The workers who remain are getting older and are therefore less productive, which will hold back living standards. The numbers of retirees are increasing and that will threaten the financing of pensions and health care.
In the 27 countries of the European Union, each pensioner is today supported on average by four people of working age. By 2050, this old-age support ratio will have fallen to just 2:1, according to United Nations and EU projections. Latvia, which has applied to join the euro in 2014, provides an extreme example of the trend. By 2060 there will be four Latvians of working age for every three aged 65. Because of emigration and low fertility, the Baltic state’s population shrank by 14 per cent, or 340,000 people, between 2000 and 2011, prompting warnings of an existential threat to the nation.
Many European countries are raising the retirement age, including the UK, which is seeking to maintain a comparatively favourable population profile.
Apart from putting pension systems on a more sustainable footing, investing in education and training so that workers are more productive should be a policy priority, economists say. As should expanding childcare, to allow more women to join or stay in the work force.
How to share out the cost of ageing spells potential political trouble, pitting pensioners, perceived to be increasingly favoured, against younger generations who feel overtaxed and overworked. This has been described as a structural issue, which is really about the social model and the rights and obligations of citizens and the duties of the state. The sovereign debt crisis gripping the developed world is fundamentally about how to meet implicit liabilities for ever older populations. Current and future expectations of levels of health care and pension provision may prove to be over-optimistic and unaffordable.