Society and Economy DOI: 10.1556/204.2019.015 DEMOGRAPHICS, LABOUR MARKET, AND PENSION SUSTAINABILITY IN HUNGARY1 ANDRÁS OLIVÉR NÉMETH – PETRA NÉMETH – PÉTER VÉKÁS Department of Economic Policy, Corvinus University of Budapest, Hungary Email:
[email protected] Department of Macroeconomics, Corvinus University of Budapest, Hungary Email:
[email protected] Department of Operations Research and Actuarial Sciences, Corvinus University of Budapest, Hungary Email:
[email protected] The sustainability of an unfunded pension system depends highly on demographic and labour market trends, i.e. how fertility, mortality, and employment rates change. In this paper we provide a brief summary of recent developments in these fi elds in Hungary and draw up a picture of the current situation. Then, we forecast the path of the economic old-age dependency ratio, i.e. the ratio of the elderly and employed populations. We make different alternative assumptions about fertility, mortality, and employment rates. According to our baseline scenario the dependency ratio is expect- ed to rise from 40.6% to 77% by 2050. Such a sharp increase makes policy intervention inevitable. Based on our sensitivity analysis, the only viable remedy is increasing the retirement age. Keywords: pensions, sustainability, demography, employment, dependency ratio JEL codes: H55, J11, J18, J21 1 This research has been supported by the European Union and Hungary and co-financed by the European Social Fund through the project EFOP-3.6.2-16-2017-00017, titled ”Sustainable, intelligent and inclusive regional and city models”. 1588-9726 © 2019 The Author(s) Unauthenticated | Downloaded 10/02/21 07:51 PM UTC 147 ANDRÁS OLIVÉR NÉMETH et al.