Discussion Paper No. 25
October 8, 20123
Europe is ageing. Latvia and the two other Baltic States –Estonia andLithuania –are, too. Yet, the Baltic States are not only ageing, their popula-tions are shrinking. The shares of working-age population have peaked andwill decline going forward. Fertility is below its natural replacement rate, andthere will be fewer youngsters entering the labour market. Dependency ra-tios are increasing, putting a burden on economic growth and the socialsafety net. The 2011 population censuses, the data of which are being pub-lished only bit by bit, are producing new insights into demographics. Duenegative net migration flows (i.e., emigration), many of the risks that throughthelens of official statistics had previously been viewed as problems of thedistant future have been fast-forwarded into the very near future or even thepresent. Over the last decade, the Latvian and Lithuanian populations haveshrunk by 13% and 12%, respectively, and that of Estonia by 6%. This isnearly twice the official pre-census estimates, as the true size of emigrationhad been baldly underestimated. Many experts, including ourselves, havebeen warning about this for years, and the recent population censuses pro-vide hard supporting data. Demographics is not the challenge of the future, itis the challenge of today.The populations will continue ageing. Because of free labour mobility andwide income gaps with the more affluent EU countries, emigration will con-tinue to take its toll. Yet, by acting proactively it is possible to reduce the ex-tent of such demographic trends and limit their negative consequences onthe economic sustainability of a country and the businesses operating there.The aim of this report is, therefore, to analyse the implications for economicactivity and policy of such a demographic change.Data from the 2011 population censuses are still very scant,which puts con-siderable limitations on our analysis. This is the reason why we limit our analysis to Latvia (it simply has been faster to publish its census data); how-ever, most of the challenges discussed are relevant also to the other twoBaltic States.To put Latvian demographics and some of its economic impli-cations within the Baltic context, we have added Appendix 1, which brieflyoutlines the following issues for all three Baltic States: (i) demographic pro- jections until 2060; (ii) estimates of ageing and population decrease on per capita GDP growth; and (ii) estimates of the fiscal cost of ageing.
2.DEMOGRAPHY: what has been going on?
The 2011 population census data for Latvia are just rolling out of the statisti-cal bureau, and at the time of writing this paper there is a full data set avail-able only for the year 2011. The previous trustworthy data are for the year 2000, when the former population census was taken. In this chapter, weshall therefore discuss only the change between the years 2000 and2011and leave aside the volatility of the in-between years, as those data have yetto be revised to account for the dynamics of emigration.
The good, the bad,and the ugly…
Ageing and the population decrease in Latvia have been driven by a mix of good, bad, and ugly trends. The good part of the story is that life expectancyhas been rising. From 2000 to 2011, life expectancy at birth has improvedfrom 76.0 to 78.7 years for women and from 64.9 to 68.8 years for men.Quite a spurt, but still far to go compared with the EU averages of, respec-tively, 82.5 and 76.7 years (or, respectively, 83.4 and 79.4 years in
The Baltic States areageing and their populations areshrinking…… demographics is not the challenge of thefuture, it is the challengeof today Good news: lifeexpectancy has beenrising, people areenjoyinglonger lifetimes