The greying West – the story of an aging Europe

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Do it for mom!” says the headline of one of the most recent commercials by Spies Rejser, a Danish travel company. The agency decided to take initiative on decreasing birthrate offering free “child-friendly holiday” and three years of baby supplies to anyone who could prove they conceived while on a vacation booked through the company.  With just 1.7 births per woman, Denmark is one of the countries largely threatened by a phenomenon that now affects much of the whole Western World – the low rates of fertility.

Active-ageing policy – EU’s new plan

The European Commission has projected that the EU is becoming “increasingly grey” over the long term. Because of different trends, such as the fertility issue, we can foresee a significant change in the age structure of the EU population. Even though the overall size of the population is projected to be larger by 2060, it will also be significantly older.

Due to the big number of demographic changes, EU will face several severe questions. One of them is the labor force and their retirement dilemma. The life expectancy at birth is said to rise on average by 6.55 years till 2020. This would imply that the old-age dependency ratio (people aged 65 or above relative to those aged 15-64) would almost double over the projection period. Moving from 27.8% to 50.1%, the EU would have to sustain its economy with two working-age people laboring for a person over 65, as opposed to 4 such people as it is currently the case. This will inevitably result in greater social and healthcare demands, even though the tax basis that finances them constantly declines.

Countries inside the European Union and in most of the Western World are indeed becoming concerned about their social security policies – in particular about the rising costs of healthcare and pensions. To tackle this issue, the European Commission is proposing several “softer” policies such as the Active-aging policy. The laws adopted should encourage elderly citizens to be more involved in society, be more active, engaged in continuous education and ultimately remaining healthy.  Maintaining autonomy and independency is the key goal of both individuals and policy makers. “Active-aging policy assumes that yesterday’s child is today’s adult and tomorrow’s grandmother or grandfather. The quality of life they will enjoy as grandparents depends on the risks and opportunities they experienced throughout the life course, as well as the manner in which succeeding generations provide mutual aid and support when needed. “ Says the World Health Organization in its most recent targeted manual. All of these initiatives are supposed to contribute to the overall health of the population and pose thus a lower burden on the health-care system. As it wasn’t enough, the ultimate goal would be to naturally extend the period that an individual remains in the workforce and thus contributes more to the social system.

Recalling the baby boomers

Another strategy that the EU is pursuing is encouraging higher birthrates rates. In countries such as France and Sweden, governments have recently adopted pro-fertility policies. In both countries, the day care is subsidized and parents can take from 6.5 months (FR) to 18 months (SE) paid leave. As a result, both countries were quite successful in raising the birthrate up to 2.0 babies per woman. According to several studies, the effectiveness of pro-natalist policies largely depends on whether they influence the “total number” or the   “timing” of births. The evidence suggests that in most cases the policies would have greater impact on the timing (i.e. the age when a woman gives birth) rather than the total number of babies born to a woman. Cases from Sweden, Italy and even Israel showed that the introduction of such governmental incentives would only cause a “speed premium” – that means incentivize women to have babies at the time of the policy introduction, as opposed to encouraging them to have more children overall.

Europe’s blue card – hanging on to the last string of hope?

The high costs and the questionable effectiveness of the pro-natalist approach in hand with the aging population and rising living costs, have all played in favor of those advocating for more immigration. If a country allows for immigration of highly skilled migrants, it can, in ideal conditions, almost immediately benefit from them joining the workforce.  Given the time intensive nature of the workforce replacement, immigration surely is a very effective immediate measure. According to Richard B. Freeman, an economist and a Harvard University scholar, it has proven to be very effective to cover for skill shortages in the US. Following that example, the EU has introduced an alternative to the US green card – the so called “blue card”.  Apart from the targeted group of highly skilled migrants, the EU is also considering the European J visa equivalent, which would encourage the admission and procedures of seasonal workers, paid trainees and intra-corporate transferees.

Many have, however, argued that the blue card policy is very restrictive and does not solve Europe’s aging problem in the long run. The Maastricht University’s analysis suggests that income per capita will increase if countries allow for low-skill immigration. If the proportion of low-skilled workers among immigrants is not higher than such proportion among natives, the unemployment rate will not increase. Thus, the immigration enables to successfully stimulate the economic growth. As part of a coherent policy bundle to tackle Europe’s grey color problem, a well-managed immigration may seem to be an effective tool.

Governments and policymakers should realize how the alignment of all aforementioned policies contributes to a healthy state, especially in times of growing tensions and propagandas becoming an efficient election fuel. The Western World is not getting any younger by itself.

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