Greece’s demographic time bomb is expected to go off in the next few years, causing turmoil in the economy and, consequently, the social security system that will be burdened to the tune of an estimated 37.3 billion euros by the increase in life expectancy, according to a new study.
Among other findings, the study by Panteion University Professor Savas Robolis and PhD student Vassilis Betsis shows how difficult it will be to achieve high growth rates in Greece in the post-bailout era due to the aging workforce, which will have a negative impact on the social security system.
Based on the findings, the aging population will incur a cost of about 1.3 billion euros annually from 2017 to 2057 or the equivalent reduction in benefits to the insured and pensioners.
According to the two academics, in the coming years Greece will experience a decline in its population, an increase of the workforce and, at the same time, a fall in the working age population’s growth rate (aged 15-64).
The researchers maintain that the forthcoming developments in the structure of the population, in the workforce and in employment can be explained by the increase, under the bailout programs, of the retirement age: From 59 in 2010, the average retirement age increased to 63 in 2017 and is expected to reach 65 by 2022 due to the implementation of a 2015 law.
Further increases can be expected, as a law approved in 2016 states that the retirement age should be adjusted every 10 years in line with any increases in life expectancy. The next review is scheduled for 2020.
According to recent European Commission assessments on the sustainability of Greece’s social security system, it is estimated that in 2060 the retirement age will be 71.
This increase in the retirement age will result in an increase in the workforce, especially of women, and the aging of the labor market. At the same time, this will lead to a reduction in the number of young workers due to reduced fertility and the fact that people will be working longer.
This, in turn, will have consequences on labor productivity, as an aged workforce is less productive than a young one.
The researchers point out that while Greece aims for annual GDP growth of 2 percent, the negative impact of aging will mean that growth of 4 percent will actually be necessary.