March 23, 2023

How the aging population is affecting the economy in four charts

Posted Jan 27, 2023, 11:01 AM

Europe has never worn its nickname of “Old Continent” so well. Under the joint effect of longer life expectancy and falling birth rates, the European Union has one of the most aging demographies in the world: 21% of its population is over 65 years. This indicator, already 3 points higher than that displayed in 2011, could still climb to 30% by 2050, according to Eurostat projections.

“Although Europe has more immigration than emigration, the gradual decline of Europe’s population and its workforce will continue”, warns the European Commission in a recent working document on the impact of demographic change.

In addition to pushing states to reform their pension systems, this decline puts pressure on labor markets, since it risks creating “labour shortages”, recalls Pierre Pestieau, professor of economics at the University of Louvain and the Paris School of Economics, author of “Live happy for a long time – How much does it cost? “. “Recourse to immigration is a partial solution because we do not have, like in the United States or Canada, selective immigration policies to compensate for the lack of labor in certain sectors”, specifies t -he.

In France, the share of the population of working age could lose more than 5 points between 2019 and 2070, falling from 55.6% to 50.5%. Slovakia, Poland, Poland, Luxembourg and Lithuania are the most affected European countries, with a drop of more than 10% in their labor pool.

The European Commission also fears that “the lack of replacement of older workers with high productivity will create imbalances”. A scenario to qualify, according to Pierre Pestieau, who recalls that the productivity of workers over 50 “rather tends to decrease”, making them less attractive for companies. “The later people work, the less it will cost the state,” however, recalls the economist.

From 24% to 28.9% of GDP

The aging of the population also creates additional needs, including the adaptation of our health and social protection systems and our work methods and spaces.

For companies, first of all, this aging of the workforce is synonymous with “big challenges” judge Pierre Pestieau, who believes that the extension of activity must go hand in hand with “periods of retraining of the workforce -of work”. Namely: continuous training – for example to stay in tune with new technologies – or even flexible hours. “It’s an evolution that requires a lot of imagination. If companies have so far mainly shown conservatism on this subject, they will have to make adjustments, ”he points out.

For the care of addiction and health care, then. Within the EU, the cost of population aging could rise from 24% to 28.9% of GDP between 2019 and 2070, according to the worst-case scenario studied by the European Commission. A lower relative increase in France: calculated at 29.5% of GDP, this cost could rise to 32.1% in the worst case. “The extension of life will cause situations of dependence (for example in the event of forms of dementia or chronic illnesses) increasingly important”, explains Pierre Pestieau, who fears that these needs are “underestimated” by projections.

The accompaniment of forms of dementia or chronic illnesses represents an additional expense for those who suffer from them. “We have progress to make, because the public authorities have left much of the burden on families, who themselves play a less and less meaningful role.”

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