Population aging, migration, and productivity in Europe

Abstract

This paper provides a systematic, multidimensional demographic analysis of the degree to which negative economic consequences of population aging can be mitigated by changes in migration and labor-force participation. Using a microsimulation population projection model accounting for 13 individual characteristics including education and immigration-related variables, we built scenarios of future changes in labor-force participation, migration volumes, and their educational composition and speed of integration for the 28 European Union (EU) member states. We study the consequences in terms of the conventional age-dependency ratio, the labor-force dependency ratio, and the productivity-weighted labor-force dependency ratio using education as a proxy of productivity, which accounts for the fact that not all individuals are equality productive in society. The results show that in terms of the more sophisticated ratios, population aging looks less daunting than when only considering age structure. In terms of policy options, lifting labor-force participation among the general population as in Sweden, and education-selective migration if accompanied by high integration, could even improve economic dependency. On the other hand, high immigration volumes combined with both low education and integration leads to increasing economic dependency. This shows the high stakes involved with integration outcomes under high migration volumes.