The labour supply Because labour force participation varies so much in different age groups, the future age structure is highly significant for the labour supply and thereby also for growth. The Nordic countries have generally high activity rates, around 87 per cent in the age group 25-54, compared with the other European countries. In the oldest age group, participation has decreased over the last 10 years. One reason for this is that the retirement age has fallen. In Sweden today, the actual age of retirement is 62 years. The only group in which there has been a rise in the labour supply in recent years is elderly women, since those that live to a higher age today are better educated than their predecessors. The proportion of elderly in the population is growing larger throughout Europe, and the Nordic countries are no exception. At present, 16 per cent of the European population are 65 years or older. This percentage is forecast to increase to 18 percent by 2010. If we look instead at the number of people over 80 years in Europe, this will double over the next 15 years. According to Statistics Sweden, the proportion of people in Sweden that are 65 years or older will rise from 17 per cent today to 23 per cent in 2050. Meanwhile, the economically active proportion of the population, those between 20 and 64 years, will decline from 59 per cent in 2002 to 54 per cent in 2050.
The trend here has also been more closely correlated to the level of economic activity, with prices falling over the last three years. However, the price decline in Malmö [9 per cent] has been considerably gentler than in Stockholm [24 per cent] or Gothenburg [18 per cent]. These declines have been mainly caused by lower rents, which essentially have been a result of lower demand for office premises due to the subdued economic activity. It also makes sense that Malmö has been affected less than the other major cities given that the slowdown has not been as severe here. The rapid rise in prices and their subsequently rapid decline points to a trend not all that dissimilar from that experienced during the property crisis at the beginning of the 1990s. Nevertheless, there are many differences between the two situations. There is no doubt that we experienced a bubble at the beginning of the 1990s, when prices largely lost their relationship to fundamentals and were instead underpinned by expectations of future price rises. For a period of time the direct yield on property was 8 percentage points lower than the yield on a government bond. So investors must have expected prices to increase a good deal more than 8 per cent in order to compensate them for the risk of investing in property rather than bonds. In this case, you can really say that expectations of price rises were high! This is not the situation today.