The demographic future of Europe – from challenge to opportunity

With Europe currently facing a demographic challenge, the Commission wishes to turn this key issue into an opportunity, and has published a communication to present its objectives with regard to employment for the elderly, the modernisation of social protection and demographic renewal in Europe.

ACT

Commission Communication of 12 October 2006 "The demographic future of Europe – From challenge to opportunity" [COM(2006) 571 final – Not published in the Official Journal].

SUMMARY

The European Union (EU) currently has to cope with demographic decline, low natural growth and the ageing of part of its population. To respond to this challenge, the Commission sets out a number of recommendations drawing mainly on the renewed Lisbon strategy to take full advantage of the opportunities offered by longer lives, whilst also sparking off demographic renewal.

The ageing population in Europe: trends and outlook

Demographic ageing, i.e. the proportion of older people within the total population, is the result of significant economic, social and medical progress in terms of the services offered to Europeans. This demographic ageing is the outcome of a number of simultaneous demographic trends:

the average number of children per woman, which stands at 1.5 children in the EU whereas the population replacement level is 2.1. The rate projected by the EU for 2030 is 1.6;
the decline in fertility ("baby crash") which followed the baby boom is the cause of the large proportion of 45-65 year-olds in Europe's population, and poses a number of problems in terms of pension funding;
life expectancy (which rose by eight years between 1960 and 2006) could continue to increase by a further five years between 2006 and 2050 and would thus result in a larger proportion of people surviving to the ages of 80 and 90 – an age when their health situation can often be delicate;
immigration (1.8 million immigrants into the EU in 2004, 40 million in 2050 according to Eurostat's projections) could offset the effects of low fertility and extended life expectancy.

These trends will slightly lower the total EU population, which will also become much older. The working-age population (15 to 64) in EU-25 will fall by 48 million between 2006 and 2050 and the dependency ratio is set to double, reaching 51 % by 2050. This demographic change will also be accompanied by profound social changes (social protection, housing, employment) in all the countries confronted with the challenge of an ageing population.

The impact of the ageing population

The next decade will see the active population fall as a large number of baby-boomers retire. This reduction in the working-age population may affect the economic growth rate if current trends and policies remain unaltered. Rigorous implementation of the Lisbon agenda should help turn this corner by making full use of the resources of experienced workers whilst also offering younger people quality training.

The ageing population will also have an impact on social protection and public finances. On the basis of current policies, ageing will lead to considerable upward pressures on public spending. Budgetary deficits of this type could compromise the future equilibrium of pension and social protection systems in general, and perhaps even the potential for economic growth or the functioning of the single currency. The EU governments have, however, already started to take action, especially in the fields of public pensions or the modernisation of social protection systems. Better adapted healthcare services and a preventive approach to chronic diseases could, finally, reduce public spending on health and dependency care by half.

A constructive response to the demographic challenge

The European Commission outlines five directions to meet the demographic challenge over the coming years:

promoting demographic renewal in Europe by improving the balance between professional, private and working life (parental leave, more flexible working arrangements, implementation of the commitments on childcare made at the Barcelona European Council);
promoting employment in Europe through more jobs and longer working lives: the EU seeks to improve education systems and wants to prioritise "flexicurity" systems which facilitate the transition between the different stages in the life cycle (increased flexibility on the labour market combined with lifelong learning). Work enhancement also entails combating discriminatory prejudices against older workers and promoting a genuine European public health policy (tackling smoking, alcoholism and obesity) in order to reduce differences in life expectancy (which are directly related to the standard of living and level of education);
a more productive and dynamic Europe thanks to the refocusing of the Lisbon strategy since 2005. This revised strategy will give the different economic operators the chance to take full advantage of the opportunities presented by demographic change;
receiving and integrating immigrants in Europe: given the attraction of Europe, the EU is working with the Member States to develop a common policy on legal immigration. Over the next 20 years, Europe will in fact have to attract a qualified labour force from outside in order to meet the needs of its labour market. It is also the task of the Union to promote diversity and combat prejudice in order to facilitate the economic and social integration of immigrants;
sustainable public finances in Europe: to guarantee adequate social protection and equity between the generations in most Member States, budgetary restraint is absolutely essential, particularly when reforming the pensions system. There will also be a need to link the coverage of these systems and the level of contributions to the development of private saving and funded systems.

Background

This communication is a follow-up to the communication to the European Council entitled “European values in the Globalised World” and the Commission’s Green Paper on “Confronting demographic change: a new solidarity between the generations”.

The United Nations has been drawing attention to the ageing of the world population since 1982, when it organised the first conference on this subject and adopted an international plan of action on ageing on this occasion.

The European Councils at Stockholm (2001) then Barcelona (2002) emphasised the scale of the demographic challenge in the EU. The reforms presented by the EU are part of the renewed Lisbon strategy and respond to a common perspective of restored confidence. The reform process and implementation of these initiatives will be the subject of the next biennial European Demographic Forum, which was held for the first time in October 2006 and will form the subject of a chapter in the Annual Progress Report introduced under the Lisbon strategy.

Key figures (EU 27)

Rate of the population of working age in 2050 (aged 20-64): 52 %
Rate of the population aged from 15 to 24 in 2050: 19 %
Rate of the population aged 65 and over in 2050: 29 %
Dependency ratio in 2050: 50 %
Fertility rate in 2060: 1.68 children per woman (replacement threshold 2.1)
Life expectancy for women in 2060: 89 years
Life expectancy for men in 2060 : 84.5 years
Net migration in 2007: +1.9 million

RELATED ACTS

Commission staff working document – Demography Report 2008: Meeting Social Needs in an Ageing Society [SEC(2008) 2911 - Not published in the Official Journal]. In 2008, the demographic development of the European Union (EU) reached a turning point, considering the rapid ageing of the European population. From this date on, and for the next twenty-five years, the segment of the population aged 60 years and above should start to grow by an average of 2 million each year. At the same time the segment of the population of working age should shrink by 1 to 1.5 million per year from 2014.

This demographic trend will certainly have serious consequences on the level of economic growth and on the viability of public finances of EU Member States. It also constitutes a factor that will transform the structure of European families. The use of statistical data in demographics should also allow social and family policies to be targeted.

Member States should continuer to promote the employment of seniors. In 2007, 50 % of men and 40 % of women were still working at 60 years old. These rates demonstrate an increase in employment since 2000, in line with the objectives of the Lisbon Strategy for active ageing.

Moreover, the number of active women is increasing in all Member States, without having an impact on birth rates. Appropriate national and European policies should allow their rate of employment to be increased, through measures to favour families, the fight against poverty and the reconciliation of work and family life.

Commission Decision 2007/397/EC of 8 June 2007 setting up an expert group on demographic issues (OJ L 150, 12.6.2007).

In line with this Communication and at the request of the Member States, the Commission has created an expert group on demographic issues, with the main task of assisting and advising the Commission in the development of policies geared to the Union's new demographic reality, as well as monitoring population and workforce developments in terms of ageing. It will also serve as a platform between the Member States for exchanging experiences and good practices in areas such active ageing, family policy, care for dependent elderly people or immigration.

The group comprises representatives from all the Member States, assisted by independent experts and chaired by Eleonora Hostasch, former Austrian Minister for Employment, Health and Social Affairs.

Commission Report on the social situation in the European Union. Overview 2004 [Not published in the Official Journal].

Communication from the Commission of 3 March 2004 - Increasing the employment of older workers and delaying the exit from the labour market [COM(2004) 146 final - Not published in the Official Journal].

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 3 June 2003 on immigration, integration and employment [COM(2003) 336 final - Not published in the Official Journal].

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 30 December 2003 - Modernising Social Protection for More and Better Jobs: a comprehensive approach contributing to making work pay [COM(2003) 842 final – Not published in the Official Journal].

Report from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions - Report requested by the Stockholm European Council: "Increasing labour force participation and promoting active ageing" [COM(2002) 9 final - Not published in the Official Journal].

See also