Projections of population, education, labour supply and public pension benefits. Analyses with the dynamic microsimulation model MOSART

Abstract

Norway, like most developed countries, is facing an ageing population from the beginning of the 21st century, and this may have large impacts on public pension expenditures. These relations are analysed with a dynamic cross-sectional microsimulation model called MOSART. The model simulates the life course of a representative sample of the Norwegian population with respect to demographic events, education, labour supply and public pension benefits. Changes in these subjects since 1960 are also reported, and the MOSART model is tested by its ability to reproduce the actual development in this period The base line alternative of the analyses is a situation where "everything continues as in 1993". Consequences for the tax level are analysed by calculation a contribution rate given by dividing public pension expenditures by the sum of wages and half the public pension expenditures (pensioners pay less taxes than wage earners). This contribution rate was 15.6 per cent in 1993 and increases to 25 per cent by year 2014 with the base line alternative. The size of the population has stabilized by this time, and the projected contribution rate is the result of structural aspects of the individual life courses. These aspects include the average number of years each respectively participates in the labour force or is a pensioner, and the ratio between average pension benefits and wages. Improved benefits and longer life expectancy explain most of the growth in the contribution rate.