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In the age group 60-64, the inactivity rate for Finnish women exceeds the OECD average, while the inactivity rate for Finnish males is around 13 percentage points above the OECD average. 5 .. 5 .. 6 .. 3 .. 4 .. 6 .. 0 Total AGEING AND EMPLOYMENT POLICIES: FINLAND – ISBN-92-64-02030-6 © OECD 2004 a) The OECD average excludes data from Australia, Canada, Korea, Japan, Mexico, New Zealand and Turkey. Source: OECD Labour Force Statistics. 6. Inactivity status in Finland and average in OECD countries, 2001 The reasons for inactivity also differ dramatically between Finland and the OECD area.

1. The demographic challenge The key factors behind this transition are rising life expectancy and declining fertility rates. 8 and 83 years, respectively. 1). e. the ratio of the population aged 65 and over to the population aged 20 to 64. e. 2, Panel A). 6%). However, the increase will be far stronger in the first half of the period. Indeed, by 2025 Finland is expected to have the second highest ratio and the third largest increase – only Korea and Japan will experience larger increases. Thus, to cope with the pressure from an ageing society, Finland has to start taking measures earlier than most other countries in the OECD area.

Source: OECD estimates. Thus, reversing the trend in effective retirement ages is of utmost importance in Finland. In order to do this, among many other things, the financial incentives to continue working in older ages have to be enhanced. Indeed, the role of the welfare system and the delicate balance between social protection and adequate incentives to work will be discussed in detail in the next chapter. 56 AGEING AND EMPLOYMENT POLICIES: FINLAND – ISBN-92-64-02030-6 © OECD 2004 Chapter 3 STRIKING THE RIGHT BALANCE: INCOME SUPPORT FOR OLDER PEOPLE AND WORK INCENTIVES Finding a balance between guaranteeing an adequate income for the elderly while not undermining work incentives, is a challenge facing all OECD countries.

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