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Effects of Ageing: Potential Employment Gaps and the Possible Role of Migration

Published online by Cambridge University Press:  01 October 2008

Ernest Berkhout*
Affiliation:
SEO Economic Research, Roetersstraat 29, 1018 WB Amsterdam, The Netherlands

Abstract

Although age distributions differ between countries, the ageing challenge is apparent everywhere. In the coming decades, the average age will increase all over Europe. As a consequence, the ratio between the working-age population (age 15–64) and the elderly population will decline, meaning a relatively reduced supply of labour, resulting in a ‘potential employment gap’. Although different in magnitude, the ageing effect is clearly present in all countries. If the EU-25 employment rate were to remain at its present 63% the average employment level will have decreased by 30 million persons in 2050. This effect is even relevant in the short-term perspective, as the first post-war birth cohorts are exiting the labour market already. After mentioning solutions to close this potential gap, such as raising participation rates and real labour productivity, this paper will focus in more detail on the possible role of migration in labour supply. As well as being the most unpredictable, this is also the most disputed variable. As traditional migration patterns are rapidly changing at the moment, this paper does not have the intention of being conclusive and absolute. However, the labour migration debate can still be elevated to a more scientific level by tackling some common misperceptions and adding new empirical facts.

Type
Focus: Labour Migration
Copyright
Copyright © Academia Europaea 2008

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References

References and Notes

1. The projection database is officially called ‘EUROPOP2004’: EUROstat POpulation Projections 2004-based and originally consisted of four scenarios; the three basic projections ‘baseline’, ‘low growth’ and ‘high growth’ plus a hypothetical no-migration variant. Here, I mainly use the baseline projection because this projection is built on the most realistic assumptions given current knowledge. The high-growth and low-growth variants indicate what will happen if all assumptions work together in population growth or population decrease. I use the no-migration variant to indicate the implicit effects of migration in the baseline projection.Google Scholar
2. In detailed calculations it will become clear that this assumption does not matter for the relative size of the potential employment gap, if we assume that the size of demand is proportional to the size of the population.Google Scholar
3. I call it a potential gap because in this calculation we make some strong implicit assumptions.Google Scholar
4. These numbers are only illustrative; for realistic assumptions, at least national estimates should be used, and one should calculate demand growth per capita. Productivity growth should be analysed, preferably on a sectoral level, and corrected for inflation. Sectoral labour shifts (let us say from industry to services) will influence labour productivity (in this case to lower productivity).Google Scholar
5. See statline.cbs.nl: ‘External migration by country of birth, sex, age and marital status’.Google Scholar
6. S. Drinkwater, J. Eade and M. Garapich (2006) Poles Apart? EU Enlargement and the Labour Market Outcomes of Immigrants in the UK. IZA Discussion Paper 2410.Google Scholar
7. G. Hughes (2007) EU enlargement, migration from Central and Eastern Europe and their effect on migration policy in Ireland. Paper presented at LoWER Workshop on Migration, 20–21 April 2007.Google Scholar
8. E. Wadensjö (2007) Migration to Sweden from the New EU Member States. IZA Discussion Paper 3190, Bonn.CrossRefGoogle Scholar
9.Kahn, L. M. (2004) Immigration, skills and the labor market. Journal of Population Economics, 17, 501534.Google Scholar
10. Unfortunately these data only reflect ‘old migrants’ because they refer to the year 2000 for most countries.Google Scholar
11. The definition of skill level in the OECD/Eurostat data that I use is much less detailed than it is in Kahn’s study. I have only three skill levels (low, middle and high) on a national level while Kahn used a continuous distribution on an individual level. More important is that OECD and Eurostat use the ‘highest completed level of education’ as a proxy for skills whereas Kahn uses a complex instrument measuring applied cognitive skills (International Adult Literacy Survey).Google Scholar
12.OECD (2006) International Migration Outlook 2006 (Paris: OECD).Google Scholar