Population ageing and the labour market during the recent crisis in Portugal

Abstract

The recent debt crisis has affected Southern European countries particularly severely. One of its most negative effects has been the high level of unemployment. The ageing of populations complicates the functioning of social security systems, particularly owing to an increase in financial commitments to pay pensions. This creates pressure for larger budget deficits that, in turn, increase public debt, thus worsening the crisis and also the unemployment rate. Nevertheless, population ageing can also operate favourably in reducing the unemployment rate. Here we discuss the effects of ageing on the aggregate measures of labour market performance and call attention to the frequently forgotten positive direct effect of a change in the age structure of a population. We exemplify this with data from the period when Portugal was in crisis, Portugal being one of the countries that was not only affected by the severe debt crisis but also has a high proportion of elderly individuals in the population. In addition, we research the relative performance of the different age groups in terms of their labour market experiences.