 Okay, I'm keen to have the discussion now about demographic trends, yeah, and I'm really happy to open up with Professor Axel Börsch-Supern, who is the director of the Munich Center for the Economics of Aging at the Max Planck Institute for Social Law and Social Policy. I hope I brought the name fully, yeah, and correctly, excellent, I thought so, yeah. We will hear a little bit about demographic trends in the euro area countries and what they imply, among other things, for the economic growth, for employment, and in particular for capital flows, yeah. And his paper will be discussed by Professor Anna-Maria Meider, who is an associate professor at Georgetown University, and like always, after we have the presentation and the discussion, we will have a Q&A, and I'm pretty sure it will be as lively as the last one, because they are very interesting, I think, conclusions coming out of your presentation. And you will talk about migration, I heard, which is for sure something what is very interesting and very important right now, too. So please, the floor is yours, Axel. Thank you. Thanks a lot. It's not only an honor, it's also fun to talk in this audience and to celebrate with you the achievements of having the euro for two decades. Now I have the modest talk task of talking about the next four decades of the euro area, and I will do this by focusing on demographic changes, a little bit on migration, and quite a bit more on economic growth. So let me start. There will be a lot of slides. What is population aging? For the next two decades, it is not so much the shrinkage of the population. That will happen in the third and fourth decade from now. It's more a shift of shares of the different cohorts, age brackets, within a fairly steady population size. Now if you look, that is best measured as what we call the old age dependency ratio, and you see in the upper left hand corner, this is the number of people 65 and over divided by the number between 20 and 64. You can change this to a similar number, it doesn't really matter, and you see four countries. So there's obviously Japan, we all know as the oldest country on top, and below are the two front runners in terms of youth, China and the US, and you see interestingly China is now the youngest but will actually give place to the US, and the euro zone is in the middle. And if you look at the orders of magnitude, then they're huge, right? You have about five young people to one old in China right now, and it's two to one in Japan, huge changes in between. Now the interesting thing, that is sort of a first message, the euro zone is so heterogeneous it almost fills the entire place between China and Japan. So the heterogeneity of demographics is huge within the euro zone. Now why is that so? You can spend all kinds of details here, I tried to make the story short. There are some countries where you had a very sharp transition from the baby boom to the baby bust. These are the apologies, Germanic countries, including the Netherlands, Austria, Switzerland, and also China for a different reason, Chairman Mao greeting you, also has very sharp transitions between boom times and boost times. So that's one group of countries. Another country is more of the Mediterranean ones, for a long time had low birth rates in high life expectancy, that's why they have the largest proportion of older people. And then there are some countries like France, Sweden, the Scandinavian countries and the US which have an increase in life expectancy but no decline in fertility, essentially no decline in fertility. So these are three very different patterns and that explains some of the variety of demographic trends. Now the aim of sort of looking at the next four decades seems crazy given these long time horizons. So one important question is how reliable are actually these projections and as you will see it's quite different from the world in which you are a central bankers. So what we actually see is that for the next 10, 20 years the bandwidth of different projections is fairly low. Now this is taking all kinds of combinations between low and high fertility, low and high migration and so forth. You take the two extremes which are at the top and the bottom and you see they do fan out but we are now talking very hard for you, probably, to read until 2060, so a long time ago. If you go for the next say 20 years then it's for sure that the Eurozone will age. This is actually showing the fans for Germany but for the Eurozone it's the same. And the most important message here is it will not be a temporary phenomenon. So even in the best of circumstances there will be a plateau which we reach about in 35, 2040 but it's not a temporary phenomenon which go away. So any kind of policy which tries to sort of dig a tunnel under the demographic mountain will fail. The tunnel will never reach the light. Either by some grandiose demographic fund, that won't work, or if you try to fund the pension, the healthcare systems by increasing debt and then try to repay it you won't have the chance actually to repay it. That's another important message to keep in mind. Population change is there to stay and it will change that world to a world where we have more older people. Now what migration help? That's my short only slide on migration and obviously it does make a difference. Now these are again for Germany you see three scenarios where you have migration of 100,000, 200,000, 300,000 per year in and out and you see it does make a difference but it makes only a small difference. Now obviously if you have huge migration and these are younger people who migrate in which is the typical kind of phenomenon then you can bring the odd age dependency down but you have to look at the numbers here. So to flatten out the curve the average for the next 40 years has to be 1.2 million per year. Now that is more than Germany had in 2015 so it's completely out of the question right? And this is only the average because aging is nonlinear actually at the peak it would be 2.1 million. So it's out of the question that migration will take care of population aging. The other one which is always asked what about a new baby boom? So rather than having 1.5 kids have more than two like the US had until recently. And again you don't have to think very long. Well if you look at the odd age dependency ratio which divides 65 to 20 to 64 you obviously don't see anything for the next 20 years right? Even if there were a baby boom right now it takes 20 years until they enter the labor market. So it won't help to adjust for the increase which we have. And even in the long run you see the same what you have seen earlier. Even with the much higher fertility rate you will just lower the plateau but not go back into a young world. So the issue is the demographic changes will be there independent more or less of migration and in the future baby boom. So let me move now from demographics to economics and show you the same picture in a different metric now the share of working age people. And obviously it's the same kind of figures just upside down. The point I want to make here is really economics 101. What happens in an aging economy you have if you look at GDP per capita just fewer workers per capita as the main input in an economy. And this will tell you that GDP per capita will be under pressure consumption and everything which you derive from GDP per capita. It's not as straightforward. So what we actually do is adapt a use a OLG model which computes GDP per capita consumption other macroeconomic aggregates and look how that will develop when we have fewer and fewer people in working age. Now the figures I show you and that's important are net of the general productivity trend. So what you see as a decline is a decline relative to a now let's assume exogenous productivity trend. I'll actually talk about productivity later why this is not completely a stupid assumption that we have exogenous productivity here. Now what you see is this is the decline of labor force per capita and the point to the first point I want to make is if you look at GDP per capita it will not decline as much and why so. Essentially this difference is explained by changing relative prices. Let me actually jump to the next point. You will see some increase in wages because there's a lack of young people so that drives wages up relative to that return to capital I mean return to productive capital will go down actually more than that and we'll talk about that later as well. Then of course drives endogenously some substitution of labor by capital robots whatever you imagine. And this substitution of young people by capital will actually generate a slower decline of GDP per capita than the labor force. So that's the first good news sort of endogenous adaptation thanks to higher capital intensity. Let's actually look at the difference in the growth rates here if you translate this over the long time this loss of GDP per capita relative to the exogenous productivity trend is about half a percentage a little less and that is again an important number if we think about productivity changes being in the order of one and a half percent or two percent then this is substantially lower. Now all the gloom about population aging doesn't mean that GDP is actually going down or consumption possibilities it goes down relative to a still growing trend now there's still even if you if you're a modest think about secular stagnation there's still some positive growth left and I again I think that that's an important message it's relative to productivity there's something left over. And if you look there there there there are two more graphs here and the first one is gross national income and the second one is consumption now you see gross national income is actually declining much slower than GDP per capita what is happening here now this oil G model is a multi-country model where you have as symbols for the for the Eurozone you have the countries Germany Italy and France and for the rest of the world I take the US as a simplification what happens in a world where the Eurozone ages much quicker than the in deeper than the United States there will be foreign direct investment going actually from Europe to the United States where you actually have a higher rate of return as long as the returns equilibrate in this model very simplistic model and then a part of the income in the Eurozone is actually generated outside of the of the Eurozone so you get a big divergence between gross domestic product and gross national income and that actually finances consumption for quite a while so what you see is that international capital flows are positive for quite a while you see turns around in the 2040s then eventually the baby boom will have sort of used those assets which have been invested in here in the United States rest of the world outside of the Eurozone repatriates that and then the the flow will reverse and that helps to actually stabilize consumption quite a bit more than even GDP per capita so there they're two endogenous largely endogenous adaptations which would happen one is higher capital intensity and the other one is international capital flows back and forth for some time right eventually this will also go down I put these circles around 2030 and you see the differences okay unfortunately there's still something left if you want to keep the growth not the level but if you want to keep the growth of GDP or capital or consumption as we have been used to how to fill that triangle well there's no endogenous adaptation here in the Marlin anymore you actually need policy to do so and I think it's pretty much a no-brainer these are sort of the typical policies recommended by the Commission by the OECD and so forth increased retirement age tried to get people earlier into the labor force increased female labor force participation everything which sort of helps to increase the pool of labor do something about unemployment and this is sort of a stylized reform and the interesting question is now these these are what I would call moderate steps it's not increasing retirement age from 62 in France to 69 it's two years people also quarrel about this but in the grand scheme of things and you and this is done in a in a in a time horizon of more than 20 years so it's a small change in every year anyway so this the question is can the modest reforms of this type actually fill that triangle and the answer is it depends let me first show if we think that labor supplies exogenous so all these changes imposed by policy will 100% be done and then you see that the the labor force per capita would still slightly decline GDP will slightly decline but recover and consumption more or less is stabilized now obviously I choose the parameters to achieve that exactly but this is exogenous labor supply now the next step I do is from a modeling point of view fairly complicated I endogenous labor supply and allow some substitution between the extensive and the intensive margin of labor supply so there will be a law change which requires you to work longer but you're actually able to for example within the family between between the two parts in the marriage to redistribute your your labor supply and there are other mechanisms you work less in somewhat less in older age but somewhat more in younger age if you allow these kind of substitutions you get in quite an astounding result which is that the that the reaction is actually fairly big right and a lot of the reforms will be undone I call this backlash effect you may want to give it a similar remark but it's not that easy if you have endogenous labor supply to actually force people to move out now this is calibrated to what has happened in the last 10 years in in the eurozone so maybe that effect over estimates what will happen in the future but you know all these resistances to working longer and this pretty much undoes the reform effects okay so if I take a short interim resume aging takes about one third of the growth in the in the eurozone but it's still the remainder still positive there are endogenous forces which sort of accommodate this and make it easier than than one may think in the in the first round but this will only happen these automatic adjustments will only happen we talked about this a little bit earlier in the in the session today if we actually allow digitization and higher capital intensity many urans are against it and we allow free capital mobility but within the eurozone and out of the eurozone which is the big big one so it's not completely automatically and it will be one of the the policy issues we have to think of moderate structural reform needs and can fill the remaining gap but the backlash may be large so avoiding backlash will be important thing okay let me pick up a point of which may interest you as central bankers and go back to the decline of the of the the not the interest rate but the rate of return to productive capital and most of you have heard of the the asset meltdown hypothesis which sort of is very blackish in predicting that exactly when the baby boomers need their savings most it actually will be devaluated and you do see this but it's it's important to recognize this depends very much on the openness this again is a simulation same olg model now using only Germany you see that the decline in rate of return is substantially lower if there's if Germany has a free fact capital flows within the EU and even less so within the OECD and if you add sort of global markets china india and the large asian country will be less depends a little bit on on the pension systems but these are details i i don't want to get into in any case what you see is not an asset meltdown but it is a decline in rates of return there's no doubt about that rates of return will decline particularly in in in relation to to the wage effects okay let me change scenery now now completely and actually go to to to the micro foundations of some of the stuff i'm i'm doing in the olg model one of the controversial assumptions is productivity stays exogenous now you could think actually that it's not the case because we have more older people older people are less productive as many think then obviously endogenously there will be another decline in in productivity not only because of quantity but also because tfp will actually decline now there is no evidence whatsoever we can find at least on what i would call shop floor product productivity over normal worker in a standard job now that's something special so there there there are many professions where age may help or age may hurt i think in central bank it's very different from athletes right we have the peak earlier the peak late but in the shop floor we we we don't see anything it's not easy to measure shop floor productivity that's why we need tons and tons of data this is in the automotive sector we did the same in in the service sector lots and lots of observations and essentially it's flat and it's made flat by the managers because they they actually sign people in a way that age effects are on on design flattened out and i think that's again an important message the the effect is on on aging on on GDP is essentially a quantitative effect and not so much a productivity effect i'm looking on the on the time so i would jump over this and again another change of scenery what what what i have talked about until so far and that's where my main expertise is is the real economy but here we are in zintop so i also do a little bit on on the monetary side now aging and inflation if you look at the at the literature on the demographic effects on on inflation and deflation it's a mess you get results in any kind of direction any kind of timing uh and we were quite irritated by that and so what we did is actually we augmented this oil g model by household's demand for money just some very primitive money in the utility so you you you have a demand for for cash holdings we have a central bank with a very simple tailor rule and then we we sort of push this model through the demographics again and the main insight in these somewhat complicated graphs is the blue line is inflation we don't really distinguish between expected and realized it's a very simple model but the the main point is we distinguish between two effects which happen one i call the size effect in the other one the structure effect now the size effect is uh if eventually populations shrink demand will decline aggregate demand and since supply is somewhat sluggish uh you get negative pressures on the inflation maybe not deflationary pressures but definitely dampening inflation so this is the intuition many people have about japan right uh but there's a second effect which is more subtle and more difficult to understand this is people the demographics is not linear it actually has the baby boom baby bust and the baby boom happens to be in certain stages of the life cycle and this is different from country to country now there there are times when the baby boom is still saving and then there are times when the baby boom will dissafe and actually consume much more and that changes again the structure of the pressure on aggregate demand obviously uh and depending on the country you get what we call the the structure effect and that can either amplify the size effect or work in attenuated work in the other way uh it's on top of it and it's usually smaller than the than structure effect but it modifies it quite a bit and now if you see the two countries which I have drawn here as outcomes very different uh so in Germany the both the structure and the size effect goes downhill and fairly soon crosses this uh the famous two percent uh threshold as the upper target of of the cb uh where's in France that won't happen and that of course reflects the different kind of dynamics it's even more so interesting if we look at the united states in china uh where uh you see that uh us is more like france uh where the inflationary pressures are relatively uh stable over time where it's in china you see this very quick decline and you see the the the population that's why I uh showed you in the very beginning the the two transitions between population growth and population decline thanks to chairman Mao and you see them reflected again in the in the structure effect here so let me finish my time is over and draw a final resume while all countries are aging timing speed and extent are very different even within the eurozone not to speak about globally the negative impact on growth can be dampened by endogenous reaction plus structural reforms we have seen this before product declining productivity and i jumped over the health care do not prevent reforms such as uh increasing moderately increasing a retirement age uh you don't see any kind of significant health changes between 65 and 67 on average stress on average and the final point is aging induced deflation effects uh strongly depend on demographic characteristics uh and it's a topic we talked a lot about yesterday heterogeneity within the eurozone uh is widespread and in many dimensions and demography is yet another uh dimension of strong heterogeneity which you will have to manage uh and i wish you good luck for that uh and thank you for your attention thank you okay good morning uh first of all i would like to thank the organizers for inviting me and for discussing this excellent paper and in this paper the authors analyze the macroeconomic implications of population aging on financial labor and goods markets they consider the eurozone and they use an overlapping generations model and they consider three different scenarios in the first scenario they keep uh labor force participation rates constant exogenous and they are the current ones and in this scenario we do see the population aging has a very big negative effect on GDP growth GMP growth consumption per capita in the second scenario what the authors do is to consider exogenous labor force participation rates but they set them equal to their rates identified by some labor market policy reforms for example increasing the retirement age by two years reducing the labor market entry age by two years and importantly i will go back to this point increasing women labor force participation and decreasing the unemployment rate and in this case what the authors find is that the negative impact of population aging can be mostly undone through these labor market policy reforms and so what the authors say is that demography is not destiny we can push back with policy reform but then very interestingly what the authors do is to consider an endogenous responses of economic agents in the third policy scenario in which labor force participation rates are endogenous and there what they show is that this backlash by workers and other economic agents in the economy can for the most part undo the positive effect of labor market policy reforms so in terms of the main drivers of population aging and the authors analyze for fertility rates, carbon and future ones, migration, the baby boom baby pass transition and the secular increase in life expectancy and i was tasked with considering the role specifically the migration can play with population aging in a context with population aging so i'm gonna start by discussing what i learned from the paper in terms of the role of migration and what i learned is that migration has been able to let countries avoid reductions in population sizes so it was predicted that Germany would experience a decrease in population for many years but that didn't happen and it was because migration was higher than expected but and this is the negative message from the paper about migration we also find from the model that even very large migration waves cannot undo the size effect of population aging so the reduction in the labor force and not even very extremely large migration wave can undo the structural effect of population aging so overall not a very positive message about the role the mitigating role of migration in terms of population aging and what the authors do and is to show these two charts that Axel showed you just a second ago i will go back to these charts but on the left hand side we have Germany and also on the right hand side but on the left hand side what the authors do is to consider different scenarios in terms of fertility rates mortality and life expectancy and they consider each of these drivers independent from each other and on the right hand side instead the authors consider different values of migration and the main point is that when the old age dependency ratio is kept constant is when we have flows of migrants which are politically unfeasible 1,200,000 as Axel said so my first point about this paper and in relation to migration is that my understanding of what the authors are doing is to consider the impact of migration through different sizes and age structures of migrants but truly migrants affect not only age of the current population but when migrants come in they also affect the fertility rate so i think that we should not consider these two drivers of population aging independent from each other some of the effect of increasing fertility rates should be causally assigned to the arrival of migrants so in some european countries fertility rates have increased in the last few years and that has been because migrants have arrived and they tend to have much higher fertility rates than they do so let me show you some statistics they're quite small but just to give you some examples in Belgium between 2001 and 2005 natives total fertility rate was 1.5 and the immigrant one was double it was three in Italy in 2004 the natives total fertility rate was 1.3 basically and again it was double for immigrants so basically when we go back to this left hand side chart and we look at what the impact would be of higher fertility rate higher migration we should really combine the effect of migration with some of the effect of a higher fertility rate and i'm curious what kind of numbers you would get by doing so next one of the big themes in my discussion will be that migration can affect the eurozone in the context of population aging through other channels than simply affecting the size of the labor force in different age structures so let me give you some examples and one is a channel that is still related to the labor market so there is very interesting research in the migration literature that low skilled immigrants have decreased the prices of low skilled intensive goods and services this is research and for example for the united states by Patricia Cortes in 2008 and some of these low skilled intensive goods and services are household related services for example childcare and so follow-up research shows that in the united states in italy in spain in those locations where low skilled immigrants went the labor force participation extent so the amount of work of highly skilled women increased so what is going on what is going on is that high skilled women have been able to outsource some of the household related tasks like childcare to low skilled immigrant women and so going back to what the type of labor market policy reforms that were analyzed by axon and the fact that we need to make these policy reforms viable real and we see that here immigration has played a very important role and actually i'm going to show you the example of italy in spain italy is represented by the red bars and spain is right next to it but italy in spain have very quite low women labor force participation rates and they are also the countries where it seems that and immigrants low skilled immigrants have been employed a lot in household related tasks and for these countries there is evidence about the link that i told you about so low skilled immigrants leading to higher amount of work by highly skilled women and of course low skilled immigrants don't only provide childcare services in the household they also provide for example elderly care services long term care services so they supply these services but of course population aging is going to affect the demand for these services the demand for long term care is going to increase a lot with population aging and we see that low skilled immigrants play a very important role by providing these services for which there is not enough supply of native workers and this is especially true in countries in southern europe that rely a lot on families on households as opposed to public and private institutions to provide long term care so again italy spain southern european countries but there is not much empirical evidence about this channel next population aging is going to affect the demand for healthcare services and again we see that here high skilled migrants have provided healthcare more and more in destination countries starting from the us the united kingdom but this is increasingly true in the eurozone area so for example in ireland almost half of the nurses in ireland are foreign trained and more than one third of the doctors in ireland are foreign trained and here you see some summary statistics for countries around the world in terms of the fraction of doctors and nurses who are foreign trained and these fractions are going up um next because i'm running out of time i'm gonna switch focus from um well already did from low skill to high skilled immigrants and i'm gonna talk about research that is growing about the impact of high skilled immigrants on innovation and productivity there is um robust evidence that high skilled immigrants have increased the level of innovation and patenting activity this evidence is for the united states but also for europe i'm working myself on data from france and we are finding we are confirming the same result high skilled immigrants promote patenting activity innovation that can take place through many different channels it might be knowledge flows from countries of origin it might be selection on observables so immigrants a lot of times at least in the united states tend to specialize in very technical fields and it might be mobility across firms that allows knowledge to flow across firms and it might be task specialization a lot of time highly skilled native workers tend to specialize in more uh administrative co type of tasks while um foreign highly skilled workers tend to specialize in research naturally and um so let me show you some statistics for the united states that are quite shocking i think in a good way that show you how much skilled migrants have contributed to innovation and and productivity in the united states so in 2047 percent of the stem workforce with phd's in the united states was foreign born and a quarter of patents originating between 1919 2000 from the united states were by were authored by foreigners and one quarter of us-based noble prize recipients between 1919 2000 were foreign born so you can really see that highly skilled migration is an engine of innovation and growth so let me conclude with a few sparse considerations which are as important um so first of all the authors talked about the role that fdi can plays a mitigating factor of population aging and there is now growing evidence about the fact that immigrants promote foreign direct investment i have myself worked on data on refugees for the united states who settled refugees and we do find that of course with a certain lag and there is a positive impact of resettled refugees in the united states on foreign direct investment back to the origin countries next and i want to briefly discuss what das manfakinen senorotto called the floridization of europe so the fact that there is this movement from the north to the south of europe of old age individuals and of course that is going to have macroeconomic implications in terms of health expenditures in terms of long-term care expenditures in terms of inflation and i think it would be interesting to introduce it in the model and finally i did not talk about the fiscal impact of migration which is of course related to um what axl talked about because it's usually the aspect of the interaction of population aging and migration that is more often discussed better known but i want to make two points about the fiscal impact of migration the first one is that immigrants not only tend to come in their prime working age so they're young not only they have higher fertility rates than natives but they also a lot of times are temporary migrants especially europe and so they tend to go back to their origin country exactly at the time when they would get pension benefits so it turns out that a lot of times they contribute to the pension system but they don't take back from it and if there are no portability laws between the destination and the origin country and finally i want to point out that the fiscal impact of migration varies a lot across studies across countries it depends of course on the on the assumptions that we make on participation rates of natives versus migrants and values as other assumptions and i want to show you a graph which is quite telling and so this is a graph from italy and it's from an official document of the current government one of the very first documents so even in a place where migration is very controversial the role of migration in reducing and fiscal problems is recognized so here you have three scenarios the dark green line corresponds to actual migration and it shows you the impact on the debt to GDP ratio so the debt to GDP ratio would go up in italy if migration were reduced by 33 percent basically the debt to GDP ratio was would almost double while if migration was increased by 33 percent the debt to GDP ratio would almost almost stay constant so i'm gonna conclude very quickly basically my point in this discussion was to say that i really enjoyed the paper that i've read and i learned a lot i wanted to bring in a discussion about what role migration can play and the role that migration can play is way more complex than the impact that the direct impact on the size and age structure of different parts of the population many thanks many thanks anna maria i will give i will give axel the opportunity to answer to some of the questions and comments made by anna maria and then i will give you the floor here in the in the auditorium okay i'll be short thanks a lot great discussion and i fully agree that i maybe we all have to study migration more it's complexity and all the feedback cycles which are involved just a couple points the high migration of the order i i draw how to flatten the the the aging profile is not only politically feasible it's infeasible period so many people won't come and anyway the the fertility effect the numbers you showed are the is the fertility of the incoming natives they actually adapt very quickly so after one generation you see essentially no fertility differences anymore so it helps quite right and it should be modeled but the effect is attenuated if you if you go in the long run then you have the i really like that the nanny effect let's call it the nanny effect that you improve labor force participation among high skilled women and i i would really like to see a sort of a quantitative estimate how much that great yeah and now in the following points you made i think it's very important to distinguish the indirect effect and the direct effect if if if we have more people working in long term care as their primary job that then i would call the direct effect because that's more people they get a job that is actually in the numbers the indirect effects are the interesting one like the nanny effect which which kind of top or the other one is the fdi channel that it makes fdi easier to to have because you you you can build on the networks which immigrants may may may work here final remark is on high skilled migration to my knowledge almost all of the high skilled migration say to italy or say to germany or to france is within eurozone and migration and very little comes from from abroad if i may call outside of the eurozone abroad that is somewhat different from from the situation of the united states which gets high skilled migrants from uh yeah across the pond i'm looking at the various mit graduates sitting here who most of them come from elsewhere right okay the uh so this but i agree that there there are more upsides of migration than i but there's also down down size downwards tensies integration costs are very high and germany now now sees this and whether the long run effects really outweigh the the integration costs right now is an open question they have been various studies in the u.s some some are a little bit positive some are a little bit negative but it's not as large an effect as you you want just because skilling these new immigrants especially what has happened in 2015 is quite a quite a bit of an effort but anyway thank you a lot very interesting discussion and many thanks to to axl and anna maria for sure my boss the watch tells me six minutes are left i'm already looking pleading for christine to give me another five minutes good 11 left but in order for everybody or not everybody but at least to have four or five questions i would ask you kindly ask you to keep very short question and short answer quick one please richard portes london business school i want to focus on the dependency support ratio story um and uh there are several qualifications i think you have to make to that the demographers have consistently underestimated the the rate of increase of life expectancy we know that uh why won't they continue to make that mistake why won't they have continued to make that mistake and what's more important healthy life expectancy is going up even faster than life expectancy because of medical advances so that's one factor that i think changes the picture so much the second factor is that um exogenous and dodgerness labor supply there's resistance to working longer sure but there are some strong counter railing forces one is the decline in pension incomes if you like the decline in replacement rate i think that's very likely over the i think most of the pension predictions say that and that will induce people induce people to work longer and the second point and the final point is that is a little more complicated over the past couple of decades with relatively stagnant real wages household incomes the the rise in household incomes has been driven by labor rising labor participation of women and there's a limit to that right however many nannies you may get in uh there's a limit to that and we're approaching that limit uh now given that and the rise in mean childbearing age you're going to have families well where earners are 65 say with children 25 20 25 um maybe 30 but still in need of the bank of mum and dad right and um that will be a further inducement for people to work beyond the age of 65 so i'm very doubtful about the the 65 year limit there i wanted to connect this excellent session to the first one yesterday about convergence i was uh so access showed uh wide diversity of aging process across the EU and as well as wondering whether uh what is the contribution of this diversity in the conversions or lack of conversions of EU countries uh this can go directly through the production function or consumption patterns but it can also go through um uh the median voter that ages at a different pace across countries maybe even the uh franco-german divide across the Rhine could partly be due to the different demographic patterns so i wanted to have your your views on that so accounting but also the political economy of this thanks anything and next to you then your growth center for european policy studies in brussels i thought that your presentation missed out one point which is very important in europe which is the upscaling of the skill level of the population because we know that higher skilled people have de facto always a much longer working life and a large part of the increase in the labor force labor force participation of the elderly which we have seen over the last years is due to the fact that the new cohorts coming into that age bracket have a much higher proportion let's say of university graduates and others and i have seen uh projection which say that that actually will offset the impact of demographic aging so my question is if you uh combine the demographic aging with the increase in the education level of the general population um you might get very different results so one more olivier these were two tremendous presentations thank you very much i was struck by the graph of showing the rate of return the decrease in the rate of return which i take to be the rate of interest safe and assume is determined by global saving and global investment in your mall if this is the case and everything we discussed in the last two days becomes very relevant which is that with such rates the issue of first the cost of debt but also the zero lower bound you know likely to be with us for a number of years okay and then i have one more at the end and then i will finish the questions and you you please have a short answer yeah but Charles got out there let's see um unusually richard is exactly wrong in his comments uh one of the one of the main problems of aging uh which was not mentioned and is going to be enormously increasing is dementia dementia is an exponential function of age and as the number of aged over the age of 80 increases the number of care workers will have to increase enormously it was an ft column that suggested in japan within 10 years 10 of the workforce will have to be carers and carers are not likely to have much in the way of productivity increases second point is that the increased participation of the elderly has already over the last 20 years increased enormously and it will be increasingly difficult to raise the participation rates of the over 55 by a much greater extent now the questions i have are twofold uh the first one is surely with the collapse or with the reduction of globalization and the reduction of the a number of young workers the bargaining power of labor which has collapsed with a continuing decrease in the number of uh members of private sector trade unions that the bargaining power of labor will come back with the vengeance and that will offset the deflate any of the deflationary pressures that you've been mentioning and my second question which is primarily at your discussant is if immigration is so benefit economically beneficial why is it so politically unpopular okay so axel would you like to start yeah and i try to be short uh richard uh we all agree that the uh 65 as a sort of a limit to all that dependency makes no sense uh and uh but this is not the driving force here we actually have uh in the olg model uh it's a flexible transition there's no fixed retirement uh except in the laws where then it's a band with now how people actually decide now what we have seen in pensions uh and the incentive to work longer that has worked fabulously so in the 80s and 90s we have seen very very low incentives to work longer and lower labor force participation that changed around the turn of the century and since then we have a rebound of of labor force participation among people 55 and over unfortunately since 2015 it goes the other way around and that is part of the policy backlash which which i i have tried to model uh so that may be turned around again but uh i have muted optimism that this will uh will will get quick given the political situation right now convergence uh well i think it goes the other way around and it will strengthen divergence and will not only have a rine uh with a bridge uh but also the alps right and it will rather increase and uh will certainly be part of the uh EU commission's work uh try to minimize these effects uh danya the uh the true if there were an upscaling of the skill level that could do a lot that runs counter the the the the current observation of a secular stagnation uh so we have seen the the the upscaling of skill levels in the last 15 years uh but if you look at productivity levels uh they uh they they seem to go down but there are all these measurement issues uh the big big big new debate uh but i i i'm somewhat muted on that uh on on on on that issue um olivier of course yeah the zero bound will be more of a and finally charles uh i uh i agree that uh dementia will be a big cost issue uh these models abstract from the health care system if you built in the health care system and rising costs uh so sort of to model a let me say american health care system as part of the eurozone luckily we don't have that then uh you you you you obviously see much more of a problem uh that has nothing to with labor supply uh indirectly but the the costs are just skyrocketing of long-term care uh with the bargaining of the uh of the younger generation uh in in terms of wages uh that is i would say so reflected in the increase in wages which you have seen on one of the slides and a maria would you like to add something yes so for long-term care i briefly touched on it um so long to actually cost will increase also because of lack of workers who want to provide those services and that's one of the aspects where low-skilled immigration can help and in terms of the final question my answer is going to be related to what uh jamaica was talking about in the previous discussion and just like trade migration can produce very large benefits but there are very uneven effects so um some groups may gain less or be hurt and so there needs to be way to redistribute some of these gains i should say that the literature on migration actually does not find evidence of these negative labor market effects and being substantial they're either zero or they're very very small and eventually the medium to long run they turn positive so this is the first answer income distribution effects the second answer is misinformation so when you look at survey data you see that a lot of people don't know don't have a clue about the number of migrants in their country and um so for example now arrivals to europe are going down and migration politically is becoming more and more important which is a paradox and um uh messaging i think is very important i think in terms of migration we have been very defensive in trying to uh rule out negative effects but we haven't done a good job in talking about the positive effects so a more assertive messaging about migration has has been done in the past not now in the united states well um a little bit i i'm so sorry it's not possible i'm already over my time for at least uh 10 minutes i think and you will not have any lunch yeah um i'm pretty sure you will you will have a good discussion over lunch and this afternoon we had the big topics here at the end you know we talked about inequality between the regions we talked about permanent transfer we talked about aging and migration yeah and from my point of view um we could have another afternoon talking about policy solutions yeah it seems it's the old solutions again yeah it's having a good migration policy yeah put a lot of money into education probably a good idea yeah um and and probably all the other things which were discussed for the last 30 years and sometimes do not happen yeah and i would like to thank my panelists very much you know it was a great session with you