Economic Problems of European Union Caused by the Demographic Ageing

By Perca, Iulia-Alexandra | Romanian Journal of European Affairs, September 2011 | Go to article overview

Economic Problems of European Union Caused by the Demographic Ageing


Perca, Iulia-Alexandra, Romanian Journal of European Affairs


Abstract:

The purpose of this paper is to offer a realistic perspective upon the imminent situation of demographic ageing issue in European Union. The forecasts are not reasons to major concern for the society but rather to become more responsible and not to neglect a problem that could affect our future. The demographic overview of Europe for 2011 - 2060 shows low birth rates, an increase in life expectancy and migration flows having an impact on population. As a result, the parent generation will no longer completely be replaced by the next generation of children and the narrowed active population will have to sustain a large number of persons far advanced in the age. Economic consequences of this social trend, such as increased expenditures on pensions, extended health care costs and the employment problems, are also discussed in order to define the best policy option available.

Keywords: ageing, births, life expectancy, migration, economic impact, policy options

JEL: J11 - Demographic Trends and Forecasts

1. Current situation

The ageing population problem is a global issue, discussed and assessed worldwide with hope to find an answer to the question: what is our future as human beings going to look like on this Planet? While environmentalists state the need of a better preservation of the surroundings for our children, scientists worry about the actual number of children that will ensure the future of humanity. The same concern is disputed in the European Union (EU) Member States and the EU Institutions, as the proportion of older people is growing, birth rates are low and the shift between generations has to go on.

Recent history shows that Europe's population has more than doubled during the 19th century (from 325 million people in 1900 to 732 million people in 2010, which stands for 1 1 % of the world population). Except for the two World Wars, when the number of inhabitants has decreased, Europe's population showed an upward trend. The main reasons for this are the political and economical stability in the area as well as the improvement of food supply, hygiene, living conditions and medical progress.

The United Nations' data1 shows that we have reached a peak and projects a narrowing community over the next 50 years, estimating that Europe's population will reach 691 million people by 2050, dropping 5.7%. The main cause for this seems to be the declining number of children, apparently insufficient to ensure the generations succession, a phenomenon known as "demographic ageing". As a result, the median age of European population is projected to rise by another 1 0 years: from 38 to 48 years2. Moreover, the age structure in EU is described as 15.44% young population (0-14 years), 67.23% active population (1 5-64 years) and 1 7.33% old population (65 years and over). Such an age structure can no longer be described as "pyramid" because the gravity has shifted from the young to the old. The "pyramid" is a graphical illustration that shows the distribution of various age groups of population; its basis is set by youth and its highest point represents people far advanced in the years. The long term effect consists in expenditure on pensions, health care, education, all sustained by a reduced number of active population who bears the burden of providing the society decent living conditions.

According to the Berlin Institute for Population and Development, three major trends shape the European Union's population today: longevity, a declining number of children and an increasing number of migrants (Münz, 2007). Today, Europeans have a life expectancy at birth of 75 years for men and 82 years for women, families on average have less than 2 children and the number of migrants represents 8.3% of total EU population (including migrants from other EU member states). Under these conditions, the demographic change has implications, on the long-run, for the workforce and for the EU economic and social future.

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