02.05 Review

Ageing Labour: Pension reform has halted the decline in the working-age population, but is unable to solve the problem of reducing the inflow of new workers


Over the past two years, economic dynamics in Russia have been strongly influenced by labour market tensions. In addition to the structural factors that have determined this new situation, the demographic factor remains fundamental. Since the early 1990s, the population below working age has fallen from 36 million to 27.1 million, while the population aged 65 and over has grown from 15.7 million to 24 million. The 2018 pension reform was linked to the fact that numerous groups of baby boomers — those born after World War II and in the 1950s — were reaching retirement age in the 2010s. The reform slowed the decline in the working-age population and thus reduced the demographic burden on the population, i.e. the ratio of the working to non-working population. This effect will peak in 2028, but the reform will not affect the underlying demographic trend, which is the decline in the share of the population below working age. Over the next 10 years, it will continue to decline by an average of 600,000 people per year. Thus, the reform will slow down the decline in the total size of the labour force, but will accelerate its ageing and will not solve the problem of weak inflow of new workers into the labour market.

Russia's population continues to age. According to Rosstat, the number of people aged 65 and over increased from 15.7 million at the beginning of 1992 to 24.1 million at the beginning of 2023, i.e. from 10.6% of the population to 16.5%. The share of the population below working age, on the contrary, decreased from 24% in the early 1990s to 18.5% in 2023, or from 36 million to 27.1 million. The rapid pace of population ageing in recent years is due to the fact that, since the mid-2010s, the baby boomers — those born after the war, mostly in the 1950s — have been turning this age, notes Demoscope-Weekly. Previously, the pace of ageing was slowed down because only a small group born during and immediately after the war was reaching old age. Indeed, the fear of demographic change prompted the 2018 pension reform. Since the late 2000s, baby boomers began to come of retirement age and the number of pensioners began to grow rapidly.

The population over the working age rose from 29.3 million in 2004 to 37.4 million in 2018, accounting for 45% of the working-age population. If not for the pension reform, it would have reached 39.4 million in 2023, i.e. 47% of the working population, according to Rosstat. The retirement age is being raised in stages, and at the current level (57 for women, 62 for men), the number of people older than working age is 3.6 million less at 35.8 million, or 24.5% of the total population and 43% of the working-age population. 

The number of pensioners will continue to decline until 2028, while the retirement age will increase to 60 for women and 65 for men. According to Rosstat's ‘medium’ demographic forecast, it will decrease to 32.5 million by 2028, but then will begin to grow noticeably and reach 36.4 million in 2044, again representing 45% of the working-age population in Russia. According to the 'high' version of the forecast, i.e. if the life expectancy of Russians increases faster, the number of pensioners will reach 45% of the working population by 2041, and in 2045 it will be 50%.

However, the overall decline in the share of the working-age population (relative to the total population) will slow down. In 2006 it was 63%, and in 2019 it will be only 55%. By 2023, it increased to 57% and will continue to rise until the early 2030s. However, this will not only come from raising the retirement age, but also from reducing the share of the population below working age. If in 2024, the share of the population older than working age is 23.6%, the working-age share is 58%, and those younger than working age is 18.4%, then by 2033 (according to the ‘medium’ forecast scenario), the first group will remain the same at 23.6%, the working-age share will increase to 61.7%, but the share of younger ages will decrease to 14.7%, meaning that fewer new workers will enter the labour market than before.

Population dynamics of working-age and non-working-age groups, according to Rosstat's 'medium' forecast, 2024-2046, thousand people

In practical terms, this means that, in 2024, there are 724 non-working individuals per thousand workers, of whom 317 are under working age (under 16) and 407 are older. By 2036, the demographic burden on the working-age population will decrease to 624 non-workers per thousand workers. However, there will be only 231 children under the age of 16 per thousand workers (according to the 'medium' forecast scenario). That is, the demographic burden will decrease against the trend of reducing the total population and younger ages due to low birth rates. Over the next ten years, the population younger than working age will decrease by an average of 600,000 people per year.

The decrease in birth rates will occur in those territories where it is still relatively high. Generally, the demographic situation in Russia varies significantly by region: the share of the older population varies from 9.8% in Ingushetia to 30.1% in the Tambov region, Demoscope notes. Six subjects of the federation have an older population of less than 14%: Ingushetia, Chechnya, Tyva, Dagestan, the Yamalo-Nenets and Chukotka Autonomous Okrugs. On the other hand, 16 subjects have an older population ranging from 28% to 30%. Among the regions with the oldest population there are a number from central Russia: Kostroma, Ryazan, Tambov, Tula, along with the Pskov, Kirov, Penza and Kurgan regions. In the Central Federal District as a whole, the older population stands at 26.5%, while in the North Caucasus it is 17.2%.