What an aging population in Europe means for its economic and social future

What an aging population in Europe means for its economic and social future
Dec 19, 2019

Longer life expectancy and declining birth rates are fundamentally changing society. How can we maintain social cohesion and organize public services to prepare for the future?

For the first time, policymakers of the most advanced and emerging economies weighted aging as a global risk at this year’s G20 summit. The hosts, in particular, Japan—the world’s fastest aging nation—called for effective measures to address the pressure on public finances and labor markets. Others are more optimistic: members of the British Parliament recently stated that aging should instead be seen as one of the most ‘promising opportunities of the 21st century'.

Do aging societies bear opportunities with the increased economic and social activity of people over 65 in Europe? Or do they challenge social cohesion by increasing public expenditure? We are living longer and healthier lives, but most of us will rely on health- and long-term care in late life. Both factors require a rethinking about aging and different life stages, in addition to better support for people with long-term conditions.

As demographics shift older, the working population shrinks

In the European Union, the working-age population—between 15 and 65—is projected to fall from 333 million in 2016 to 292 million in 2070. Meanwhile, the share of people aged 65 and over will rise from 19% to 29% of the population, and people aged 80 and over will increase from 5% to 13%.

This significant transformation will impact our labor markets, health, long-term care, transportation, housing, and pension systems. Next to globalization, digitalization, and environmental degradation, population aging will shape economic developments, as outlined in the Organization for Economic Cooperation and Development’s (OECD) 2019 Going for Growth edition. This report and the recent demographic scenarios for the EU recommend counterbalancing longer life expectancy and decreasing birth rates through sophisticated skills policies and more inclusive labor markets.

Opportunities that come with age

The opportunities for Europe’s shrinking workforce are longer working lives and education to adapt to an already changing labor market. Career and age-management offer several strategies to help people to participate in employment as they age: acquiring and maintaining necessary qualifications and competencies, flexible working careers, different retirement options, and supporting breaks throughout careers.

On top of employment, people over 60 are increasingly involved in civic engagement and volunteering. Examples across Europe are third age universities, multi-generational projects, and befriending. These activities support new skills and experiences, increase individual well-being, and bring people from different backgrounds and generations together—leading to positive impacts for communities and society as a whole. For example, in the UK, 35,000 members of 289 time banks support each other, with huge potential to relieve health and social care services.

In recent years, many have called for “untapping” the opportunity of aging societies, with a focus on participation in employment and society and growth in the ‘silver economy’ market. For example, in the Active Ageing Index, policymakers can assess active and healthy aging policies.

This also requires rethinking our entire life course and aging. Life stages should be regarded with more flexibility—away from three static and linear stages of education, working life, and retirement (which people enter due to their physical age). In addition, positive perspectives on aging, such as “active aging,” need to start with our attitudes. According to a German aging survey, people who regard aging negatively are less physically active and more ill than people who are more optimistic about their future and age.

The costs of health and long-term care

Although we live longer, we are very likely to develop a disability or multiple long-term conditions, such as cardiovascular disease or dementia, in later life. As a result, costs for long-term care and health will increase by 2.1 percentage points to 26.7% of GDP between 2016 and 2070. Affordable, quality, and community-based services—as outlined in the European Pillar of Social Rights—are vital to staying healthy and active for as long as possible and to live a good life until death.

The reform of Europe’s care systems includes, in many countries, honest debate about higher spending and ways to share costs between the state and the individual. Between rich and poor and between young and old, it’s a discussion many politicians have avoided so far. Next to sustainable and accepted funding models, a focus on independent living, autonomy, and dignity impacts on quality of life and can, in turn, lead to more efficient spending.

Health or long-term care provisions tend to forget about individual abilities and experiences. A focus on peoples’ strengths—rather than their impairments—can enable them to remain in control of their lives and provide support more efficiently. For instance, approaches in England and Germany recognize capabilities, social networks, and individual wishes when assessing the need for care. This also necessitates commitment from frontline workers. For example, in the Danish Life Long Living model, multi-disciplinary teams help people perform everyday tasks by themselves for longer. In the Netherlands, the Buurtzorg model cut out administrative tasks, allowing community nurses to spend more time with their patients. This resulted in higher quality of care and better working conditions for the professionals and reported savings of around 40% of healthcare costs.

An investment in formal care requires trained, skilled, and committed staff. Better working conditions and higher wages can raise the attractiveness of this sector, which so urgently needs workforce. In turn, sustainable and inclusive job creation will support gender equality, as women provide most of unpaid and professional care to older people.

Looking at aging through a brighter lens

Besides economic sustainability, reforms and investment should be seen in the context of the welfare state’s principles of equality and equity—promoting well-being for all citizens. Without change, most welfare systems will probably fail to support millions of vulnerable older people, ultimately depriving them of their right to dignified and quality lives.

Aging is a complex issue with financial, political, and social implications. Next to discussions about spending, we need change on a number of fronts: attitudes towards age and life stages, education and employment policies, opportunities to engage on a community level, and reform of health and long-term care services.

"By looking at the opportunities brought by an aging population—not just the challenges—Europe can establish the policies needed to support many generations to come."

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