In order to address these problems, a team from the Poverty Reduction Economic Management (PREM) and Human Development (HD) Departments of the World Bank Group – led by Hans Timmer, World Bank Chief Economist for the Europe and Central Asia (ECA) region – convened at a regional aging workshop in Munich on March, 31 – April, 1, 2014. The “From known knowns to unknown unknowns” workshop – jointly organized by the World Bank and the Munich Center for the Economics of Aging – offered participants a chance to learn from international experts and exchange views on the questions of aging and the potential impacts on the economies in Europe and around the world. The Workshop was financed through innovation grant in the Europe and Central Asia (ECA) region and represented an opportunity for experts from the World Bank to share knowledge and experience with external partners.
The primary macroeconomic implication of aging is a shrinking supply of labor resulting from a declining working-age population. The structure of working age population will change as well, with potential implications for labor productivity due to loss of dynamism and less job reallocation across occupations, sectors and locations. This has significant implications for economic growth - which depends on the supply and productivity of labor. Furthermore, aging populations tend to save less, what can have negative consequences for investment and capital accumulation and thus further slowdown economic growth. Population aging will increase demand pressures on public services, most importantly the provision of health care and long term care. Finally, increasing expenditure on pensions and health care will affect long term sustainability of public finances.
In the face of these daunting challenges, how do we move forward?
This was the question that the panelists tried to answer in the final session, also offering their views on how the World Bank Group already is and can be engaged in assisting our clients in these issues. According to Hans Timmer political economy plays a large role when it comes to designing responses to the challenges of aging. Any response should take into consideration the realities of an individual country or region – avoiding the trap of a ‘one size fits all’ model – and importantly, should have strong analytical underpinnings to have a good understanding of underlying demographic processes and factors. He also found that in ECA strong cohort effects may be at play - low labor market participation rates in old age may be a transitory phenomenon, which may reflect specific education and work experience background gained during the communist period. Looking ahead future generations of old age workers may show much more open and active mindset. What should be further analyzed is the impact of aging on dynamism and labor market outcomes, the impact on asset prices and the impact on environment.
As many of the challenges that countries in the ECA region face mirror those in more advanced countries in Western European, broader cooperation and increased knowledge transfers with these countries would be beneficial to all involved partners.
In keeping with the title of the workshop, the group was able to address some key challenges of the “known knowns” of aging. Areas where further analysis is needed – the “known unknowns” – were also discussed. At the heart of the issue, then, according to many of the participants at the workshop are the “unknown unknowns” – the areas and impacts that we do not currently see and have not yet analyzed. By continuing to convene high-level workshops like this one, however, it is hoped that more can be learned about these unknowns – unlocking both the questions and their answers.