Model-Based Exploration of Societal Aging in the Netherlands

Model-Based Exploration of Societal Aging in the Netherlands

Erik Pruyt (Faculty of Technology, Policy and Management, Delft University of Technology, Delft, Netherlands) and Tom Logtens (Netherlands Organization for Applied Scientific Research (TNO), The Hauge, Netherlands)
Copyright: © 2015 |Pages: 39
DOI: 10.4018/IJSDA.2015010103


Mismanagement of societal aging is an important threat to health care, social security, and the economy of many nations. A System Dynamics simulation model related to societal aging in the Netherlands and its implications for the Dutch welfare system is used here to generate exploratory scenarios and to test policy robustness across many scenarios. Key concerns derived from this research are (i) the existence of plausible scenarios with severe labor scarcity, especially in health care, (ii) unsustainable evolutions of health care costs, and (iii) insufficient labor productivity, especially in health care. The authors' analysis shows that labor productivity may be cause of, and cure for, many of undesirable evolutions. The authors conclude that there is a need for: (i) sufficient increases in labor productivity, especially in health care, without pinching the necessary workers in care, and (ii) sufficiently raising the retirement age as well as raising the willingness to work longer and to employ older people. These conclusions are derived from the systematic data analysis documented in the appendix.
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1. Introduction: Societal Aging In The Netherlands

Population age distributions in many countries are shifting upwards due to increasing life expectancies and declining birth rates. This is often referred to as societal aging. Mismanagement of societal aging is an important threat to health care systems, social security systems, and the economy of many industrialized and some industrializing countries. In the Netherlands, a large proportion of current employees, the so called ‘post World War II baby-boom generation’, is expected to retire in the coming decade. With fertility rates below the replacement ratio of 2.1 children per woman (CBS, 2013), this leads to a smaller workforce relative to the size of the total population. A smaller relative workforce may be problematic for the Dutch welfare system which is partly based on tax payments from the active workforce to those in need of welfare benefits.

The increasing proportion of retirees may thus put the Dutch welfare state under pressure for two reasons. First, it may result in lower overall contributions to retirement funds, social security funds, and health care funds. And, second, it is likely to lead to increased public spending on retirement benefits, health care, and housing for elderly. In order to deal with the consequences of these demographic changes the Dutch government has recently raised the retirement age (from 65 to 66 in 2020). It is questionable, though, whether this policy is sufficient for dealing with the consequences of societal aging. In our research we therefore investigate the effects of slow but steady societal aging and policies to address problematic aspects of societal aging.

There are many studies related to societal aging and the fiscal sustainability of societal ageing. But many of these studies, like RIVM report by van der Lucht & Polder (2010), focus only on a particular aspect or subsystem affected by aging, like the labor market or the health care sector, in spite of the fact that many of these subsystems are strongly interlinked. For example, a decreasing workforce due to societal aging may result in a decreasing availability of personnel in health care, which may result in a decreasing quality of health care, which may in turn influence the availability of healthy workers, etc. Investigation of the effects of societal aging on all interrelated subsystems and the feedback effects within and between these subsystems is therefore needed too. Other studies, like CBS (2010), do indeed take many interrelated sectors into account, but do not thoroughly explore the effects of feedback and uncertainties on societal aging and aging related subsectors. Apart from studying the interrelated nature of different subsystems, and a plethora of uncertainties, it is also important to study the time dimension of societal aging and the resulting dynamics over time. Although societal aging is a rather slow phenomenon, it is most certainly dynamically complex. And in spite of being a slowly evolving phenomenon, urgent policymaking related to societal aging may be required since most policies for dealing with societal aging take much time to implement and even more time before they start to affect the system. Hence, socially responsible policymaking related to societal aging requires consideration of the larger system and the interactions within this system over a sufficiently long time horizon as well as the inclusion of uncertainties that may significantly affect the system in the short and long term. Although System Dynamics modelling (Forrester, 1961; Sterman, 2000; Azar, 2012; Pruyt, 2013) could be used for this purpose – and has been used to study aspects of (societal) aging (Sutrisno & Handel, 2012; Thompson et al. 2012; Eberlein & Thompson, 2013) – it has not been used to investigate the dynamics of demographic change and fiscal sustainability yet.

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