EUROPEAN PAPERS ON THE NEW WELFARE

Active Ageing: the EU Policy Response to the Challenge of Population Ageing

2. The Challenges Posed by Population Ageing

The simple demographic fact of population ageing is subject to huge distortions and sometimes outrageous claims concerning the future impact of population ageing that have coloured much of the European and global debate about ageing. The ageing of the population is seen by the academic and the policy-making world from two different perspectives: first, ageing is seen only as a challenge — mainly by the classic economic line of reasoning. This crude construction is accepted uncritically and used to legitimate predictions about the negative impact of population ageing on the economy (Walker, 2003). Therefore, theorists put forward pessimistic theories about ageing (Grienberg, 1980; Cramer, 1980). Similarly, international economic agencies (OECD, WB, and IMF) and supranational organizations (European Commission) frequently project catastrophic scenarios (Jepsen and Hutsebaut, 2003: 213) of how the ageing population will give rise to large structural problems, i.e. public deficit, by 2050. The ‘alignment’ of the EU with this group has raised some criticism which will be analyzed in Section 6. Second, there are also scholars who have a dualist approach, that is, they consider the ageing of population not only as a challenge but also as an opportunity, a privilege, one of ‘the biggest achievement of the modern societies’ (Giarini and Liedtke, 2005; Walker, 2003) or even as one of the humanity’s greatest triumphs (UN, WHO, 2002).
In the following section, the paper will briefly describe some of the challenges with which the ageing of population will confront the EU based on the active ageing-related documents of the European Commission.

2.1 Europe’s Population Ageing Trends

Population ageing is one of the most important challenges facing the EU countries. Over the next 50 years the EU countries will experience one of the most pronounced ageing trends (COM, 2002; OECD, 2006). Even though ageing is a global phenomenon, since the ‘60+ age group’ is the fastest growing segment of the population in the world today, the problem is that for the time being the situation in the EU is more serious than in other countries, e.g. the USA. By 2050 the share of the above 60 age-group will be around 37% in Europe compared to only 27% in North America (COM, 2002). The process of Enlargement of the EU is not expected to have a significant impact on the ageing process of the EU. Ageing on this scale will first lead gradually to the shrinking of the labour force and second, will put enormous pressure on the financing of the social protection systems.

2.2 Shrinking of the Workforce

Europe is faced with the prospect of an ageing and shrinking work force. Over the next two decades the number of Europeans in the 20-29 year age group will fall by 20%, while the number in the 50-64 year age group will increase by 25% (COM, 2002). The ageing of the European population will gradually lead to a contraction in the labour force. By 2030 the working age population could be reduced to 280 million for the EU-25 (compared with the current 303 million) implying a significant decline in the volume of employment (COM, 2004). Therefore, the speed of demographic change in the EU reinforces the importance of the general efforts to raise the participation and employment rate of the older workers. In the European Employment Strategy the older workers are increasingly perceived as one of the most significant sources of additional labour supply as a compensation, in view of the shrinking of the workforce (COM, 2002).

2.3 Implications for the Sustainability of Pensions

Based on the present trends, the EU working age population will fall by approximately 40 million people from 2000 to 2050 and the old age dependency ratio in the EU will double from 24% to 49%. In other words the EU is projected to move from 2000 to 2050 from having four to only two persons of working age (15-64) for every person 65 and above. The OECD assessment is still less optimistic as it maintains that in Europe, over the same period of time, the ratio could rise to almost one older inactive person for every worker (OECD, 2006). An increasingly older population creates considerable pressure on pension and threatens their sustainability. Scholars argue that the pension systems will face financing problems as early as 2010, while the challenge of a shrinking labour force has already been encountered or will arise in the EU (Jepsen and Hutsebaut, 2003). Therefore, the EU member states have recognized that deeper cooperation on common problems is required in the domain of pension policy. At EU level, the challenges to pension systems are addressed both in the context of economic policy coordination and in the framework of the Open Method of Coordination on pensions (COM, 2002).
To sum up, despite substantial differences between the EU member states, more or less they face common challenges due to population ageing. The EU policy response to these challenges has been the establishment of a policy coordination instrument at EU level, the introduction of an active ageing policy which aims at increasing the employment rate of the older workers and delaying their exit from the labour market.


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