The European Union has embarked upon an ambitious program of becoming “the most competitive and dynamic knowledge-based economy in the world capable of sustained economic growth, with more and better jobs and greater social cohesion”. Such a goal is obviously bound to the size and age of its population: people capable of creating jobs, fostering development and progress, producing growth and supporting the welfare system. 

Nonetheless, current trends suggest a different picture: with the average number of children per woman decreasing and an increased life expectancy, which has the effect of shortening the employment period with respect to the whole life, experts foresee a fall in the population of working age and a declining ratio of workers to pensioners.

Declining Fertility Rates and Increasing Life Expectancy

Childbearing is increasingly being delayed in many family’s decisions in Europe and this is probably due to socioeconomic changes: for instance, the need to invest in education and working experience before having children, the general economic uncertainty, and the high rates of youth unemployment. Low fertility rates are also partially due to the fact that the decision of having a child is deeply connected with the actual costs it implies. The economic role of children has declined in industrialized societies; as a consequence, less material benefits are expected from children and the parents’ decision is focused on the direct and indirect costs of raising a child.

Following this interpretation, many European governments have experimented the policy option of lowering such costs and provide economic benefits to families, in order to decrease their monetary expenditure on a child and eventually encouraging fertility. Clearly, such a measure alone is not enough. Low fertility also depends on the difficulties that women experience in handling pregnancy and child caring together with their professional activities. Hence, a crucial option for decision-makers is represented by policies which foster gender equity: the goal, in fact, should be supporting workers with family responsibilities irrespective of gender, thus emphasizing the equal sharing of family responsibilities and eventually avoiding the penalization of women in the workplace.

The declining fertility rates have to be considered within the broader framework of our improved health systems, which have generated direct payoffs in terms of longer and better lives for millions of citizens. Indeed, the consequence of the contemporary evolution in healthcare has been a significant improvement in health conditions and life expectancy; generally speaking, now people live longer in the richer and more developed countries, and have greater opportunity to acquire non-fatal disabilities in older age. This pattern thus implies that countries with a larger decline in predicted mortality experience more population growth, which combined with a declining birthrate determines an ageing population. 

Immigration and Reforms in an Ageing Europe

The problem in Europe is that the increase of population generated by the longer life expectancy is not supported by a proper fertility rate, capable of assuring a replacement. Following the present trends concerning fertility and life expectancy, the population of working age is likely to keep falling in the next decades and the old age dependency ratio to increase.

Immigrants could contribute to reversing these developments. The effect of increasing the number of contributors via immigration is in fact usually positive, due to the positive externality that immigrants generate for the domestic population, by broadening the tax base and alleviating public finance problems. The value of an immigrant may be imagined as the same as that of a new-born child and it may be even higher if we consider than, on average, immigrants tend to have more children than natives. Of course this does not mean that immigrants’ contribution alone is sufficient to stabilize the welfare system entirely, but there are reasons to believe that it can be a significant help in altering the balance.

Addressing the challenges stemming from an ageing population, whatever will be the road that the Union and its member states will decide to follow, will require economic strategies, social adjustments, changes in attitudes about work and work participation, flexibility and innovation in social policy. To seriously address the challenges of the change to a fully mature population, with many more old than young people, or to a predominantly immigrant population, it will be crucial to enable social participation and value all contributions to the development of our societies. To put it differently, there is an imperative to be inclusive.

Demographic change is a slow process, and that is both good news and bad news for Europe. In fact, the comforting feeling of “having time” might go hand in hand with a continuous postponement of necessary reforms.

Image source: Vinoth Chandar