order to ensure social coverage.

16.       If high female participation in the labour force is to be maintained, more attention should be given to reconciling paid work with family work as factors influencing reproductive and family behaviour. Additionally, societal changes call for a more equal sharing of paid and unpaid work between men and women.

17.       In the more developed countries with a strong welfare system, better conditions for women and greater institutional support are reflected in "modern" patterns of behaviour, which are more compatible with fertility. This means that institutional factors can help to reconcile the desire to have children with changes in types of union, later timing, and women’s aspirations for a fulfilling family and working life.

18.       The Assembly recalls Recommendation No. R(96)5 of the Committee of Ministers on reconciling work and family life, and the Final Communiqué of the XXVIIth session of the Conference on European Ministers responsible for Family Affairs on the theme of reconciling working and family life, which took place in Ljubljana on 20 – 22 June 2001, commends the work of the Forum for Children and Families, and considers it crucial to develop collective efforts between different public authorities, employers, organisations of employers and workers, as well as civil society, in order to induce a real change of attitudes not only within public structures, but also in the business sector and society at large.

19.       In a given context of long-term decline in the working age population in Europe, with an ageing work force and an ageing population, and increasingly elderly dependency ratios, it remains to be seen whether future economic conditions and technological changes will create additional job opportunities and increase the demand for labour. Reduction of the relatively high cost of labour in Europe may be envisaged in the medium and the long term by switching some of the revenue burden from taxes on income and employment to environmental charges.

20.       In the long term, the process of ageing will necessitate not only fiscal reforms, reforms in social welfare policies, and reforms in employment patterns, but also changes in attitude and redefinition of individual and societal values. Perceptions and attitudes towards family responsibilities, childcare, involvement in informal care and volunteering will have to change too. The value of unpaid work to society will have to be fully recognised and reflected in new and more flexible patterns of employment for both genders.

21.       In global terms, the projected increase of 50% in the world population will put a greater strain on natural resources and will call for international solidarity in making the distribution of wealth, the use of resources and the ecological “footprint” more equitable. The Assembly calls on the member states to fully implement the commitments set forth at the World Summit on Sustainable Development.

22.       The Assembly therefore recommends that the Committee of Ministers:

i.       invite member states to give careful consideration to the principles set out above;

ii.       instruct the relevant bodies of the Council of Europe to:

a. provide guidance and assist member states, in their efforts to reform national pension schemes;

b. invite member states and their social partners to hold a greater European debate on pension reforms;

c. pursue work on reconciling working and family life and less unequal sharing of paid and unpaid work between genders;

d. pursue and develop activities concerning elderly persons, notably with a view to guaranteeing their human rights;

e. step up the search for policies to promote greater social solidarity, particularly between generations and genders;

f. review migration policies in Europe and the possible impact of appropriate immigration policies as a means to overcome the negative effects of ageing and depopulation on the projected workforce in Europe.

II.       Explanatory memorandum by Mr Hegyi

1.       Demographic trends and evolution of labour markets in Europe

1.1       Global demography projections

1.2       Ageing in Europe

1.3       Working age population

1.4       Migration flows

1.5       Labour force participation

1.6       Fertility in Europe

2.       Policy implications to offset negative effects of ageing

2.1       Rights of the elderly

2.2       Healthcare reforms

2.3       Active ageing

2.4       Pension reforms

2.5       Family policies

2.6       Change in enterprise culture

3.       Vision for the future

3.1       Environmental considerations and economic development

3.2       Job opportunities through shift in taxation

3.3       Change of values

1.       Demographic trends and evolution of labour markets in Europe

1.1       Global demography projections

1.       According to the 2000 Revision of the United Nations population estimates and projections, world population reached 6.1 billion people in 2000 and is currently growing at an annual rate of 1.2 % or 77 million people per year. The population of more developed regions, currently 1.2 billion, is anticipated to change little during the next 50 years because fertility levels are expected to remain below replacement level1. After 2050, thirty-nine countries, many of which are European, are projected to have 14-40% population decrease in comparison to today’s figures.

2.       However, the population of the less developed regions is projected to rise steadily from 4.9 billion in 2000 to 8.2 billion in 2050, bringing the world population to 9.3 billion people in 2050 (medium projection), a 50% increase (see appendix, figure 1).

3.       Around 2050, the fertility rates across the world are expected to gradually converge to the replacement level of 2.1. This trend will induce the stabilisation of the world population in the long term (beyond 2050) (see appendix, figure 2).

4.       For 1995-2000, life average expectancy at birth in the more developed regions is estimated to be 75 years, while in the less developed regions only 63. By 2050 the gap will narrow, with less developed countries attaining 75 and more developed increasing to 82 years (see appendix, figure 3).

5.       As world fertility continues to decline and life expectancy rises, the world population will age faster than during the past century before stabilising in the second half of this century. Projections for 2050 and beyond indicate a ratio of one older person (21%) for every child (21%) (see appendix, figure 4).

1.2       Ageing in Europe

6.       Europe has been leading the process of population ageing. The population aged 60 or over in Europe constitutes today about 20% of the population. By 2050, it will most likely account for 33%. The older population has already surpassed the child population (aged 0-14) and by 2050 there will be 2 older persons for every child (16% of the population).

7.       However, these aggregate figures would have to be counterbalanced by regional differences. In Eastern Europe for example mortality has increased over the past decade causing relatively low life expectancy of 68 years (for the 1995-2000 period). By 2050, Eastern Europe’s projected life expectancy, at 78 years, remains the lowest in Europe.

1.3       Working age population

8.       The working age population (WAP-aged 15-64 years) in Europe was estimated 488 million in 1995 and is projected to increase until 2005, followed by a period of stability to 2010 and then to decline to a projected figure of 370 million in 2050. Meanwhile the world working age population is projected to increase from 3.5 billion in 1995 to 6.0 billion in 20502.

1.4       Migration flows

9.       In theory, international migration could significantly influence the size and composition of the labour force in Europe (see appendix, figure 5). In practice, the immigration flows are tightly controlled and regulated; the potential pool of immigrants is not as geographically close; and other destinations will become more attractive, particularly North America and Australia. Whether these assumptions will hold, it remains to be seen.

10.       However, migration flows within Europe continue. Over the period 1995 to 2010 many countries in Eastern Europe - including Albania, Belarus, the Czech Republic, Lithuania, the former Yugoslav Republic of Macedonia, Moldova, Poland, Romania and the Federal Republic of Yugoslavia (Serbia and Montenegro) - are projected to lose 1.2 million by net emigration3. The situation is even more severe in Bosnia and Herzegovina, Russia and Ukraine.

1.5       Labour force participation

11.       In a given context of long-term decline in the working age population in Europe, with an ageing work force and an ageing population, and increasingly elderly dependency ratios, it remains to be seen, however, whether future economic conditions and technological changes will create additional job opportunities and increase the demand for labour.

12.       Current statistics on unemployment in Europe show that human resources are not being used to their full potential. Many people of working age are economically inactive (see appendix, figure 6). While people out of work may be involved in making other contributions to society, for example through volunteering, caring for the young and elderly or learning, many suffer social exclusion and are more likely to experience low self-esteem and poverty which can lead to disillusionment, depression and ill health.

13.       The labour force participation rate for men has declined in all European regions since the 1970s, while the corresponding rate for women increased.

1.6       Fertility in Europe

14.       The relationship between women's labour-force participation and fertility has been a long-standing issue in demography. Fertility decline in Europe correlated historically with child mortality, urbanization, education and more recently with increased employment rates for women and higher income.

15.       In the last half-century, fertility and family behaviour have gone through dramatic changes in Europe. The post-war baby boom continued with a steady increase in fertility throughout the "golden age of marriage" in the 1950s and 1960s. The economic affluence of the 1960s coincided with societal changes and greater awareness of women’s rights. In the last three decades women achieved more equality in access to education and employment, which progressively led to their economic independence and hence a diversified range of family patterns.

16.       In the last two decades, fertility rates have declined to historical lows and are now below replacement level in virtually all European countries. According to the 2000 World Population data sheet, the average rate for Europe is 1.4, with 1.7 for Northern Europe, 1.3 for Southern Europe, and 1.2 for Eastern Europe (see appendix, figure 7).

17.       In Western Europe, the fall of fertility has been accompanied by progressive postponement of child-bearing and first marriage. A longer education for women, increased participation in the labour market for younger women, more gender equality and all the social and cultural conditions that characterise so-called post-modern development are associated with later fertility.

18.       In the former socialist regimes of Central and Eastern European countries, governments had encouraged a strong integration of women in into the labour market, based on the principle of gender equality. But given the difficult economic situation and low wages, for a comparatively large segment of women, employment was a necessity as well as being normatively expected. Although family policies and provision of state day-care services were able to compensate to some extent, the combination of work and family obligations represented a dual burden for women, which led to lower levels of fertility. More recently, the period of economic transition went in hand with an increase in individual insecurity and a loss of trust in traditional institutions. A dramatic drop in fertility rates has been one of the consequences.

19.       In countries of more advanced development and a strong welfare state such as Scandinavian countries, better conditions for women and greater institutional support are reflected in "modern" patterns of behaviour which are more compatible with fertility. This means that institutional factors can indeed help to reconcile the desire to have children with the changes in the types of union, the later timing, and women’s aspirations as regards fulfilling their life both in the family and through a working career.

2.       Policy implications to offset negative effects of ageing

2.1       Rights of the elderly

20.       The momentum of the 1999 International Year of Older Persons4 spurred governments, NGOs and international organisations to promote the United Nations Principles for Older Persons which advocate independence, participation, care, self-fulfilment and dignity of older persons.

21.       The principle of independence covers access to adequate living conditions; opportunity to work; participation in determining when and at what pace to withdraw from work; access to education and training programmes; a safe environment; and the opportunity to reside at home for as long as possible.

22.       The principle of participation reflects the notion of being integrated in society; interaction with other generations; volunteering; the right to association.

23.       The principle of care covers family and community care; access to healthcare; access to social and legal services; use of institutional care (protection, rehabilitation, social and mental stimulation); guarantee of human rights while in residential care (respect of dignity, beliefs, needs and privacy, etc.)

24.       The principle of self-fulfilment embraces dignity and security; non-discrimination; the right to pursue opportunities for the full development of a person’s potential; and access to the educational, cultural, spiritual and recreational resources of society.

25.       The specific situation and the rights of the elderly have already been addressed by the Assembly in the Recommendation 1254 (1994) on the medical and welfare rights of the elderly: ethics and policies and the Recommendation 1428 (1999) on the future of senior citizens: protection, participation and promotion, and more recently by the research on “elderly persons within their family – legal and social responsibilities” undertaken in the framework of a coordinated research programme in the social field by the Group of specialists on Optimising the Living Conditions of Elderly Dependent People (CS-QV) which completed its work with the report “Improving the quality of life of elderly persons in situations of dependency”5

26.       Moreover, the Rapporteur welcomes the initiative of the Commissioner of Human Rights who recently dealt with the particular situation of the elderly in retirement homes or institutions, and refers to the conclusions and the proposals made at the seminar6

27.       Human Rights of the elderly are of growing concern. Many elderly particularly in countries of Central and Eastern Europe, but also in some parts of Western Europe, live in extreme poverty and are subject to threats of violence. They encounter isolation and face difficulties in maintaining their independent living. Housing arrangements for example are often inadequate due to high maintenance costs, the cost of heating, physical isolation, etc. In some cases, the limited stock of social housing may cause a serious conflict between generations as a growing number of elderly live alone, while young families with children face difficulties to access social housing and live in substandard conditions. Alternative housing solutions are therefore needed to provide the independent elderly with better living conditions and regular access to support services on the one hand, and to improve access of younger families to existing social housing on the other. The Rapporteur invites relevant Directorates of the Council of Europe to pursue activities concerning elderly persons, notably with a view to guaranteeing their human rights.

2.2       Healthcare reforms

28.       Population ageing will lead to changing demands on healthcare systems. Healthcare systems will be expected to accommodate care for older adults together with care for other groups. Medical costs of treating illnesses that occur at a very advanced age (80 years and over) will grow exponentially as a result of scientific and technological advances in medicine. While ageing is not in itself a disease and old age should not be seen as equal to frailty and sickness, increasing demands on the health sector are inevitable.

29.       Many European governments are currently undertaking reforms in healthcare systems in order to make them more cost-effective and more widely accessible. While this topic will be treated in a separate report, the Rapporteur would like to highlight issues more closely related to population ageing.

30.       According to the World Health Organisation (WHO), major chronic conditions affecting older people include cardiovascular diseases (e.g. coronary heart disease), hypertension, stroke, diabetes, cancer, chronic obstructive pulmonary disease, musculoskeletal conditions (e.g. arthritis, osteoporosis), mental health conditions (e.g. dementia, depression), blindness and visual impairment. Chronic diseases of the older population are significant and costly causes of disability and reduced quality of life. The likelihood of experiencing major disabilities dramatically increases in very old age, but disabilities associated with ageing can be prevented or delayed.

31.       It would be therefore crucial to put in place policies and partnerships across different sectors to prevent and halt the expansion of chronic diseases. Policies that focus on community based development, health promotion, disease prevention, and increased physical activity and productivity are relatively inexpensive but have received little attention so far.

32.       The Rapporteur commends the work of the European Health Ministers who devoted their 6th Conference (Athens, 1999) to the specific issue of healthy ageing. The theme of the conference was inspired by the right to health promotion and disease prevention written into the European Social Charter and the right to equitable access to health care guaranteed by the Convention on Human Rights and Biomedicine (adopted in 1996). Their work focused on an economic and social environment that promotes dignity and independence; policies aimed at reducing the need for hospital and/or institutional care; and means of optimising the efficiency of care.

33.       To promote healthy ageing, health systems need to provide equitable access to primary care and a balanced approach to long-term care. Integration of health and social services is crucial.

34.       Long-term care has evolved from a mix of activities undertaken by informal carers (family, friends and neighbours) and/or professionals (health and social services) to ensure that a person who is not fully capable of self-care can maintain the highest possible quality of life. The long-term care therefore includes both informal and formal support systems. They may cover a broad range of community and public health, primary care, palliative care and rehabilitation services as well as institutional care in supportive housing or nursing homes, and treatments to halt or reverse the course of disease and disability. Mental health services should be an integral part of long-term care.

35.       One of the greatest challenges in future health policies will be to strike a balance between support for self-care of the elderly, informal support through family members or friends, and formal care through health and social services. Governments ought to develop specific measures to support informal care, through support services to carers and greater recognition of informal care (compatibility with employment, access to social protection and benefits, etc.).

World Health Organisation (WHO): healthy ageing project7

36.       With the "healthy ageing project" the World Health Organisation (WHO) aims to provide advice on national policies, structures and effective practices for ageing and health. The project seeks to reduce dependency in old age by identifying appropriate low-tech instruments of geronto-technology, and promoting its use, payment and development. A network of leading businesses in the field will be established in order to exchange their experiences in the development and trade of low-tech products.

37.       Scientific developments in the area of pharmacology, genetics and biotechnology pose both great advantages and challenges for healthy ageing. While advances in research are likely to ease the distress of patients and their carers for diseases such as Alzheimer’s or Parkinson's, ethical considerations in some areas of research and its application in practice will need to be made. WHO therefore set up a task force to develop guidelines through consensus. The task force will also advocate healthy ageing as a human right.

38.       Within this project, WHO is currently developing indicators to monitor and assess developments with regard to healthy ageing. The focus will shift from disease indicators to developing a set of wider indicators to be used by policy-makers as well as social and health workers.

39.       Finally, pilot projects were developed with the media, role models, senior statesmen and other leading figures in Europe, in order to change prejudices regarding senior citizens in our societies. They will promote the image of the elderly and raise awareness of their value and resourcefulness for society.

2.3       Active ageing

40.       The term "active ageing" was adopted by the World Health Organisation (WHO) in the late 1990s: "Active ageing is the process of optimising opportunities for physical, social, and mental well-being throughout the life course, in order to extend healthy life expectancy, productivity and quality of life in older age".

41.       Other international organisations, academic circles, and governmental groups including the G8, the Organisation for Economic Cooperation and Development (OECD), the International Labour Organisation (ILO) and the Commission of the European Communities, are also using the term "active ageing", primarily to express the idea of continuing involvement in socially productive activities and meaningful paid or unpaid work.

42.       An active ageing approach to policy in the fields of health, employment, education and social affairs, would have the potential to address the challenges of population ageing so that: fewer adults die prematurely in the highly productive stages of life; fewer older people develop disabilities and pain associated with chronic diseases; more older people remain independent and enjoy a better quality of life; more older people continue to make a productive contribution to the economy and to important social, cultural and political aspects of society; and fewer older people are in need of costly medical treatment and care services.

43.       Measures to help older people remain healthy and economically active should be seen as a necessity, not a luxury.

2.4       Pension reforms

44.       The debate on pension reform is currently high on the political agenda across Europe. The European Commission and the OECD have been very active in developing policy principles to guide these reforms. However, the Rapporteur considers that the financial and economic consequences have so far received most attention in the debate on ageing, placing a strong emphasis on the control of government expenditure, while the social implications have been given much less attention and priority.

45.       In response to the request of the OECD Ministers, the OECD developed in 1998 a set of seven policy principles8 to guide the reforms:

46.       At its meeting in Lisbon in March 2000, the European Council decided to mandate the High Level Working Party on Social Protection - a high level co-ordination body between 15 member states - to prepare on the basis of a Commission communication, a study on the future evolution of social protection from a long term point of view, giving particular attention to the sustainability of pension systems.

47.       The Rapporteur commends the recent work of the European Commission9 and the Social Protection Committee10 particularly for widening the debate and for setting a triple challenge:

48.       Most of the resources available to older people are provided by pension systems. They are usually divided into three distinct pillars: statutory public schemes, occupational schemes, and individual retirement provision (savings, life insurance). In the overall package of support to people after retirement, pensions represent the largest share, and the main sources of pension income today are public pension schemes.

49.       While the source of income needs to be diversified, the Rapporteur considers that public pension schemes should be maintained as a basic level of social insurance beyond a minimum social safety net. Maintaining the solidarity system is also crucial for social cohesion in Europe. Such public schemes enable decent pension coverage for poor sections of society, for the unemployed, and for those involved in unpaid domestic work or informal care of children, elderly, or sick members of society.

50.       Sweden introduced a "notional defined-contribution" scheme in 1998. The state pension is financed by a social insurance contribution of 18.5 percent of earnings, of which 16 percent goes into the public scheme. Although this year's contributions pay this year's pensions, the social insurance authorities open a notional account that keeps track of each person's contributions. The account attracts a notional interest rate reflecting average income growth. A person's pension is based on his or her notional lump sum at retirement (in other words, social insurance mimics annuities) and on projections about life expectancy and future output growth. There is a safety-net pension for people with low lifetime earnings, and periods spent caring for children carry pension rights. The remaining 2.5 percent of a person's contribution goes into a funded scheme—either a private account or a government-managed savings fund. The individual can choose to retire earlier or later, with the pension being actuarially adjusted accordingly.Thus, Sweden has a defined-contribution scheme with a safety net. Such method gives people choices, for example about their preferred trade-offs between the duration of retirement and living standards in retirement, while presenting them with the actuarial costs of those choices.11

51.       The Rapporteur agrees that a strategy to make pension schemes sustainable must tackle the root of the problem, namely the growing imbalance between the number of those who are employed and the number of pensioners, striking a better balance between contributors and beneficiaries.

52.       However, measures that are envisaged to raise the employment levels of elderly workers should not be detrimental to other sections of society, especially younger generations. Many countries in Central and Eastern Europe are faced with the problem of youth unemployment and consider tackling this problem a priority. Youth emigration would otherwise have serious and long-term consequences for their future economies. Raising the mandatory retirement age should therefore be viewed with caution.

53.       Life expectancy varies in different member states and within different social groups. It has consequences for the viability of pension schemes, and it could be considered an important element in determining mandatory retirement age. As most countries are gradually switching from the pay-as-you-go system to direct contribution systems, the retirement decision ought also to be based on the number of years spent in employment.

54.       There is a growing consensus that the transition towards retirement should be made more gradual and flexible, allowing for part-time work, self-employment, volunteering, informal care, etc. However, the compatibility of different types of activities and diversified payments still remains to be regulated. In a number of member states a person in a final salary scheme switching to part-time work not only experiences a fall in immediate income, but also in the pension drawn in retirement.

55.       Gradual or partial retirement has many benefits ascribed to it, but despite these attractions, the incidence of gradual retirement in member states is extremely limited. OECD and ILO have identified a number of impediments to gradual retirement in practice12: swamping by early retirement provisions; negative consequences under complementary pension schemes; difficulties for the employer in organising work; older workers’ own attitudes; and over-regulation.

56.       Transformation of work and work organisation is not something which is susceptible to legislation. However, the state and employing organisations could play a facilitating role, at least ensuring that their pension systems and systems of social protection do not discourage part-time work.

57.       The way in which early retirement provisions swamp partial retirement provisions suggests that until the impetus to operate the former diminishes, the wide-scale take up of the gradual transition to retirement is unlikely. Member states therefore ought to engage a dialogue with socio-economic partners and actively campaign for late retirement. Various incentives for late retirement (e.g. tax reductions) and disincentives for early retirement should be considered to support this process.

58.       Pension schemes also have to adapt to changing employment and family patterns. Self-employment, short-term employment, "temping", agency work and other types of more "flexible" labour are emerging in response to new demands of the economy. In addition, career breaks or spells of reduced working time are nowadays more frequent for both men and women. They reflect the periods of time spent in further education, career change or unemployment, childcare or informal care of the elderly and sick. Moreover, such "flexible" employment patterns are often less regulated in terms of social protection and pension insurance. This gap remains to be filled in by new regulations.

59.       The minimum standards that pension systems have to meet are enshrined in the legal instruments of the Council of Europe: the European Social Charter, the revised European Social Charter, the European Code of Social Security, its Protocol, and the European Code of Social Security (Revised). The Rapporteur insists that these standards should be kept in mind when reforming pension systems.

60.       Moreover, the Rapporteur underlines that the sustainability of pension schemes cannot be reduced to the financial dimension, but is subject to a multiple challenge: that of meeting their social aims, ensuring their viability, and responding to the changing needs of society and individuals. With a wider-ranging approach, the changing role of women in society, more flexible labour markets, greater individual choice and different family and household structures will be addressed more appropriately in the national reform programmes.

2.5       Family policies

61.       We have seen in preceding chapters that the phenomenon of population ageing is a result of longer life expectancy coupled with low fertility rates in Europe. In the last few decades, most European countries have experienced a dramatic drop in fertility rates, to levels well below the replacement level of 2.1 (see appendix, figure 7).

62.       The current situation reflects to a large extent the increase of women’s participation in the labour force, more diversified family patterns (increase in divorce, smaller family units, single parents, single households), and in some cases the increase in the level of individual insecurity (more precarious types of employment, youth unemployment, reduction in social welfare, etc.).

63.       If the objective of high female participation in the labour force is to be maintained, more attention should be given to reconciling paid work with family work as factors influencing reproductive and family behaviour. Additionally, societal changes are calling for a more equal distribution of paid and unpaid (domestic, care taking) work between men and women.

64.       The Council of Europe has made some important contributions in this regard. The Rapporteur recalls the legal basis provided by the Revised European Social Charter, in particular articles 1, 20 and 27, which respectively relate to the effective exercise of the right to work; the right to equal opportunities and equal treatment in matters of employment and occupation without discrimination on the grounds of sex; and the right of workers with family responsibilities to equal opportunities and equal treatment. Two Recommendations of the Committee of Ministers are also of direct relevance, Recommendation No. R(94) 14 on coherent and integrated family policies and Recommendation No. R (96) 5 on reconciling work and family life.

65.       Most recently, the European Ministers responsible for family affairs13 recommended that the Council of Europe, through its Forum for Children and Families, should identify ways in which reconciling work and family life can be a factor of social development, should promote good practice, and, through research studies, should highlight the benefits accruing to families and children, employers, employees and society as a whole from the implementation of such measures.

66.       In more traditional terms, family policy could be said to include benefits and services that are exclusively targeted to couples with children and/or to single parents. They include cash and in-kind benefits such as direct cash transfers to families, tax relief for families with children, maternity and parental leave, childcare facilities and subsidies, as well as family law.

67.       While the specific issue of maternity in Europe will be dealt with in a separate report, the Rapporteur would like to underline that reform of family policies in Europe ought to cover: provision of an adequate child benefit package; sufficient public childcare facilities for children aged 0-3 and 3-6 years; where necessary changes in maternity leave and parental leave schemes (duration, payment) to favour higher fertility rates; measures to involve fathers in childcare; measures to provide public support for working parents, more flexible employment patterns to allow for periods of part-time work for both parents.

68.       It would not be possible to fully understand the above trends in family policies without placing them in their relevant economic and political context, and without examining these trends in other components of the welfare state. If taking a broader view, family policy could be expanded to all public policies that may potentially affect the well-being of families, including policies and services related to employment, education, health, housing, public transport, immigration, etc.

69.       Benefits provided by regional and local governments, and benefits provided by employers are also to be considered. Scattered evidence suggests that there are considerable regional variations and variations between employers in the level of support provided to families14.

70.       The Rapporteur considers it crucial to develop collective efforts between different public authorities, employers, organisations of employers and workers, as well as civil society, in order to induce a real change of attitudes not only within public structures, but also in the business sector and society at large.

2.6       Change in enterprise culture

71.       We have seen in the preceding chapters that the current trend of growing imbalance between the number of those who are employed and the number of pensioners could be partly offset by raising the mandatory retirement age, but more importantly, by increasing the level of employment for the inactive part of the working age population.

72.       Future generations will have to work longer, but perhaps with more diversified career patterns. Rapid technological changes and new forms of globalised economy call for changing skills, an adaptable workforce and more flexible types of labour.

73.       In turn, the business sector will need to adapt better to societal changes, particularly to the ageing workforce and the effects of the increased employment rates of women. Working conditions will need to take greater account of individual needs throughout different phases of life. More qualitative investment will need to be made in terms of lifelong training, further education, possibilities of career change, negotiated models of flexible employment to reconcile the parenting role and time spent in informal care of the sick and the elderly or volunteering.

Effect of ageing on the labour force

74.       Training and continuing education are crucial in helping older workers to adapt to changing demands and opportunities to avoid their involuntary early retirement. The demand for new skills and knowledge places older workers at a disadvantage, as their training earlier in life is likely to be obsolete with rapid changes in technology and production patterns.

75.       Age discrimination underlines many of the difficulties faced by older workers. The ability of older workers to learn new skills is sometimes questioned and these biased attitudes defy the efforts of older workers to find new employment.

76.       The ILO World Employment Report 2000-2001 emphasizes the need for training throughout working life. The report highlights the potential that information technology offers to enhance the contributions and quality of life of older workers and argues that opportunity lies in innovative technological, social and organizational responses.

77.       The ageing of the workforce implies a radical change in human resource strategies and a new approach to managing age at the workplace, as future competitiveness will rest to a large degree on the performance and productivity of ageing workforces.

78.       Employers are beginning to reassess the consequences of early retirement. It is being seen by some as a waste of experience and human resources and of the investment they have made in the workforce. Others see roles for older workers in training younger people or in preventing skill shortages. Some enterprises are recognising that the organisation with a diverse age base is likely to be able to respond best to rapidly changing circumstances. In the service sector in particular, employers are seeing the benefits of adjusting the age range of their employees to better reflect the age composition of their customers.

79.       The European Foundation for the improvement of living and working conditions undertook the first systematic European search for good practice, which focused on initiatives in favour of the retention, reintegration and retraining of older workers in the EU15. The examples of good practice cover job recruitment; training, development and promotion; flexible working practices; ergonomics/job design; and changing attitudes within organisations.

Impact of working patterns and flexibility on employment rates

80.       The level of unemployment in Europe is still relatively high, which results in unbalanced use of human resources between the active and economically inactive part of the working age population. While those in employment often find themselves under pressure to work long hours, the economically inactive part of the population remains deprived of job opportunities. The situation is unsatisfactory for both groups.

81.       Recent surveys by the European Foundation for the improvement of living and working conditions16 show that:

82.       Economically active individuals in Europe work on average 39 hours per week. The average working time of employees varies between 33.7 hours in the Netherlands and 41.1 hours in Austria. The average figures conceal the differences between men’s and women’s working times, since women in each country continue to carry the main burden of unpaid domestic and family work and, for this reason, tend to devote less time to paid work than men. In order to achieve more equity in the share of domestic work and family care, many employees would like to vary their working hours over the course of their working lives and would prefer to work shorter hours. Across Europe as a whole, this would mean a reduction of 4.5 hours in weekly working time to 34.517.

83.       Another survey18 shows that the existing types of "flexible" employment (non-permanent employment, temporary agency work, part-time employment, self-employment) are considered inadequate and in many cases "precarious" as they lack adequate regulation and social protection coverage.

84.       The above findings clearly demonstrate the urgent need to develop and negotiate new and more flexible working patterns, without diminishing social rights. Flexibility may benefit younger as well as older employees and especially carers involved in childcare, informal care of the elderly and ill members of society. Specifically with regard to older people, such flexibility may be an important method of retaining this group in employment.

3.       Vision for the Future

85.       Politicians in all member countries of the Council of Europe are faced today with the difficult task of harmonising two relatively opposing trends in Europe: pressures of globalised economy to reduce labour costs and remain competitive; and the need to strengthen the European social model in order to respond to the demands of citizens and to create a basis for a stable and socially prosperous Europe. This topic would merit further discussion in a separate report.

86.       Regarding population ageing, the Rapporteur considers that the European debate ought to be placed in a global perspective. While the European population is projected to decline in the course of this century – having risen from 548 million in 1950 to 727 million in 2000, it is projected to decline to 603 million in 2050 - the population of the less developed regions is projected to rise steadily from 4.9 billion in 2000 to 8.2 billion in 2050, bringing the world population from 6.1 billion today to 9.3 billion people in 2050 (medium projection)19. In other words, the world population is expected to grow by 50% in the next 50 years.

3.1       Environmental considerations and economic development

87.       Many ecologists and scientists wonder about the ecological consequences of this kind of growth. Within the next twenty-five years, scientists should know if the trend towards global warming, ozone depletion, and species extinction is continuing as they will be able to estimate the damage with more certainty and precision.

88.       Changes in the size, rate of growth and distribution of human populations have a broad impact on the environment and on development prospects. In some ecologically rich but fragile zones, known as "biodiversity hotspots", population growth is well above the global average of 1.3% a year. Rising demand from more affluent areas adds to the pressures on natural resources in these ecosystems.

89.       In the wake of the "Rio + 10" World Summit on Sustainable Development (Johannesburg, 26 August – 4 September 2002), United Nations Secretary General Kofi Annan said20: "Progress towards the goals established at Rio has been slower than anticipated and in some respects conditions are worse than they were ten years ago."

90.       Affluence in the more developed countries has led to enormous and wasteful consumption of natural resources. Production and consumption have grown worldwide more rapidly than population over the last 50 years. In 1950 the world produced only about a sixth of the goods it does today.

91.       Production and consumption activities have both direct and indirect effects on environmental systems, from the extraction of raw materials, through intermediate processing, manufacturing and final products, consumption and disposal. At all stages these activities involve the use of materials and energy as well as the emission of pollutants and waste. Climate change, stratospheric ozone depletion, loss of biodiversity, acidification and forest degradation are some of the major global effects of such resource-wasteful patterns of economic development.

92.       Increases in production and consumption are particularly concentrated in a limited number of countries which total only one quarter of the world’s population. For example, the United States, with only 4.6% of the world’s population, produces one fourth of global greenhouse gas emissions. Current economic development and consumption patterns in the developed world could not be sustained if applied by the developing countries.

93.       In this regard, the Rapporteur welcomes the recent publication of the United Nations Population Fund entitled "Footprints and milestones: population and environmental change"21:

94.       Measures to reduce waste, conserve energy, curb pollution and promote sustainable use of natural resources are essential for sustainable development in the future. Parallel measures will also be needed to stabilise global population growth.

95.       Definitions and understandings of development have changed. Economic development, the state of the environment, human health, social structures and the status of women, are intricately linked.

3.2       Job opportunities through shift in taxation

96.       Twenty years after the first Earth Summit, scientists have made certain progress in evaluating the environmental costs to growth and development. In most cases global consumption already exceeds the sustainable rate, even though in many countries per capita consumption is low. If developing countries such as China increase consumption to northern levels, the planet's carrying capacity will be exceeded many times over and the effects will be catastrophic for everyone.

97.       Should the risk prove threatening to human culture and survival, then an ecological tax ought to be placed upon those resources and the money generated should be used to develop, and install, ecologically safe technology.

98.       Switching some of the revenue burden from taxes on income and employment, to environmental charges on resources, waste collection, and pollution would yield double economic benefits. The environmental cost that is currently imposed on society would be covered by polluters.

99.       This trend would have far reaching consequences for the global economy and consumption patterns. As energy prices would rise, transport costs would be affected, making local production and use of the local workforce much more economically viable.

3.3       Change of values

100.       We have seen throughout this report that the process of ageing will necessitate not only fiscal reforms, reforms in social welfare policies, reforms in employment patterns, but also changes in attitude and redefinition of individual and societal values.

101.       As our societies grow older, there will be a growing need to strengthen social welfare as well as levels of individual solidarity. The chapter on healthcare reforms clearly shows that human resources in formal healthcare will not be able to cope with future needs unless coupled with informal care provided by families, friends, or volunteers in local communities.

102.       Perceptions and attitudes towards senior members of society will have to change too - no longer perceiving them as passive members of society that represent a social and financial burden, but instead fully recognising their value and contribution in knowledge and experience. Opportunities for diverse types of more active involvement in society remain to be developed.

103.       The increase of women’s participation in employment calls for a more equal share of unpaid work between genders. Perceptions and attitudes towards family responsibilities, childcare, involvement in informal care and volunteering will have to change too. The value of unpaid work to society will have to be fully recognised and reflected in new and more flexible patterns of employment for both women and men.

104.       Collective and individual efforts are needed to strengthen solidarity in all its forms: individual solidarity through informal care, volunteering or community involvement; intergenerational solidarity through mutual support between generations; solidarity brought about by public policy concerned with social cohesion and the redistribution of wealth; and, finally, international solidarity in making the distribution of wealth, the use of resources and the ecological footprint more equitable.














Figure 7

Europe

2000 World Population Data Sheet: Total Fertility Rate

Reporting committee: Social, Health and Family Affairs Committee

Reference to committee: Doc. 8220, Reference No. 2328 of 4 November 1998 and Doc. 8798, Reference No. 2747 of 24 june 2002

Draft recommendation unanimously adopted by the committee on 24 October 2002.

Members of the committee: Mrs Ragnarsdóttir (Chairman), Mr Hegyi, Mrs Gatterer, Mr Christodoulides (Vice-Chairmen), MM. Alís Font, Arnau, Mrs Belohorská, Mr Berzinš, Mrs Biga-Friganović, Mrs Björnemalm, Mrs Bolognesi, MM. Brînzan (alternate: Mr Tudose), Brunhart, Cerrahoğlu, Colombier, Cox (alternate: Mr Hancock), Dees (alternate: Ms Zwerver), Evin, Floros, Flynn, Ms Gamzatova, MM. Geveaux, Giertych, Glesener, Gönül, Gregory, Gusenbauer, Güstafsson, Haack, Herrera, Hladiy, Hřie, Hörster, Jacquat, Ms Jäger, Mr Klympush, Baroness Knight, MM. Kontogiannopoulos, Lomakin-Rumiantsev, Ms Lotz, Ms Luhtanen, MM. Makhachev, Małachowski, Manukyan, Mrs Markovska, MM. Marty, Maštálka, Mrs Milotinova, MM. Mladenov, Monfils, Ms Nowiak, MM. Olekas, Ouzký, Padilla (Mrs Fernández-Capel), Podobnik, Popa, Poty, Provera, Pysarenko, Rigoni (alternate: Mr Piscitello), Rizzi (alternate: Mrs Paoletti Tangheroni), Mrs Roseira, MM. Santos, Seyidov, Mrs Shakhtakhtinskaya, MM. Slutsky, Surján, Telek, Ms Tevdoradze, Mrs Topalli, MM. Truu, Turjačanin, Vella (Mr Debono Grech), Mrs Vermot-Mangold, MM. Vesselbo, Vis, Vos, Mrs Zafferani, Mr Zidu, ZZ … (Romania) (alternate: Mr Ionescu),

NB: The names of those members present at the meeting are printed in italics.

Committee secretariat: Mr Newman, Mrs Meunier, Ms Karanjac and Mr Chahbazian

1 Replacement level fertility is the level necessary to ensure that the population replaces itself over the long run. For most populations, replacement is ensured with a fertility of 2.1 children per woman.

2 Source: UN projections, 1998 Revision

3 source: Council of Europe, Population studies No. 33: Europe’s population and labour market beyond 2000.

4 For more information see internet site: www.un.org/esa/socdev/iyop

5 http://book.coe.int - ISBN 926871-4999-2

6 For more information see internet: www.commissioner.coe.int

7 for more information see: www.who.dk

8 OECD publication: "Maintaining prosperity in an ageing society", 1998

9 Communication from the Commission to the Council, to the European Parliament and the Economic and Social Committee: "The future evolution of social protection from a long-term point of view: safe and sustainable pensions", COM (2000) 622 final, 11.10.2000

10 Social Protection Committee: "Adequate and sustainable pensions", report presented to the European Council in Göteborg, Sweden, June 2001

11 see N. Barr: “The Truth About Pension Reform. Finance and Development”, 2001/3.

12 “Incentives and disincentives to early and late retirement”, OECD, Working paper AWP3.3, 1997

13 27th Session of the Conference of European Ministers responsible for family affairs (Slovenia, June 2001)

14 «Public policies affecting fertility and families in Europe: a survey of the 15 member states», paper prepared for the European Observatory on Family Matters, annual seminar 2000

15 «Managing an Ageing Workforce: a guide to good practice», European Foundation for the Improvement of Living and Working Conditions, 1998

16 list of consulted surveys for the period 1998-2000: "Employment and working time in Europe "; "Working time preferences at different phases of life "; "Gender, employment and working time preferences in Europe".

17 Source: European Foundation for the improvement of living and working conditions. Data concerns 15 EU member states. For more information see: http://www.eurofund.ie

18 "Working conditions in atypical work", European Foundation for the improvement of living and working conditions, 2000

19 "World population prospects: The 2000 Revision", Population Division, Department of Economic and Social Affairs, United Nations

20 "Implementing Agenda 21", Secretary General’s report for the World Summit on Sustainable Development, United Nations, December 2001

21 for more information see: http://www.unfpa.org