Migration, retirement, and aging in stable populations

Fernando Riosmena, University of Colorado at Boulder
Maria E. Winkler-Dworak, Vienna Institute of Demography
Alexia Fürnkranz-Prskawetz, Vienna University of Technology
Gustav Feichtinger, Vienna University of Technology

Immigration has drawn attention as a potential contributor to solve some of the problems associated with population ageing. However, previous studies have deemed it as an inefficient way to rejuvenate the population, and one that would generate unrealistic growth levels in many ageing nations. While this literature as a whole highlights the trade-offs between the rejuvenating and growth effects of immigration, most studies look at either of these effects, rarely concentrating on the actual trade-off between them. Further, these studies have used a stable population model with fixed migrant inflows or, in one study, tying migrant flows to a share of the birth flow. We argue that a fixed inflow or a target tied to the number of births may not yield an optimal or realistic solution to the aforementioned trade-off and propose the use of an immigration regime in which the number of migrants is tied to labour market needs, approximated by the difference between retirees and new labour force entrants in a given year. Guided by prior work on the optimal age composition of intake into organizations, aimed to reduce ageing while curbing growth, we also propose the use of a bimodal age distribution of immigration that includes members both just entering the labour force in addition to older individuals close to leaving it. In addition to being optimal in terms of its rejuvenating/growth effects on the mean age, we study the implications of using such a schedule in terms of its effects on dependency ratios vis-à-vis more commonly-used age distributions of immigration. We illustrate these effects using the case of eleven European, East Asian, and North American nations with varying levels of below replacement fertility, with all also undergoing substantial ageing, and which have had sizable immigration in the recent past.