1. Modelling the Economic Potential of the Silver economy ING. MAREK RADVANSKÝ, PHD. 2 nd Neujobs validation event 9. A PRIL 2014, B ONN

2. Introduction Ageing / third stage of demographic transition Private consumption only (care, education) Information based on EHBS (European household budget survey) Ageing and demographic structure based on NEUJOBS scenarios Purely demographic effects on consumption Behavioural changes - Consumption habits of older differs by country and age Future economic growth will to big extent depend on consumption of older

3. Understanding „Silver economy“ Several empirical studies on impact of demographic changes on economic growth (Mason, Lee / 2004,2007..) Lifetime and savings of older (Bloom,Canning / 2004) Studies on structure of consumption (Lührmann, 2005 ) Income replacement rate for the EU average constitutes approximately 70 % More active ageing and use of accumulated capital by seniors, older tend to spent savings – reverse mortgages

4. Understanding „Silver economy“ Ageing in EU policy - significant role since 2000 EC Green Paper on ageing, 2005 EC 2006: ageing can even represent an opportunity to enhance the competitiveness of the European economy... producing special goods and supplying special services targeted at the older population: the first contour of “the silver economy” EC 2009 Ageing Report: “ageing societies bring new opportunities to innovative firms through the demand for new or adapted goods and services” EC 2007 define Silver economy as „new economic opportunity responding to the needs of older people by making accessible specific goods and services to improve their quality of life“

5. Silver economy In 2007 the Council encourages European research in this area with the aim to “become a leading example of the silver economy” Olders – specific demand for goods and services – 50-64young old (+13 mio., +11%) – 65-79seniors (+19 mio., +24 %) – 80+very old (+12 mio., +41 %) Silver economy – Effects of ageing on structure of consumption Silver consumption – Consumption of households with reference person over 60

6. Uneven ageing in EU 27 based on the extent and intensity (2010-2030)

7. Increasing significance of the demand of households over 60 Decreasing income vs. ability to consume 2010 EU – 36 % “Silver households“ comprised roughly 28% of hsh. consumption Highest share of consumption in Germany – 32 %, low in Slovakia (less than 25 %) Significant increase across countries in both scenarios (increase of „Silver households“ to 43 % in 2030) – growth over 20% Similar trend in consumption From 28 % in 2010 to 32 % in 2025 (35% - 2030)

8. Structure of consumption of households with the reference person

9. Changed structure of aggregate demand 30-30-4445-5960+ Food278.81190.38208.49199.14 Alcohol and tobacco45.4729.6731.2222.07 Clothing67.6161.8352.7242.10 Housing and utilities201.29235.21239.99309.75 Furnishing46.1553.5050.6353.34 Health21.6826.6439.2356.60 Transport111.54128.32120.6786.69 Communication49.2538.2636.0327.80 Recreation and culture68.2587.3881.1580.06 EducationNA Restaurants and hotels37.9748.1144.6139.18 Miscellaneous60.7786.5184.0079.96 Mean expenditures on COICOP 1-digit level in European countries by age of the reference person

10. Changed structure of aggregate demand (older) 50-6465-7980+ Food189.61181.82186.41 Alcohol and tobacco26.7819.5714.73 Clothing43.9138.5531.92 Housing and utilities225.60292.27370.98 Furnishing45.9748.1261.57 Health40.5953.2064.49 Transport102.9275.3140.89 Communication30.0524.8225.51 Recreation and culture71.7774.6758.13 EducationNA Restaurants and hotels38.9234.9632.18 Miscellaneous74.5872.0977.88

11. Structure vs. real consumption on household Age group Mean net income Mean consumption Mean net expenditure Propensity to consume Owning main residence Mean net wealth 16-34124549502115130.76371.1%50300 35-441377810430126800.75786.5%84900 45-541420411131123460.78394.6%88900 55-64116529032101630.77596.2%94800 65-747912632770140.80096.9%71600 75+5730442948420.77394%76500

12. Shares on total consumption of households in Germany in % (friendly) 200520102015202020252030 60-60+60-60+60-60+60-60+60-60+60-60+ Food7.553.617.254.457.274.407.244.416.535.185.955.75 Alcohol and tobacco1.240.461.290.461.290.451.280.451.150.531.40.59 Clothing3.341.403.601.73.561.63.521.53.201.242.941.38 Housing and utilities19.2010.4818.8411.2718.9311.1818.8811.2217.2713.1516.414.61 Furnishing3.621.823.641.713.651.713.651.723.382.13.202.23 Health1.841.821.801.661.861.671.901.691.831.961.812.18 Transport9.803.489.913.439.913.409.883.419.54.008.424.44 Communication2.170.722.430.902.350.862.270.831.871.11.491.12 Recreation and culture7.253.847.713.347.683.307.623.296.893.886.294.31 EducationNA Restaurants and hotels2.831.433.120.843.120.843.110.852.880.992.721.10 Miscellaneous7.923.387.253.117.463.197.633.287.533.747.634.17 Total67.4932.5167.6432.3667.8632.1467.7332.2762.2037.8058.0341.97

13. Shares on total consumption of households in Slovakia in % (friendly) 200520102015202020252030 60-60+60-60+60-60+60-60+60-60+60-60+ Food 18.516.3518.376.7118.087.0017.337.7816.668.4716.188.96 Alcohol and tobacco 2.220.552.180.592.140.612.050.681.980.741.930.78 Clothing 4.540.834.440.934.400.974.281.084.161.184.071.26 Housing and utilities 22.019.1222.329.1721.919.5820.6110.6119.3911.5318.4412.16 Furnishing 3.220.923.161.003.131.053.031.162.931.272.851.34 Health 1.861.031.791.171.761.221.741.361.751.491.771.58 Transport 7.050.876.661.126.591.166.481.306.401.436.371.53 Communication 3.470.693.280.823.250.853.180.953.121.043.101.10 Recreation and culture 4.890.964.561.154.521.204.451.344.391.474.351.56 Education NA Restaurants and hotels 3.930.303.250.523.240.543.250.613.270.673.310.73 Miscellaneous 4.671.284.651.344.591.394.391.554.201.694.051.78 Total 77.0822.9275.4624.5474.3925.6171.5528.4568.9831.0267.1632.84

14. Shares on total consumption of households in EU27 in % (friendly) 200520102015202020252030 60-60+60-60+60-60+60-60+60-60+60-60+ Food 9.744.359.534.729.504.839.454.959.115.398.745.82 Alcohol and tobacco 1.720.551.740.551.720.561.690.581.610.631.540.68 Clothing 4.471.214.421.174.381.204.371.234.231.344.081.45 Housing and utilities 18.999.2819.009.8018.8510.0118.5610.2217.6111.1416.6212.03 Furnishing 4.161.604.051.594.021.623.981.663.851.813.741.96 Health 1.921.261.741.371.741.401.761.441.801.571.901.70 Transport 9.982.659.712.689.632.739.592.799.303.069.053.31 Communication 2.270.672.350.702.300.712.230.722.060.791.880.84 Recreation and culture 6.712.366.692.316.612.346.512.396.222.625.952.82 Education NA Restaurants and hotels 4.611.214.551.174.551.204.571.234.471.344.361.46 Miscellaneous 6.882.486.682.466.582.536.502.606.302.826.133.04 Total 72.3427.6671.3728.6370.7729.2370.0929.9167.3932.6164.7735.23

15. Expected effect on total employment 4 analysed countries (DE, SK, IT, FI) + EU Static Input-Output model Estimated number of households Two main effects – On structural demand – On employment Est. effects between 2010-2025

16. Effects on demand by product/service (top) and expansion labour demand (bottom) - Germany

17. Effects on demand by product/service (top) and expansion labour demand (bottom) - Slovakia

18. Effects on demand by product/service (top) and expansion labour demand (bottom) - Italy

19. Effects on demand by product/service (top) and expansion labour demand (bottom) - Finland

20. Effects on demand by product/service (top) and expansion labour demand (bottom) - EU

21. Results The negative effects of younger households on total workforce demand varies between -3.5 % (friendly scenario) to -5.3 % (tough) in Germany and -0.1 % to 0.6 % in Slovakia since 2010 until 2025. Silver demand effect 0.0 - 0.6 % of total workforce in Germany, 1.1 - 2.2 % in Slovakia, 0.5 - 1.6 % in Italy, 0.8 – 1.3 % in Finland and 1.2 – 2.0 % in EU27. Impact on total on employment varies from 0.5 to 2.0 % of additional employment in Slovakia to job loses between -5.3 to -2.9 % in Germany.

22. Results Aggregate demand of younger is decreasing in all observed countries / will be partially compensated by demand of older Uneven effect on consumption and labour market caused by productivity changes Different consumption structure – Main growth in health, food and recreation – Main decrease in education, communications and clothing Employment estimates are underestimated in labour intensive sectors in respect to expected high productivity gain

23. Policy recommendations Measures for domestic markets: – supporting the interest in, and accessibility of the preventive healthcare – supporting long-term care and supporting services (home deliveries etc.) – supporting energy-efficient housing Measures for foreign markets: – supporting domestic tourism interesting for foreign senior citizens – supporting domestic healthcare which can be demanded by foreign senior citizens (export of services) – supporting cross-border accessibility of health and social care services – supporting domestic Silver producers’ ability to compete with foreign producers and thus helping their access to foreign markets

24. Conclusions Only Private consumption effect was analysed Uneven consumption and labour market effects in countries according wealth differences, ageing structure and productivity Increased demand for LTC services will also leads to increased pressure on public finances, that will need to be addressed by additional policy measures Silver effect on EU labour market imbalances – additional 2.6 – 4.4 million new jobs during 2010-2025 – Negative effect on productivity gain and loss of demand of younger - 4,5 to – 0,5 million – Total effect of consumption changes -1,9 to +3,9 mio.

25. NEUJOBS Outputs D 12.3 WP: Modelling The Economic Potential of the Silver Economy D 12.4 PB: Impact of ageing populations on silver economy, health and long-term care workforce

26. Thank you MAREK RADVANSKÝ (MAREK.RADVANSKY@SAV BA.SK) 2 nd Neujobs validation event, 9-11 April 2014, Bonn