Unbalance between young and elder generation

The aging process of population, which manifests with the reduction in the share of the birth rate of children and correspondingly reduction in the share of population of labor age, is observed in Azerbaijan, as in large part of world. From 2001 to the present time, in Azerbaijan the number of children of up to 14-15 years of age reduced from 32% to 24%. The number of Azerbaijani citizens at the age of 65 years and older during this time makes up 7 percent of the total number of population. As compared to other countries of the former Soviet Union, this index for Azerbaijan is not so terrible. Thus, with the higher share of elderly people at the age of 65 years and older, amongst the former Soviet Union republics, Latvia, Ukraine and Estonia (16%), Lithuania (15%) and Belorussia (14%) differ. In other countries it is low: Moldavia -10%, Kazakhstan - 8%, Kirghizia - 6%, Uzbekistan - 5%, Tadzhikistan and Turkmenistan - 4%.

Aging is a worldwide tendency. Population at the age of 65 years and older make up 7% of the world population. In the developed countries, the fraction of the people of 65 years of age and older in the total population reaches 15%, but in the developing countries, the figure does not exceed 5%.

Ten countries with the greatest and smallest share of population at the age of 65 years and older, %

Source: Center for Demography and Human Ecology of Institute of Economic Forecasting

It is expected that after 40 years the number of elderly people in the world will exceed the number of children. According to the estimations of the UN experts, the fraction of the people of older than 65 years in the total population approximately will double by 2050. For example, in the CIS countries, in particular in Byelorussia, it will grow from 14% to 25%, in Russia - from 13% to 25%, in Ukraine - from 14% to 27%. Such rates of aging are characteristic for the developed European Countries. According to the same forecasts of United Nations, in Austria and Switzerland an increase in the number of elderly population will be from 15% to 30%, Belgium - from 17% to 28%, Germany - from 16% to 28%, Greece - from 18% to 34%, Spain - from 17% to 37%. In China the expected growth rates can be even higher - from 11% to 33%.

Reduction in the birth rate and its stabilization at the low level will unavoidably bring to the absolute and relative reduction of the young and increase in the specific weight of elder ages. According to the data provided by the State Statistics Committee, in the first half year, the average life expectancy in Azerbaijan is 72.4 years. Even if the lifetime in Azerbaijan will remain at the present level or will insignificantly increase, already over the next few years a rapid reduction in the absolute population at the labor age and an increase in the number of elderly people will be continuing.

Under the present parameters of the pension system and labor market, this will indicate a sharp increase in the pension load, which falls on the labor force, which can negatively affect not only the financial guarantee of the operational pension system, but also the prospects of economic development of the country in general.

According to the data provided by the State Statistics Committee, currently in Azerbaijan there are 1,259,900 (14.65% of population), and 3.73% of GDP goes to payment of pensions. For the comparison, in Austria the pension deductions cost 15% of the GDP of the country per year, in Italy - 14%, in France - 13%, in the USA - 6.5%, in Japan - 5%, in Canada - 4.5%, in Russia - 1.5%. And, judging the present demographic situation, the expenditures on pension will grow in the geometric progression.

Answering the call of the increasing aging and taking into consideration the experience of the economically developed countries of Europe, several CIS countries take the path of gradually increasing the age of pension within the pension reforms. In Azerbaijan repeatedly it was decided to gradually rise female retirement age for three years from 57 to 60 years.

Age of retirement on pension in various countries

Increasing pension planking is the simplest way of settling problems of replenishing pension budget. However, there are other easier variants used in the worldwide practice. It needs to increase the amount of children allowance.

Already in winter the Azerbaijani NGOs protecting the rights of children, following examples of foreign counterparts, gave proposals on the payment of one-time money benefit on birth of child in amount of more than AZN 50. But still this theme stands in the center of consideration. The Deputy Chairman of the Permanent Social and Political Commission of Azerbaijan Parliament, Musa Guliyev, said that this proposal can be realized soon.

According to him, the Commission considers the issue of opening money account for the newborns in Azerbaijan, as this was done in Russia. In the opinion of the Deputy Executive Secretary of the ruling New Azerbaijan Party, member of Standing Committee on Security and Defense of Azerbaijan Parliament, Siyavush Novruzov, State must provide benefit to the newborn. In his opinion, this measure will help to avoid reduction in the population. "Nearly $3,000 should be paid for one child and $10,000 for two," Novruzov said.

It is possible not to issue the money to parents, but to transfer to the bank accounts of the children. The parents can spend monthly percentage of this amount on the needs of child. After reaching maturity, the children themselves can use the money being paid for them. Azerbaijan has capability to ensure the future of children, transferring money to their bank accounts. Thus, after reaching maturity, the young citizens will have certain funds in their accounts. This will serve the development of the future generations and will become stimulus for abridging the created unbalance between the young and elder generation.

But together with this entire situation, it is necessary to recognize that today the pension system of Azerbaijan increasingly corresponds to the world standards, due to the reforms, carried out over past couple of years.

Currently bringing the minimum wages and pensions to the same level with the living minimum is one of the priorities of the social policy of Azerbaijan. Although it was earlier supposed that this will take place already in 2008, today the experts, considering inflationary development in the country, incline to the opinion that it will be possible to reach this purpose not earlier than 2010. The level of the living minimum in accordance with the prices at the market will grow and, therefore, next year it is possible to expect an increase in the minimum wages and pensions.

The index of the ratio of average monthly wages to the average amount of pensions, which today is 34.1% in Azerbaijan, also moves experts to optimism. Let this not be the best index amongst the post-Soviet countries, but is a sufficiently acceptable figure under the conditions of the Azerbaijani economy. For comparison let us note that in Armenia this index is 18.1%, Belarus - 44.1%, Georgia - 16.7%, Kazakhstan - 27.2%, Kyrgyzstan - 27.5%, Latvia - 31.9%, Lithuania - 29.8%, Moldova - 29.1%, Russia - 25.6%, Tajikistan - 34.1%, Estonia - 23.9%, Ukraine - 40%.

High index in Ukraine is connected with the fact their Social Protection Fund receives payments not only from social insurance, but also from the production of alcoholic beverages, tobacco, sale of automobiles. Furthermore, in this country, the Public budget transfers to Social Protection Fund considerably more monies than in Azerbaijan.