INFLUENCE OF DEMOGRAPHIC TRENDS AND EMPLOYMENT ON THE FINANCIAL SUSTAINABILITY OF THE MONTENEGRIN PENSION SYSTEM
INFLUENCE OF DEMOGRAPHIC TRENDS AND EMPLOYMENT ON THE FINANCIAL SUSTAINABILITY OF THE MONTENEGRIN PENSION SYSTEM

Summary/Abstract: The aim of this research is to analyze the impact of employment on the sustainability of the Montenegrin pension system. The paper discusses the impact of demographic trends on the stability of pension system financing. The stability projection of the pension system is based on demographic trends and the change in the level of employment on the labor market. The research method included the analysis of extensive statistical material, the research of the latest published papers regarding the subject, as well as a comparative overview of the pension systems of the transition economies.Research of demographic trends indicates that in the first half of the 21st century, the population aging process will be one of the most important features of Montenegro's demographic development. The aging of the population will affect the increase in costs for dependents or persons over 65 years old, primarily those costs that are being distributed from current fiscal revenues.Current pension system is financially unsustainable in shortterm and medium-term, given the rate of activity on the labor market (53.7%) and employment (44%). In order for the existing system to be sustainable, the activity level of the population should be 61% and the level of employment should amount to 51%. By analyzing the projection alternatives, we note that the sustainability of the pension system in the long run requires intensive economic growth and development that will lead to an increase in long-term labor market activity as well as a smaller increase in the number of pensioners and an increase in inflows from contributions. Thus, this should all lead to a reduction in the deficit of the pension system.

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