Aging Europe

The Demographic Crisis Is the Defining Issue for The Continent’s Future

News | Darko Gacov | October 2007

The aging Austrian population makes immigrants essential (Photo: Cannon Vision)

Europe is aging, and aging fast. Twenty million workers will leave the workforce between now and 2050 and more than one-third of the population will be over 65, creating labour shortages, pension havoc and other less easily quantifiable measures of social change like little innovation and an aversion to change.

"This is a process without parallel in the history of humanity," said a United Nations  Report published earlier this year, predicting that world wide people older than 60 would outnumber those under 15 in 2047 for the first time.

Researchers described the ability to resolve the demographic crisis as "the defining issue" for Europe’s future.

"If we fail to find an adequate solution, Europe will not have a future," said economist Hans Werner Sinn in 2006 at the University of Munich, "and in that case, being able to solve all the other problems will not matter very much."

While world population is expected to increase from just over six billion in 2,000 to 8.9 billion by 2050, the number of Europeans is expected to decline. During the same period, the population of the 27 EU countries is expected to fall by 6%, from 482 million to 454 million.

For countries with particularly low fertility rates, the decline is dramatic: By mid century, the Italian population may fall to 45 million, from 57.5 million in 2000, a drop of 12.5m in just 50 years, according to UN estimates, considered generally reliable by demographers.

The year 2000 signified a turning point for Europe, according to the research team, led by Wolfgang Lutz of the Austrian Academy of Sciences in Vienna, and the International Institute for Applied Systems Analysis, in nearby Laxenburg.

That year, the population’s "momentum" turned over from positive to negative, a measure that reflects the age structure of the population. Two factors are responsible for Europe’s negative population momentum. The first is well-known – that women on average are having fewer than two children. The second factor is that women’s average age at childbirth has been increasing over time. This so-called "tempo effect" matters, because it reduces the number of children born in a given year, boosting the average age at which women have children.

"The story of the future is labour shortages," said Kenneth Rogoff, a professor at Harvard and former chief economist of the International Monetary Fund in the International Herald Tribune in January. The problem, he added, is that "Europe has an immediate demographic problem and is very hostile to immigration."

Besides the dangers of stagnation, nationalism also still plays an important role, and all EU members have imposed legal and bureaucratic obstacles to slow the influx of immigrants. This is closely tied to politics and can affect a politician’s standing with the electorate, pushing candidates to the right in many countries.

Critics of the restrictions warn that societies may face thousands of empty work places, a shortage of skilled labor and a surplus of highly agitated, almost hostile, human resource managers. Even now the labor deficit is visible in some industries. Siemens, for example, is already having difficulty filling the company’s power-generation and medical-technology units, according to spokeswoman Monika Brücklmeier. Siemens hopes to recruit 2,300 university-trained staff, most of them engineers and information technology experts.

In most of Europe, the declining birth rate has transformed the European pension systems into potential time bombs. Other than in France and Ireland, where populations are actually growing, elsewhere the aging population faces ever shrinking generations to fund their old age. Eventually there will come the point when the needs of pensioners will no longer be met by the taxes of the ever-declining work force.

However, there are several possible measures, analysts say, that could soften or even counterbalance these threats, if implemented in a timely fashion.

One includes the emotional subject of migration. With 2006 now recognised as the first year when deaths exceeded births in Western Europe, only a lifting of restrictions to allow a greater influx of immigrants, experts said, will keep the population growing.

"The EU must become a real magnet for highly skilled immigrants," said Franco Frattini, European Commissioner for Justice, Freedom, and Security, to students at the London School of Economics in September. He presented a scheme for an EU-wide employment permit, nicknamed the "Blue Card," inspired by the US Green Card, that is gaining a foothold in policy discussions.

The card would allow citizens and permanent residents of EU countries to travel and work anywhere in the European Union – liberating people from the demoralising problems of differing visa and work permit requirements – and to bring immediate family members along. If adopted, supporters claim, a range of labor force bottlenecks would be eased, and workers would have more choice.

However, implementation would present difficulties, with policy makers expecting resistance from citizens who fear an open door to foreigners in "their" country, taking "their" jobs and living in their neighborhoods. In Germany, Chancellor Angela Merkel and Minister for Family Affairs Ursula von der Leyen have made the Blue Card a prominent issue.

A second involves more support of families. And even when couples marry, they are often not in a hurry to have children.

Today, when many see children more as a burden than an asset in many European countries – costing money, restricting consumption and mobility and pushing people down in social status – when life as a single person has become the standard, and marriage is replaced with informal affairs and partnerships, alternatives must be found.

In Germany, a new program providing parental support payments (Elterngeld) began earlier this year, replacing up to two-thirds of a new parent’s salary to a monthly maximum of €1,800, or about $2,500, if he or she decides to stay home. It has replaced a program that only helped lower-income families with at most €450 a month and is another attempt to offset the demographic aging of the population by motivating people to have more children.

Austria has a similar, long-standing policy, enacted in 1967 as the Families’ Compensation Act (Familienlastenausgleichsgesetz), expanded in 1997 with the Child-Rearing Allowance (Karenzgeld). Entitlement to Family Support Payments (Familienbeihilfe) is given to parents with minor children living with them in Austria. For children under 10, the parents receive an average of €118 monthly which increases to €136 per month between 10 and 19 years of age. In addition there is a Additional Child Bonus (Mehrkindzuschlag) for large families, of €29 per month for the third and any subsequent children.

Austria also has very generous parental leave of up to a two-year entitlement tied to previous employment that provides protection against dismissal and a right to return to the job, according to the European Commission.

Additionally, since 2002, all parents caring for a child receive a child care allowance (Kinderbetreuungsgeld) until the child is 3 years. At €436 a month, this allowance is slightly higher than the "old" parental leave benefit and allows earnings of about €14,500 a year.

However, in spite of all the incentives, the negative demographic trend continues. Apparently, it is not just a question of money, but rather a question of changing an entire lifestyle. The developed world seems to have become synonymous with ambition and career, which seems to discourage people from having a traditional family life.

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