2010 – Demographic Turning Point on the EU Labor Market

www.allianz.com issue March | 20102010 – Demographic turning point on the European Union labor marketIt’s down to the “oldies” nowThe decreasing birth rates According to Eurostat, the European tirement will be around 220,000 higher Union is currently home to around 28.6 than the number of school-leavers look-over the past few decades million young people aged between 15 ing for work this year. As the babyindicate that in 2010 there and 20. Based on past experience, around boomer generation makes its transition two-thirds of them will be looking for a into retirement, this “gap” is set to stead-will be for the first time job or training position after finishing ily widen over the next few years, rising tofewer new entrants on the school, and become available to the labor 8.3 million by 2030. 1European labor market market. 28.8 million EU residents are aged between 60 and 65. This means that, The only other G-20 state currently facedthan retiring workers. in purely arithmetical terms, the number with the same problem is Japan, where of people approaching or entering re- around 6 million young people aged 1

Demographic Pulse issue March | 2010between 15 and 20 are available toreplace 10 million 60- to 64-year-olds.By the end of the decade, however, thenumber of school-leavers in Russia,Canada, South Korea and China will alsofall short of the number of employees 2nearing retirement. This is associated,both in these countries and in the Euro-pean Union, with a drop, in absoluteterms, in the potential economicallyactive population, i.e. the segment of thepopulation that is of working age, or agedbetween 15 and 64.In the U.S., on the other hand, the num-ber of people of working age is still on therise, due for one to the country’s attrac-tiveness as an immigration destinationand for another to the rise in the birthrate from 1.8 to 2.1 children per woman 3since 1980. Assuming that birth ratesand immigration levels will remain con-stant in the long term, the number ofpeople of working age in the US will haverisen to 18 million by 2030, whereas it is ated by the demographic changes wouldexpected to have fallen by at least 13 likely be too much for many countries’ 4million in the European Union. integration programs to handle. The laborious approach to tackling unem-So are the Europeans the lucky ones? ployment by improving further educa-Does this mean that our current labor tion and training is the only alternative.market problems will more or less re-solve themselves? No! It would be naïve So does Europe have an impoverishedto hope that unemployment will become future ahead of it? Will the demographica thing of the past simply because of the change automatically gnaw away atshrinking working population. Even economic momentum, marginalizingtoday, unemployment is largely a struc- Europe compared with “Chinamerica”?tural issue, i.e. the educational and train- Not necessarily. The way to solve theing background of many job-seekers is problem is by adjusting working termsnot compatible with the requirements of and conditions to suit the needs of anthe labor market. This is evident from the aging population.incessant complaints about the lack ofspecialist employees, and the efforts By way of example, only around one thirdmade by many EU states to make their of all people aged between 60 and 64 incountries more attractive to highly- the EU are still out working at present. Inqualified young employees from abroad. this respect, however, there are consider-Immigration, however, is not a cure-all able differences between the individualsolution: the number of immigrants countries: according to statistics pub-required to close the workforce gap cre- lished by the ILO, Hungary is lingering at 2

Demographic Pulse issue March | 2010the bottom of the scale at 13.3 percent, 1 Source: OECD.while Sweden leads the field with 63 2 Source: UN Population Database, World Populationpercent of this age group still in work. If Prospects: The 2008 Revision. This will apply in Russia asthe rest of Europe were able to catch up of 2012, in Canada as of 2013, in South Korea as of 2017with Sweden, more than 8 million addi- and in China as of 2019. NB: In China’s case, the calcula-tional employees would be available by tion is based on the 55 to 59 age group, because the2030, closing the gap between those statutory retirement age currently stands at 55 forentering the job market and retirees. women and 60 for men. 3 Source: U.S. Census Bureau.Consequently, aiming to increase the 4 Sources: UN Population Database, World Populationproportion of older people in work is the Prospects: The 2008 Revision und Eurostat.challenge facing labor market policy overthe next few years. Key milestones havealready been achieved in pursuit of thisobjective in recent years, with moves toreduce the number of early retirementincentives being introduced as part ofpension system reforms in many EUcountries. The task now at hand is tocreate the right environment on the labormarket. If the European Union managesto do this, it can serve as a role model inthe face of an aging population world-wide – and take some of the strain off itssocial security systems at the same time. 3

2010 – Demographic Turning Point on the EU Labor Market

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