Declining working-age population to impact EU's growth

December 28, 2015

Eurostat predicts Europe's working age population to decline by 0.4% every year between now and 2040. This decline is declared to have already started in 2010 and further decline will mean that Europe will see a shortage of a young population to fill the gaps of skilled manpower requirement. A working age population is considered between 20 and 64 years.

Economic growth can come from two sources:

Gross Domestic Product per employed citizen in the EU has been low to .9% as compared to US which grew by 1.5% per year.

Growth in job market is also trailing and it is expected that the working - age population will further shrink in next 5 decades.

A policy mix is needed

EU needs to strictly work on some measures to ensure that productivity is not hampered. This includes a mix of the following measures:

Open up for immigration: Immigration from third countries can make a significant contribution to preventing the shrinking of the EU's labour force. The immigration option will lead to more employment and growth  only if the immigrants who are invited attain higher levels of qualifications and skills. EU needs to look towards countries like India where skilled professionals in IT, Engineering, Management etc. domains are easily available.

Measures to ensure faster productivity: Accelerate investment into human capital factors like education, training, skills and promote research & innovation. Currently EU lags behind the US in all these areas while other global competitors like China, India are catching up fast.

Optimum utilisation of current employment resources: The current manpower available should be judiciously utilized. Higher intra-EU mobility can help better allocate EU’s workforce across regions and sectors; this will overall reduce unemployment in EU nations.

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