*1 Introduction

1 Introduction * By Axel Börsch-Supan 1.1 Population Ageing in Europe 8 1.2 Individual Ageing: Health, Economics and Social Networks 18 1.3 How SHARE Was Created 20 1.4 The Main Messages of SHARE 21 1.5 Where Do We Go from Here? 24 1.6 Acknowledgements 25 7 Introduction This book is about the lives of Europeans aged 50 and over. It paints a picture of their health, their families and social networks, their economic situation and their happiness. It shows the large variation of life circumstances in each country, and it reveals striking differences as well as similarities across the European countries. Two observations form the background for this book. First, Europe has an enormous wealth in its diversity of cultures, histories and policy approaches. More than any other continent, Europe is blessed with large cultural, historical and political differences even within small distances. Comparing countries and regions to simply observe how these differences have shaped the behaviour of the European citizens is a fascinating task; understanding the mechanisms through which culture, history and public policy affects all of us, is even more fascinating. Second, Europe is ageing. “Old Europe”, as an outside observer has put it, is the continent already with the highest proportion of elderly citizens, and the population ageing process will continue for the better part of this century. Understanding how the ageing process will affect us all, and how it affects the people in the European countries different- ly, because their culture, their historically grown societal structures and their public policy approaches differ, is an important task for researchers in economics, social sciences and public health in order to turn the challenges of population ageing in Europe into chances for Europe. Understanding ageing and how it affects individuals in the diverse cultural settings of Europe is the main task of SHARE, the Survey of Health, Ageing and Retirement in Europe. SHARE has already collected data on the individual life circumstances of about 22,000 persons aged 50 and over in 11 European countries, ranging from Scandinavia to the Mediterranean and data collection is still going on. SHARE has made great efforts to deliver truly comparable data, so we can reliably study how differences in cultures, living conditions and policy approaches shape the quality of life of Europeans just before and after retirement. This book presents the first results from SHARE. It is a first step to better understand where we are, where we are heading to, and how we can influence the quality of life as we age – both as individuals and as societies. Ageing affects all of us, both as individuals and as societies. Section 1 introduces what we can learn from SHARE about population ageing, while Section 2 shows the interaction among health, economic and sociological issues in individual ageing. Section 3 describes the development process of the SHARE data and presents the current data, its richness and its limitations. Section 4 provides a summary of our first results. This introduction ends with an outlook where SHARE wants to go, and a big Thank You to all our spon- sors and helpers. 1.1 Population Ageing in Europe Ageing is one of the greatest social and economic challenges of the 21st century for the European societies. Of the world regions, Europe has the highest proportion of population aged 65 or over; only Japan has a similar age structure. This already high proportion of older individuals will increase to a level, which is historically unprecedented. Currently, about 16 percent of the EU15 population are aged 65 or over. According to the baseline projection of Eurostat, this percentage will almost double to more than 28 percent in the year 2050. This increase will place a heavy financial burden on society through pay-as- you-go financed pension, health and long-term care systems. The international scope of SHARE helps enormously to understand how to cope with 8 Introduction this challenge because we mainly learn from differences. And the SHARE countries do not only differ in their policies and cultures, but very basically already in their demographics. Although all European countries age, they differ in the speed at which this is happening and in where they are today. Figure 1 depicts the variety of population ageing processes: �� Figure 1 Population pyramids in the SHARE countries, 2000 Source: Eurostat: Population by sex and age on 1st January of each year None of these are really population pyramids, but the difference between, say, France and Sweden on the one hand, and Germany and Italy on the other hand is striking. While France and Sweden have no “dent” in their base due to still high fertility, the young gen- eration in Germany and Italy is only about half the size as the largest baby boom cohort. Spain and Greece follow Italy, but with a delay of about 5 and 10 years, respectively. Ger- many reveals particularly deep scars from two wars and a depression; they are much less pronounced in Switzerland. Not only the status quo but also the changes are different. As Figure 2 shows, the Eu- ropean population structure mutates from a diamond shape in 2000 to an urn shape in 9 Introduction the year 2050. In fact, this urn shape will be characteristic of all European countries. There are striking differences, however, in Eurostat’s population projections. In France, depicted in the middle of Figure 2, the base of newly born children in 2050 will be almost as broad as the large cohort of 50-year-olds, while Italy, due to its low birth rates, features an ever- decreasing cohort size. �� Figure 2 Population Ageing in the EU, France and Italy, 2000-2050 Source: Eurostat: Population by sex and age on 1st January of each year. Population projections – baseline scenario (Eurostat projections 1995, revision 1999) As is well-known, two developments cause this ageing process: low fertility and a secu- larly increasing life expectancy. The Mediterranean countries and Germany have very low fertility, while France, the UK, Belgium, the Netherlands and the Scandinavian SHARE countries feature relatively high birth rates, see Figure 3. 10 Introduction �� Figure 3 Total fertility rates, 2003 Source: Eurostat. Note: The total fertility rate indicates the number of births in a woman’s life. Differences in life expectancy are equally dramatic. A Swiss new born girl is expected to live almost four years longer than her Danish counterpart, and this difference is almost as large between Denmark and its neighbour Sweden, see Figure 4. We need to understand what is hidden behind these striking differences (genetics, life styles, or health care provi- sion?) in order to better understand human ageing. The SHARE data will contribute to this understanding. The force of population ageing, i.e. the combination of few births and long lives, is best expressed as the demographic old age dependency ratio, see Figure 5. It relates the number of elderly, here somewhat arbitrarily defined as aged 60 and over, to persons of working age, defined as ages between 20 and 59, both following a wide- spread convention. Italy has the highest old age dependency, while Spain faces the steepest increase. Denmark will need another 15 years to reach the extent of population ageing Italy already has. Learning from this variety, and being able to anticipate what will happen in one country by looking at another country is an important task for SHARE. 11 Introduction 84 82 80 78 76 74 72 70 SE DK UK DE NL BE FR CH AT IT ES GR Males Females Figure 4 Life expectancy at birth, 2001 Source: OECD Health Data 2004 3rd edition 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 � 0.2 0.1 0 SE DK UK DE NL BE FR CH AT IT ES GR 2000 2050 Figure 5 Old age dependency ratio, 2000 and 2050 (population 60 and over to population 20 to 59 years) Source: Eurostat, see figure 3 The dependency ratio has received so much attention because it almost immediately translates into the tax and contribution burden of social expenditures related to ageing, such as pensions, health and long-term care. The “almost”, however, is an important quali- fication. Demography is not everything. In fact, labour force participation is an important mediating factor between demographics and the social expenditure burden. Moreover, 12 Introduction there is an enormous variation in the design of the pension, health and

*1 Introduction

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