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long-term inequality and poverty
among the elderly in Belgium
/
Inégalités et pauvreté des personnes
âgées: une projection à long terme
Gijs Dekkers
Federal Planning Bureau
and CESO, Katholieke Universiteit Leuven
Bureau
Fédéral du Plan
Analyses et prévisions économiques
Joint work with Raphaël Desmet, Greet de Vil, Marie-Jeanne
Festjens and the MALTESE team
long-term inequality and poverty among the elderly in
Belgium
Goal of this presentation:
•
To provide a long term assessment of inequality and poverty among the
elderly in Belgium
•
To assess the impact of two recent measures; the increase of the
“guaranteed income of the elderly” (Grapa/IGO) by 14%, and the 17%
increase of the minimum right per career year, both introduced in 2006.
Bureau Fédéral du Plan
Analyses et prévisions économiques
long-term inequality and poverty among the elderly in
Belgium
Overview of this presentation:
•
The dynamic microsimulation model MIDAS, version MALTESE.
•
Long term simulations of pension adequacy: the reference scenario
•
Two recent measures: a discussion
• The increase of the Grapa/IGO
• The increase of the minimum right for the elderly
•
Conclusions
Bureau Fédéral du Plan
Analyses et prévisions économiques
long-term inequality and poverty among the elderly in
Belgium
Overview of this presentation:
•
The dynamic microsimulation model MIDAS, version MALTESE.
•
Long term simulations of pension adequacy: the reference scenario
•
Two recent measures: a discussion
• The increase of the Grapa/IGO
• The increase of the minimum right for the elderly
•
Conclusions
Bureau Fédéral du Plan
Analyses et prévisions économiques
1. The dynamic microsimulation model MIDAS, version
MALTESE (1/3).
•
Microsimulation for the Development of Adequacy and Sustainability
– A ‘dynamic microsimulation model with cross-sectional dynamic ageing’.
•
MIDAS consists of three modules
– Demographics: births, deaths, household formation and dissolution, education
– Labour market:
• Active states: work, private/public sector, civil servants, working hours,
wages
• Inactive states: in education, unemployment, disability, CELS, retirement,
other
– Social security module
• First pillar pension scheme for employees, civil servants and independent
workers
• CELS benefit, disability pensions, unemployment benefits*, welfare benefit*
Bureau Fédéral du Plan
Analyses et prévisions économiques
1. The dynamic microsimulation model MIDAS, version
MALTESE (2/3).
•
MIDAS does not (yet) take into account
• Net immigration
• Taxes and social contributions
•
MIDAS includes all relevant policy measures between 2002 and 2010
•
MIDAS reproduces the observed developments of proportions of active and
inactive states between 2002 and 2010.
•
MIDAS is as much as possible consistent with the simulation results and
hypothesis of the semi-aggregate model MALTESE
– MALTESE is used for the assessment of sustainability of social security of the Study
Committee on Ageing (report 2009)
– MIDAS is used for the assessment of (pension) adequacy of the Study Committee
Bureau Fédéral du Plan
Analyses et prévisions économiques
1. The dynamic microsimulation model MIDAS, version
MALTESE (3/3).
•
For the simulation years after 2010, MIDAS adopts the assumptions and
projections of MALTESE
– “monetary alignment” on exogenous productivity growth rates (1.5% p.a. in the
long run)
– “state alignment” to MALTESE simulation results
– An annual growth rate of of
• 0.5% for the non lump sum allowances in the social security;
• 1% for the lump sum allowances;
• 1.25% for the wage cap
• 1.25% for the minimum right per working year.
Bureau Fédéral du Plan
Analyses et prévisions économiques
long-term inequality and poverty among the elderly in
Belgium
Overview of this presentation:
•
The dynamic microsimulation model MIDAS, version MALTESE.
•
Long term simulations of pension adequacy: the reference scenario
•
Two recent measures: a discussion
• The increase of the Grapa/IGO
• The increase of the minimum right for the elderly
•
Conclusions
Bureau Fédéral du Plan
Analyses et prévisions économiques
2. Long term simulations of pension sustainability: the
reference scenario and
In the base scenario, the expected costs of ageing up to 2060 are estimated to
Equal 8,2% GDP. This cost consists of pensions (+5,3%), health care (+4,2%)
and other social expenses (-1,4%)
Bureau Fédéral du Plan
Analyses et prévisions économiques
2. Long term simulations of pension adequacy: the
reference scenario
0
5
10
15
20
Poverty risk to status
2000
2010
2020
2030
Année
Population totale
Pensionnés
2040
2050
2060
Travailleurs
Source: MIDAS
%, poverty line 60% median equivalent income, modified OECD equivalence scale
Bureau Fédéral du Plan
Analyses et prévisions économiques
2. Long term simulations of pension adequacy: the
reference scenario
.15
.2
.25
.3
.35
Income inequality to status
2000
2010
2020
2030
Année
Population totale
Pensionnés
2040
2050
2060
Travailleurs
Source: MIDAS
Ginie, equivalent income, modified OECD equivalence scale
Bureau Fédéral du Plan
Analyses et prévisions économiques
long-term inequality and poverty among the elderly in
Belgium
Overview of this presentation:
•
The dynamic microsimulation model MIDAS, version MALTESE.
•
Long term simulations of pension adequacy: the reference scenario
•
Two recent measures: a discussion
• The increase of the Grapa/IGO
• The increase of the minimum right for the elderly
•
Conclusions
Bureau Fédéral du Plan
Analyses et prévisions économiques
3. Two recent measures: a discussion
•
the increase of the “guaranteed income of the elderly” (Grapa/IGO) by 14%,
from December 1st 2006 onward.
– This measure immediately increases the cost of ageing by 0.045% GDP. This extra
cost is the result of the increase of the guaranteed income of the elderly among
previous recipients, as well as the expansion of the number of beneficiaries.
•
the 17% increase of the minimum right per career year, from December 1st
2006 onward.
– This measure increases the budgetary costs of ageing by 0.01% GDP in 2010,
increasing to 0.05% in 2030 and 0.07% in 2060.
How would the development of poverty and inequality of the
elderly have been if this measure was not effectuated?
Bureau Fédéral du Plan
Analyses et prévisions économiques
3. Two recent measures: a discussion
•
the increase of the “guaranteed income of the elderly” (Grapa/IGO) by 14%,
from December 1st 2006 onward.
0
5
10
15
20
Poverty risk to status (60% poverty line)
2000
2010
2020
2030
Année
2040
Population totale - Scénario de référence
Travailleurs - Scénario de référence
Pensionnés- Scénario de référence
2050
2060
Population totale
Travailleurs
Pensionnés
Source: MIDAS
Bureau Fédéral du Plan
Analyses et prévisions économiques
3. Two recent measures: a discussion
•
the increase of the “guaranteed income of the elderly” (Grapa/IGO) by 14%,
from December 1st 2006 onward.
0
10
20
30
40
Poverty risk to status (70% poverty line)
2000
2010
2020
2030
Année
2040
Population totale - Scénario de référence
Travailleurs - Scénario de référence
Pensionnés- Scénario de référence
2050
2060
Population totale
Travailleurs
Pensionnés
Source: MIDAS
Bureau Fédéral du Plan
Analyses et prévisions économiques
3. Two recent measures: a discussion
•
the increase of the “guaranteed income of the elderly” (Grapa/IGO) by 14%,
from December 1st 2006 onward.
.15
.2
.25
.3
.35
Income inequality to status
2000
2010
2020
2030
Année
2040
Population totale - Scénario de référence
Travailleurs - Scénario de référence
Pensionnés - Scénario de référence
2050
2060
Population totale
Travailleurs
Pensionnés
Source: MIDAS
Bureau Fédéral du Plan
Analyses et prévisions économiques
3. Two recent measures: a discussion
the 17% increase of the minimum right per career year, both introduced
from December 1st 2006 onward.
0
5
10
15
20
•
2000
2010
2020
2030
Année
2040
Population totale - Scénario de référence
Travailleurs - Scénario de référence
Pensionnés- Scénario de référence
2050
2060
Population totale
Travailleurs
Pensionnés
Source: MIDAS
Bureau Fédéral du Plan
Analyses et prévisions économiques
3. Two recent measures: a discussion
the 17% increase of the minimum right per career year, both introduced
from December 1st 2006 onward.
.15
.2
.25
.3
.35
•
2000
2010
2020
2030
Année
2040
Population totale - Scénario de référence
Travailleurs - Scénario de référence
Pensionnés - Scénario de référence
2050
2060
Population totale
Travailleurs
Pensionnés
Source: MIDAS
Bureau Fédéral du Plan
Analyses et prévisions économiques
long-term inequality and poverty among the elderly in
Belgium
Overview of this presentation:
•
The dynamic microsimulation model MIDAS, version MALTESE.
•
Long term simulations of pension adequacy: the reference scenario
•
Two recent measures: a discussion
• The increase of the Grapa/IGO
• The increase of the minimum right for the elderly
•
Conclusions
Bureau Fédéral du Plan
Analyses et prévisions économiques
Conclusions
•
The models MIDAS and MALTESE provide a joint assessment of the
sustainability and adequacy of (among other things) pensions in the context
of demographic ageing.
•
In the base scenario, poverty and inequality among the elderly is expected
to decrease considerably.
•
This is for a part the result of the increase of the “the “guaranteed income of
the elderly” (Grapa/IGO) by 14%, a policy measure that increases the costs
of ageing immediately by about 0.045% GDP.
•
The increase by 17% of the minimum right per career year causes the cost
of ageing to increase by 0.07% GDP in 2060. The impact of this measure on
the poverty and inequality among the elderly is negligible.
Bureau Fédéral du Plan
Analyses et prévisions économiques
long-term inequality and poverty among the elderly in
Belgium
Thank you / merci bien
Bureau Fédéral du Plan
Analyses et prévisions économiques
Intermezzo: a brief word on state alignment
‘standard’ Monte Carlo simulation
Pi=logit-1(βX)
Aligned simulation to target x%
Orderi=logit-1(βX+εi)
Ui < Pi
First xN individuals
State 1
State 1
Person i
State 2
order 1...n
State 2
Ui < 1-Pi
Bureau Fédéral du Plan
Other (100-x)N individuals
Analyses et prévisions économiques