Old Europe, Young World

As the EU reaches its 50th birthday, many Europeans are entering middle age with it. They are also becoming aware of the potential of demographic change to make Europe’s next half-century very different from the previous one.

The EU’s first 50 years were characterized by a growing population and a high proportion of working-age people relative to children and the elderly. The post-war “baby boom” generation drove a period of sustained economic growth that strengthened Europe’s standing in the world and led to dramatic improvements in its citizens’ quality of life.

The EU’s next five decades, on the other hand, will see the baby boomers moving into retirement, leaving a shrunken labor force with the heavy burden of supporting their elders’ health care and pension needs. Thirty-six per cent of Europeans will be aged 60 or over by 2050, and, despite increasing life expectancy, continued low fertility will mean the continent’s population will begin to dwindle by 2020.

Although Europe is unlikely to become poorer as a consequence of this demographic shift, it may experience a prolonged period of slower growth. All else being equal, per capita incomes and productivity in countries with high proportions of elderly people tend to grow more slowly than in younger countries. Europe’s economic strength relative to the rest of the world may therefore diminish, perhaps sharply.