Population ageing is poised to become one of the most significant social transformations of the twenty-first century, with implications for nearly all sectors of society, including labour market, the demand for goods and services, such as housing, transportation and social protection, as well as family structures and intergenerational ties. The contributions of older persons to society are invaluable. Many such contributions cannot be measured in economic terms – such as caregiving, volunteering, and passing cultural traditions to younger generations.
In 2008, there were 3.2 people of working age for every pensioner, and this is projected to fall to to 2.8 by 2030, creating an increasing dependency ratio. The dependency ratio is, in its simplest form, the ratio of those in a population who do not work (are dependent, and inactive) to those who do work (are active). Within the next few decades, working-age adults in the UK will need to support double the number of elderly people than they do now, putting immense pressure on welfare systems and wiping out as much as 3% of potential economic output by 2050. Unless technology delivers offsetting productivity gains, these findings highlight the need to welcome immigration to boost labour supply.
Migration offsets many of the adverse effects of an ageing population on the labour market, with the average age of migrants lower than the host population. The downside effect of the ageing is compensated by younger migrant workers who are willing and able to undertake work. With immigration, on average 800,000 per year, the population size in the EU is likely to be about the same level in 2050 as it is today. However, with no migration there would be immediate moderate decline followed by a steep decline after 2030, reaching 451 million by 2025, and 413 million by 2050, a fall of 40 million across the EU. Indeed some projections indicate that without mass immigration into the EU of around 100 million there will be a need for a significant increase in labour force participation rates for all EU countries and a rise in retirement ages of 10 years by 2050 to compensate for the impact of demographic ageing on the work force.