Europe's Shrinking, Aging Population

6 MINS READJun 13, 2012 | 10:00 GMT
Europe's Shrinking, Aging Population
Pedestrians in Munich, Germany

Europe's population will peak around 2035 and then begin to slowly decline. Official projections vary, with the U.N. Population Division predicting that Europe could lose up to 100 million people in the next 50 years. However, all projections agree on one point: Europe's population will be older. According to Eurostat, in current EU member countries the population cohort between the ages of 15 and 64 is expected to decline from 67 percent of the total population to 56 percent by 2060. The population group aged 60 and older is expected to grow from 18 percent to 30 percent in the same period.

These demographic shifts are caused mainly by two factors: declining fertility rates and increased life expectancy. Europe's fertility rates have been less than 2.1 children per woman (the so-called replacement rate) for decades, and rates are expected to remain below the replacement rate in the foreseeable future. At the same time, people will live longer. By 2060 the average life expectancy in the European Union is anticipated to reach 84.6 years for men (from 76.7 in 2010) and 89.1 for women (from 82.5 in 2010). Emigration also plays a role in these population changes, especially if young workers leave their home countries in search of better job opportunities.

The shrinking and aging of Europe's population will have geopolitical consequences for the Continent. First, the new demographic will reduce Europe's political, economic and military heft in international affairs. Second, it will create a Continent-wide competition for skilled workers, in which there will be clear winners in northern and western Europe and losers in the south and east. Finally, the new demographic will change the Continent's internal balance of power.

Demographic change directly affects a country's national strategy. Throughout history, states have worked to maintain high birth rates in order to generate more taxes, more economic activity and more troops for their militaries. Generally, a country's strength lay in its numbers, and the large states were usually the ones shaping regional or international geopolitical order. High population alone does not make a country successful; in fact, it can lead to generalized poverty or social unrest. However, most states that became regional or global leaders did so during a population surge.

European Population Projections chart

European Population Projections

From a military perspective, population size determines a country's ability to defend itself or attack others, even if technological advances diminish the importance of the number of troops. In Europe, the aging and shrinking of the population will make recruitment harder and lead to higher per capita defense costs.  

Population size also affects the size of a country's economy, which is connected to a country's influence in global affairs (ranging from trade to popular culture). A smaller population in Europe would thus decrease Europe's clout. Even if the European Union were to dissolve, European countries would still look for political and economic alliances to counterbalance their shrinking populations and help them maintain some influence in the international arena.

The balance of power within Europe could also change along with the Continent's demographics. By 2050, France and the United Kingdom will have larger — and younger — populations than Germany's. This will jeopardize Germany's economic supremacy and its status as Europe's main industrial power. Thus, Germany would be pressured to become even more efficient and innovative in order to counteract the decline in its population.

The uneven effects of population aging in Italy and Spain will force those countries to endure increasing costs in order to finance their economically depressed regions. Thus, both nations will be caught in a long spiral of high debt and deficit problems that will reinforce their peripheral status in Europe.

Poland, meanwhile, will see some opportunities as a result of demographic changes. Although it is expected to lose 15 percent of its population by midcentury, the economic effects of demographic change will be less severe in Poland than in its neighbors to the south, east and north. Poland could become the center of attention for young workers from the Baltic and Eastern European countries. Meanwhile, one of Warsaw's greatest concerns — a powerful Berlin — will be mitigated somewhat by the demographic shift in Germany.

Effects on the Workforce

Perhaps the most obvious economic consequence of the European population's aging and shrinking will be a reduction in the workforce. Official statistics show that the total labor force in current EU member countries is expected to contract by 11.8 percent (about 27.7 million people) between 2020 and 2060. Eastern European countries will be hurt the most, with Romania losing nearly 40 percent of its working population.

Fewer workers means greater pressure on pension systems. Europe will go from having four working-age people for every person aged 65 or older to only two in the next five decades — a significant decrease, since the current working generation funds the retirement of the one before. Governments across the Continent will reform their pension systems, and raising the retirement age will be a key factor in those reforms. Even with pension changes in place, the shrinking workforce will create challenges in lowering labor costs and increasing productivity.

Who Will Gain, Who Will Lose

The results of demographic change in Europe will not be equitable. Some areas of the Continent will benefit and others will suffer. The differences will occur not only between countries but also within countries.

Regions with relatively high fertility rates, good education levels and plentiful employment opportunities will benefit from a stable workforce and will be able to attract workers from other parts of the country and from other nations. Northern European countries such as Sweden, Norway, the United Kingdom, Belgium, the Netherlands, Luxembourg, France and Austria are in this category. Other countries will have mixed results, with western Germany getting more workers and investment than the eastern part of the country, and northern Italy outperforming the south. All these areas already have solid education systems and are sources of innovation and destinations for investment.

Population aging and the loss of young workers are expected to occur more rapidly in Europe's periphery. The effects will be felt strongest in Central and Eastern European countries, where emigration is already happening. Southern Italy, northern Spain and Greece will also be negatively affected by demographic change and will experience low fertility rates, massive outward migration and aging populations.

The Role of Immigration

The demographic shift will increase the ongoing competition for immigrants in Europe. Countries will try to attract medium-skilled workers such as nurses and mechanics along with highly skilled workers such as engineers and doctors. European economies will also compete to retain immigrants, because they will be seeking better pay and better living conditions.

Immigration is not spread evenly over Europe; it is concentrated in a few destinations, and Western Europe's largest economies are at the top of the list. Ultimately, the countries (and regions within them) that offer immigrants better salaries, better education opportunities and friendlier environments will win the competition for workers. As a consequence, urban centers in more developed countries whose economies are based on high capital concentration will retain their privileged places in Europe. In contrast, rural areas or regions where the economy is more labor-intensive will suffer in the new demographic environment. 

Europe's immigration trends will also have geopolitical effects. According to estimates from the Center for Strategic and International Studies, by 2050 one quarter of the population of France and more than one third of the population of Germany will be of Muslim origin. This will shape domestic and foreign policy for these countries, as citizens of Muslim origin will have greater roles in European politics.

Domestically, immigration involves some problems. First, the presence of immigrants creates social tension in some European countries. Second, some immigrants will need training and housing, and governments willing to attract immigrants will need to subsidize those needs to some degree. However, economic need will prevail, and immigration will become part of the solution to Europe's demographic challenge. As a result, in 50 years Europe will be older but more ethnically diverse.

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