Demographic change will put pressure on Europe

Outlook

Demographic change may emerge as one of the largest challenges facing societies across Europe over the next decades. Increasing old-age dependency ratios put pressure on social welfare systems and state budgets. Raising retirement ages -- or at least making them more flexible -- may be unavoidable unless pensions are cut or contributions increase sharply.

Skills shortages could be exacerbated. Migration can alleviate the problem partly, but could trigger political resistance. Another factor could be technological change and further digitalisation and automation, which could lower demand for labour overall.

Impacts

• Less need for capacity expansion and investment in infrastructure as populations shrink could depress demand and GDP growth.
• Medical breakthroughs may increase life expectancy but also enable people to stay healthy and participate in the labour market for longer.
• A larger share of older people means their interests will be better represented in politics, possibly at the cost of younger generations.