Does education matter? - economic dependency ratios by education

Alexia Prskawetz, Bernhard Hammer

Publication: Scientific journalJournal articleResearchpeer-review

Abstract

When studying the economic consequences of changes in the age structure of
the population, looking at economic dependency ratios provides us with some
descriptive and intuitive initial insights. In this paper, we present two economic
dependency ratios. The first ratio is based on economic activity status, and relates
the number of dependent individuals to the number of workers. The second
dependency ratio relates consumption to total labour income. To build up the
second ratio, we rely on the recently set up National Transfer Accounts (NTA) for
Austria. Simulations of the employment-based dependency ratio with constant agespecific
employment rates indicate that the employment-based dependency ratio
will increase from 1.23 in 2010 to 1.88 in 2050, based on a population scenario
that assumes low mortality, medium fertility and medium migration in the future.
The corresponding values for the NTA-based dependency with constant age-specific
labour income and consumption are 1.12 in 2010 and 1.49 in 2050.We then compare
how the dependency ratio would di¿er if we accounted for the increasing levels
of educational attainment. While the education-specific age patterns of economic
activities are kept constant as of 2010, the changing educational composition up
to 2050 is accounted for. In Austria, higher educated individuals enter and exit the
labour market at older ages and have more total labour income than lower educated
individuals. Our simulations of the education-specific economic dependency ratios
up to 2050, based on the optimistic projection scenario of low mortality and high
educational levels in the future, show that the employment-based ratio will increase
to 1.68 and the NTA-based dependency ratio will rise to 1.28. These increases
are still considerable, but are well below the values found when changes in the
educational composition are not taken into account. We can therefore conclude that the trend towards higher levels of educational attainment may help to reduce
economic dependency.
Original languageEnglish
Pages (from-to)1-24
JournalVienna Yearbook of Population Research
Volume16
Publication statusPublished - 2018
Externally publishedYes

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