Ministry report: Demographic changes have profound labour market effects

Ministry of Economic Affairs and Employment 27.11.2019 10.10
Press release
A lonely person is riding a bike on a peaceful sandroad, in a country side.

The publication examines the labour market effects of demographic changes in six European countries. Policy responses are very similar in all six countries. They focus on pension systems, access to employment to those with weak labour market participation, labour market policy, competence development, family-friendly solutions, and immigration policy.

A study published today by the Ministry of Economic Affairs and Employment on the labour market effects of demographic changes in six European countries concluded that demographic changes have profound labour market effects, and policy responses in different countries are rather similar. The population of several European countries is ageing – especially the proportion of persons aged 65 or over to the working age population is growing. As birth rates decline, migratory pressures intensify. The lowest retirement age for old-age pensions has also been raised, and will be raised further in many countries.

The publication examines the labour market effects of demographic changes in six European countries: Germany, the Netherlands, Sweden, Latvia, Estonia and Finland. In all these countries, the old-age dependency ratio is weakening. In other words, the proportion of those aged 65 or over to the working age population is growing. Since birth rate is not sufficient to ensure population increase in any of these six countries, migration will play an important role. As the number of the working age population falls, employment rates tend to rise. This has happened in all six countries in recent years, along with a decrease in unemployment rates. Labour productivity has not decreased in any of these countries; in some, it has actually increased.

Most recently, the old-age dependency ratio has remained largely unchanged in Germany and Sweden, while in other countries in has continued to decline. Meanwhile the birth rate trend shows more variation; Germany and Latvia have recently succeeded in raising their birth rates. With regard to migration, Latvia differs from other countries in that more people continue to emigrate than immigrate, although the situation is stabilising. Net immigration has increased lately in Estonia, Latvia (although the level remains negative), the Netherlands and Sweden.

In Finland, the situation in terms of both population and the labour market has in recent years remained the weakest in the six countries examined, based on a number of factors. Nonetheless, labour market development has been positive.

The population scenarios of Eurostat, the statistical office of the European Union, indicate the significant impact of migration on demographic development by 2035. It seems that immigration could reverse the otherwise declining population trend in the Netherlands and Sweden, and to keep it almost unchanged in Finland. In the other three countries, population scenarios show a downward trend.

Policy responses are very similar in all six countries. They focus on pension systems, access to employment to those with weak labour market participation, labour market policy, competence development, family-friendly solutions, and immigration policy. The publication is based on the work of the international labour market forecasting network (ILMFN), and includes country reports prepared by experts from six countries, and a summary article.

Inquiries:
Heikki Räisänen, Research Director, Ministry of Employment and the Economy, tel. +358 29 504 7118
Tallamaria Maunu, Senior Specialist, Ministry of Economic Affairs and Employment, tel.  +358 29 5047 193