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Social Science > Demography

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Cover Departmental Papers
Long-Term Spending Pressures in Europe
Stephanie Eble
,
Alexander Pitt
,
Irina Bunda
,
Oyun Erdene Adilbish
,
Nina Budina
,
Gee Hee Hong
,
Moheb T Malak
,
Sabiha Mohona
,
Alla Myrvoda
, and
Keyra Primus
European countries face high, rising, and long-lasting spending pressures, calling for a renewed focus on fiscal policy and comprehensive structural reforms to prepare their economies for the future. On top of existing fiscal consolidation needs, spending pressures in five key areas are imminent and growing in Europe: pensions and healthcare/long-term care driven by population aging; climate transition; increased defense spending; and higher borrowing costs. Some pressures are immediate, others will build up over time. Projections indicate that additional expenditures could reach 5¾ percent of GDP annually by 2050 in Advanced Europe and 8 percent in Central, Eastern, and Southeastern Europe (CESEE). Addressing these challenges will require extensive efforts, including enhancing institutional capacity and implementing deep structural reforms to manage spending, ensure adequate revenue, and meet environmental, social, and security objectives. Policymakers must also consider the distributional impacts of reforms, particularly on vulnerable households. A broad reform agenda tailored to country circumstances is essential, with urgent actions needed in many countries to ensure the sustainability of pension systems and to combat climate change through fiscal instruments like carbon pricing. Increased revenue mobilization, particularly in CESEE, and the reduction of inefficient spending are critical for creating fiscal space for priority expenditures. Strengthening the EU's fiscal capacity to provide common public goods such as climate, defense, energy security, and R&D and implementing structural reforms to enhance growth potential are also vital. However, raising awareness of these issues and implementing the necessary reforms will be challenging. A well-designed fiscal framework that incorporates long-term spending pressures, supported by comprehensive analysis and data, is crucial for informing public debate and guiding national decision-making to ensure that spending pressures are adequately addressed. Ultimately, inaction is not an option, as it risks fiscal sustainability and the fulfillment of priority spending needs.
Keywords:
Fiscal policy; structural reforms; climate; defense; demographics; aging; health; public debt; fiscal institutions; spending pressure; member states; EU climate goal; increase EU resilience; emissions trading system; EU financing; EU rule; carbon border adjustment mechanism; EU budget; EU country; climate goal; spending needs; Pension spending; Defense spending; Pensions; Europe; priority spending needs; data from European Union; inefficient spending; long-term spending pressure
Cover IMF Working Papers
Migration into the EU: Stocktaking of Recent Developments and Macroeconomic Implications
Francesca Caselli
,
Huidan Huidan Lin
,
Frederik G Toscani
, and
Jiaxiong Yao
Against the backdrop of the war in Ukraine, immigration into the European Union (EU) reached a historical high in 2022 and stayed significantly above pre-pandemic levels in 2023. The recent migration has helped accommodate strong labor demand, with around two-thirds of jobs created between 2019 and 2023 filled by non-EU citizens, while unemployment of EU citizens remained at historical lows. Ukrainian refugees also appear to have been absorbed into the labor market faster than previous waves of refugees in many countries. The stronger-than-expected net migration over 2020-23 into the euro area (of around 2 million workers) is estimated to push up potential output by around 0.5 percent by 2030—slightly less than half the euro area’s annual potential GDP growth at that time—even if immigrants are assumed to be 20 percent less productive than natives. This highlights the important role immigration can play in attenuating the effects of the Europe’s challenging demographic outlook. On the flipside, the large inflow had initial fiscal costs and likely led to some congestion of local public services such as schooling. Policy efforts should thus seek to continue to integrate migrants into the labor force while making sure that the supply of public services and amenities (including at the local level) keeps up with the population increase.
Keywords:
Migration; Labor Markets; European Union; migration perception; net migration; integration policy; EU citizen; migration development; Labor shortages; Aging; Europe
Cover Selected Issues Papers
Japan’s Fertility: More Children Please
Kohei Asao
,
Danila Smirnov
, and
TengTeng Xu
Japan’s fertility has declined in the past three decades. Raising Japan’s fertility rate is a key policy priority for the government. Using cross-country analysis and case studies, this paper finds that the most successful measure to support the fertility rate is the provision of childcare facilities, particularly for children aged 0-2. Offering stronger incentives for the use of paternity leave can alleviate the burden of childcare on mothers, supporting fertility. On the other hand, there is limited evidence that cash transfers are effective in supporting fertility, based on international experience.
Keywords:
Fertility; childcare; gender; labor market; fertility growth; TengTeng xu; Japan's fertility; fertility rate; fertility rate growth; Women; Gender inequality; Gender diversity; Employment; Aging; East Asia
Cover IMF Staff Country Reports
Japan: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper analyzes the main drivers of persistent gender gaps in leadership in Japan and identifies public policies that can play a role in closing these gaps. Despite its economic relevance, analysis on the drivers of women leaders and managers in Japan is limited. There are a few existing studies, such as Yamaguchi (2013), that use firm level or survey-based data to identify the key constraints to women’s career advancement. Women are also underrepresented in policy-making positions. The availability of public childcare facilities has improved, and is positively associated with the share of female managers. As witnessed in the case of Japan, increasing female labor force participation is not sufficient to ensure that women have good jobs and good careers. In order to foster the advancement of women into managerial and leadership positions, policy efforts need acceleration. Reforming current employment practices and policies are essential for improving women’s quality of jobs. This will also help increase productivity, wages and advance an equal society. First, further progress should be made on work-style reforms, such as encouraging the use of flexible working schedules and teleworking options.
Keywords:
funding affect startup performance; labor market dualism; risk culture; childcare leave cause; wage income; Income inequality; Income; Women; Income distribution; Gender inequality; Global; East Asia
Cover Selected Issues Papers
The Fiscal Cost of Aging in Belgium: Pensions and Healthcare
Mr. Jean-Jacques Hallaert
Belgium faces a fiscal consolidation challenge at a time when the fiscal cost of aging—primarily related to pension and health outlays—is mounting. Pension spending will increase relatively fast unless a combination of measures related to pension generosity and retirement eligibility are put in place. Potential efficiency gains are large in the health sector and could absorb part of the fiscal and reorganization costs related to an aging population.
Keywords:
Belgium; Aging; Fiscal cost of aging; Pensions; Healthcare; reorganization cost; cost of aging; cost pressure; fiscal cost; healthcare cost; Pension spending; Europe; Global
Cover IMF Staff Country Reports
Belgium: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper explores different aspects of fiscal consolidation in Belgium. Belgium is facing higher structural deficits and rising debt after the pandemic and energy crisis. Fiscal consolidation is needed to lower inflation, rebuild buffers, reduce debt, and preserve Belgium’s social contract. Comparisons with peers show that rationalizing and increasing the efficiency of social benefits and the public wage bill would need to be at the core of the consolidation effort. All federal entities should share the burden of the adjustment, in a coordinated manner, with accountability at all levels of government, and within a credible and clear multi-year consolidation plan. Comprehensive spending reviews would help target budgetary saving. In order to mitigate the growth impact in the near term and boost potential growth, public investment should be preserved, and the adjustment should go together with structural reforms to increase labor force participation and productivity.
Keywords:
state government expenditure; health efficiency frontier; cost of aging; major spending category; healthcare expenditure; Aging; Pension spending; Pensions; Fiscal consolidation; Europe; Global
Cover IMF Working Papers
Navigating the Well-Being Effects of Monetary Policy: Evidence from the Euro Area
Mehdi El Herradi
and
Aurélien Leroy
Central banks have recently adjusted their communication strategies to enhance engagement with the general public, yet there is limited understanding of public sentiment regarding monetary policy announcements. This paper investigates whether monetary policy announcements influence household (subjective) well-being in Germany over the period 2002-2018 and finds that tightening surprises reduce life satisfaction. Notably, the impact of a one standard deviation monetary policy shock on well-being is equivalent to a 4% decline in household income. This effect is particularly pronounced among middle-aged individuals and those belonging to the middle-class.
Keywords:
Monetary policy; Subjective Well-Being; Survey data; Euro Area; monetary policy announcement; standard deviation monetary policy shock; well-being effect; IMF working paper 23/248; monetary policy surprise; Income; Aging; Asset prices; Global
Cover Selected Issues Papers
The Recent Decline in United Kingdom Labor Force Participation: Causes and Potential Remedies
Gloria Li
and
Mr. Carlos Mulas-Granados
This paper studies the puzzling decline in labor force participation observed in the UK following the pandemic. Retirement and long-term sickness appear to be the main drivers, with chronic illness remaining a lingering distinctive factor vis-a-vis peer countries. While the government has recently adopted a battery of measures to increase labor force participation, more could be done to improve health outcomes and increase the participation of the long-term sick and the disabled, keep older workers in the labor force, increase female labor force participation, and improve the skills and productivity of both domestic and foreign workers that join the workforce.
Keywords:
United Kingdom; labor force participation; inactivity; long-term illness; retirement; productivity; IMF Slected issues paper; health outcome; decline in United Kingdom; title page; UK system; inactivity spike; Labor markets; Aging; Labor force
Cover Selected Issues Papers
Spending Efficiency and Reforms: France
Iulia Ruxandra Teodoru
and
Ruud Vermeulen
To rebuild fiscal buffers after large fiscal responses to successive shocks over 2020-22, France will need to reverse the trend spending increase observed over the last three decades through structural spending reforms. This paper identifies areas where scope for savings or efficiency gains exist based on an evaluation of the level and efficiency of public spending in France relative to European peers, using benchmarking analysis and stochastic frontier analysis to derive efficiency frontiers. Reforming social protection, health, education, and civil service, and rationalizing tax expenditures should preserve or improve outcomes while generating savings that would help meet medium-term adjustment needs.
Keywords:
Public Expenditure; Efficiency; Fiscal Consolidation; Fiscal Policy; France; efficiency frontier; efficiency gain; frontier analysis; IMF staff calculation; spending gap; Tax expenditures; Aging; Europe; Global
Cover IMF Research Perspectives
IMF Research Perspectives: Spring/Summer 2021
International Monetary Fund. Research Dept.
IMF Research Perspectives: Spring/Summer 2021
Keywords:
IMF research perspective; government spending multiplier; R&D effort; IMF CSF; central bank financing; COVID-19; Bank credit; Fiscal stance; Global; Sub-Saharan Africa; Europe; Africa