Germany's Demographic Challenge
MIN READJan 30, 2013 | 16:21 GMT
The aging and shrinking of Germany's population will be the country's primary demographic challenge in the coming decades. Germany has one of the lowest fertility rates in Europe with 1.4 children per woman, well below the average of 2.1 children per woman that are considered necessary to maintain stable levels of population. At the same time, life expectancy is 80 years, one of the highest in the continent.
This combination of low fertility and high life expectancy will have two effects in Germany. First, the country's population is projected to fall from the current 82 million to around 65 million by mid-century. Second, Germany's population will age significantly, a process that will change the structure of its labor force.
In 2010, Germany had about 50 million people between 20 and 65 years old. Official statistics expect the population of this age group to fall to below 36 million by 2060, when more than half of Germany's population will be older than 51.
This process of population decline and aging will pose substantial challenges for Germany. First, the country will have to find a way to maintain high rates of labor productivity in the context of an aging workforce. The German government will also need to approve difficult changes to social security and pension systems. These types of reforms are already proving controversial in most other European countries.
Attracting immigrants could mitigate the effects of population aging, but the arrival of foreign workers is unlikely to reverse Germany's population decline. Even if Germany managed to attract an average of 200,000 workers a year, its population would still decline during the next half century. The arrival of a massive wave of immigrants also carries the risk of generating social unrest in the domestic population.
Demographic change in Germany will have economic effects as well. Germany is projected to lose its trade surplus by 2030, due to decreased exports resulting from lower productivity, and growing imports by retirees. However, the German GDP per capita would increase as a consequence of population decline.