December 2007
Western Europe's demographic difficulties are pronounced, the region's population is aging, deaths will soon exceed births, working age manpower is about to begin an indefinite decline, and assimilation of immigrants has been proving increasingly difficult. But according to AEI's Nicholas Eberstadt and Pfizer Global Health Fellow Hans Groth, M.D., the continent's demographic outlook is not entirely bleak.
In Europe's Coming Demographic Challenge: Unlocking the Value of Health (AEI Press: November 2007), Eberstadt and Groth argue that Western Europeans also enjoy one tremendous demographic advantage: the phenomenon of pervasive "healthy aging." The health status of older Europeans even compares favorably to their American counterparts. Healthy aging offers significant opportunities for economic growth and development for Europe in the decades ahead--if governments and citizens are willing to grasp them. Yet in Western Europe today, prejudicial economic and social policies are driving older workers away from the labor force. For the region to capitalize on a healthy older workforce, it must reverse this retreat from employing the elderly.
Authors Eberstadt and Groth and discussant Jim Kolbe, former U.S. representative and current senior transatlantic fellow at the German Marshall Fund, discussed Europe's demographic prospects, the economic possibilities from "healthy aging," and the policy questions that must be addressed if that economic potential is to be realized. AEI's Megan Davy moderated.
Hans Groth, M.D.
Pfizer Switzerland
Demographic problems have serious implications for the well-being of societies. For example, millions of Chinese nationals have settled on both sides of the Sino-Russian border, while nearly 40 percent of Russian-born Siberians have left. In a few decades, this could become a geopolitical hotspot. Demography affects the role and influence of single nations, as well as relations between two states.
The greatest difference between the United States and Europe is that the population in the former will continue to grow, while that of the latter will shrink. Although both the U.S. and European populations will age, the United States will continue to have a growing workforce. Across Western Europe, the working-age population will decrease.
As societies age, they move away from population pyramids, with a large younger population, to a rectangular population structure. This will have serious implications for pension and health care systems as a smaller young population will have to support a growing elderly population. Societies that can manage this challenge in the most innovative way will be the most successful. Europe's Coming Demographic Challenge does not argue for forced migration or working forever, but it calls for a change that will tackle these problems creatively.
Nicholas Eberstadt
AEI
Without trying to refute reports about immigration problems and population implosion, Europe's Coming Demographic Challenge argues that Europe faces emerging opportunities as well as challenges. Western European governments and societies should try to capitalize on some of the demographic opportunities facing them.
Health remains a good indicator of economic potential. A robust correlation exists between health and wealth, as represented by life expectancy and per capita GDP. Western Europe has experienced a health explosion over the past four decades, making the average Western European healthier than the average American.
In the earnings life cycle, only during a relatively short period, between one's twenties and fifties, do labor earnings exceed public and private expenditures. This surplus allows for improvements in economic growth and living standards. With Europe experiencing a health boom and having its best-educated older population in history, the potential exists for capitalizing on healthy aging. But while life expectancy has increased, retirement age has fallen by about six years. Within the next few decades, the expanding number of Western Europeans who are fifty-five and older will place an economic burden on the shrinking labor force. European governments should reconsider their disincentives for people to remain in the labor force above the age of fifty-five. A return to the labor participation patterns seen as recent as the 1970s and 1980s might bring greater wealth and prosperity.
Europe's Coming Demographic Challenge does not provide specific recommendations, but rather pinpoints some issues European societies should consider. Countries also need to emphasize investments in education to ensure that their citizens have a greater ability to stay in the workforce and earn continuing returns at older ages. Finally, health care should be an investment in sustaining healthy aging and productive contributions to society, rather than a battle of containing medical costs.
Jim Kolbe
German Marshall Fund
Many policymakers recognize that demographic trends are slow-moving and far-removed. However, the policy implications are important, and policymakers have the responsibility not to ignore these issues. Generally speaking, Europe has a demographic problem, but it is not without remedy. Better health creates possibilities for dealing with these issues.
Since the industrial revolution, we have been living in a world of rapidly increasing population. Lost in this Malthusian scare, no one dealt with a threat of a declining world population. This trend is not unique to developed countries; rather, it is occurring all over the world.
One fascinating factor in determining population change is women's entry into the workforce. Rapid urbanization, even in the poorest parts of the world, creates a more favorable environment for women to pursue jobs outside the home. Eventually, this leads to a reduction in fertility rates, as women choose to focus on careers and have smaller or no families. This affects population structure and dynamics. Politicians ignore demographic trends at their own peril.
AEI intern Alexandra Prokhorova prepared this summary.
