Demographic Shifts and their influence on the economy - Part 5
Part 5 – Continental
Europe
Continental Europe, as an economy is second
only to The United States, at par with China. The four largest economies are
Germany, France, Italy and Spain. Their respective economies in terms of size
are - USD 4 trillion, 2.8 trillion, 2 trillion, and 1.4 trillion respectively –
a total of over USD 10 trillion. Their respective populations are - 83 million,
67 million, 60 million, and 47 million – a total of about 260 million. These
four countries have a combined per capita income around USD 40,000. The other
smaller EU countries also have similar levels. Europe has been relatively rich.
However, compared to The UK, they have been slower in accepting immigration.
Lately, these countries have seen a large influx of immigrants, so they haven’t
been as insular as Japan and China.
Europe has aged far more than The UK or The
USA. It’s not too far behind Japan. At present, the proportions of the elderly
(over 65 years) are estimated to be Germany 21.6%, France 20.39%, Italy 23%,
and Spain 17%.
All of these countries have very low
fertility figures and the elderly proportions are set to increase sharply. Each
of these countries and their neighbors are expected to see the proportions of
the elderly to rise to reach 30-35% range by 2050. Their populations of most of
these countries are also likely to shrink by then. France is expected to rise
marginally to 73 million, Germany is likely to shrink to 79 million, Italy to
58 million, and Spain is expected to marginally increase to 50 million. The big
difference here compared to China and Japan is that these countries have been
getting immigrants for some time and that will continue. Thus, though they are
not in the same level as The UK and The USA, they still have an incoming
population which helps them balance the situation somewhat.
These numbers are large. Immigrant
population in Germany is estimated to be 14.8% at present. It is 9.7% in
France, 10% in Italy, and 13% in Spain. Most of the EU countries have similar
proportions. This is what is holding the balance together. Some broad
statistics that give the picture for EU as a whole –
·
2.4 million immigrants entered the EU-27 from
non-EU-27 countries in 2018.
·
21.8 million people (4.9 %) of the 446.8 million
people living in the EU-27 on 1 January 2019 were non-EU-27 citizens.
Germany reported the largest total number
of immigrants (893.9 thousand) in 2018, followed by Spain (643.7 thousand),
France (386.9 thousand) and Italy (332.3 thousand). Germany also reported the
highest number of emigrants in 2018 (540.4 thousand), followed by Spain (309.5
thousand), France (341.4 thousand), Romania (231.7 thousand) and Poland (189.8
thousand). A total of 22 of the EU-27 Member States reported more immigration
than emigration in 2018, but in Bulgaria, Croatia, Latvia, Lithuania and
Romania the number of emigrants outnumbered the number of immigrants (source:
Eurostat).
Immigrants into EU-27 Member States in 2018 were, on
average, much younger than the total population already resident in their
country of destination. On 1 January 2019, the median age of the total
population of the EU-27 stood at 43.7 years, while it was 29.2 years for
immigrants to EU-27 in 2018.
The number of people residing in an EU Member State with
citizenship of a non-member country on 1 January 2019 was 21.8 million,
representing 4.9 % of the EU-27 population. In addition, there were 13.3
million persons living in one of the EU-27 Member States on 1 January 2019 with
the citizenship of another EU-27 Member State. In absolute terms, the largest
numbers of non-nationals living in the EU-27 Member States on 1 January 2019
were found in Germany (10.1 million persons), Italy (5.3 million), France (4.9
million) and Spain (4.8 million). Non-nationals in these four Member States
collectively represented 71 % of the total number of non-nationals living in
all of the EU-27 Member States, while the same four Member States had a 58 %
share of the EU-27’s population.
The fertility rates are lower than the
replacement rate, but not heading to the kind of figures one is seeing for
Japan and China. The broad statistics are –
·
4.246 million babies born in the EU in 2018.
·
1.55 live births per woman in the EU in 2018,
ranging from 1.23 in Malta to 1.88 in France.
·
29.3 years was the average age of women at birth
of first child in the EU in 2018, ranging from 26.2 in Bulgaria to 31.2 in
Italy.
·
Almost half of children born in the EU in 2018
were first born children.
Births in The EU dropped sharply from 1960
to around 1995. Since then it has held and has stopped falling.
Among the EU Member States, France reported
the highest total fertility rate in 2018, with 1.88 live births per woman,
followed by Sweden and Romania, with 1.76 live births per woman and Ireland,
with 1.75 live births per woman. By contrast, the lowest total fertility rates
in 2018 were recorded in Malta (1.23 live births per woman), Spain (1.26 live
births per woman), Italy (1.29 live births per woman), Cyprus (1.32 live births
per woman), Greece (1.35), and Luxembourg (1.38). In most of the EU Member
States, the total fertility rate declined considerably between 1980 and
2000–2003: by 2000, values had fallen below 1.30 in Bulgaria, Czechia, Greece,
Spain, Italy, Latvia, Slovenia and Slovakia. After reaching a low point between
2000 and 2003, the total fertility rate increased in seventeen Member States
and by 2018, all of them except Malta, Spain and Italy reported total fertility
rates that were above 1.30 (Source: Eurostat).
In the past 45 years, total fertility rates
in the EU Member States have, in general, been converging: in 1970, the
disparity between the highest rates (recorded in Ireland) and the lowest rates
(recorded in Finland) was around 2.0 live births per woman. By 1990 this
difference — between a high in Cyprus and a low in Italy — had decreased to 1.1
live births per woman. By 2010, the difference had fallen again to 0.8 live
births per woman with a high in Ireland and a low in Hungary. By 2018 the
difference narrowed to 0.6 when the highest total fertility rate was recorded
again in France and the lowest rate was recorded in Malta.
In general, the European countries have
aged significantly since 1990, and the trend is going to strengthen further
during the next 25 years.
The effects
In most European Union (EU) Member States
(MS), healthcare costs are covered from both private and public sources. The
public ones are financed by contributions collected from the working age
population. Thus, as the share of older recipients of services increases, so
will their dependency on the working population, since the number of employed
individuals will remain steady or decline. The old age dependency ratio “has
risen to 29.6% in 2016 and is projected to rise further, in particular up to
2050, and eventually reach 51.2% in 2070” (source: The Impact of Population
Aging and Public Health Support on EU Labor Markets - by Mirela
Cristea,Gratiela Georgiana,Petru Stefea and Adrian Lucian Sala), leading to
decreased social security contributions collected from the population of
working age. Thus, population aging applies high pressure on policy-makers,
with critical challenges going forward.
Age-related changes will have an impact on
·
pensions
·
long-term healthcare
·
education
·
unemployment transfers
All of these are changing economic
structures and the way the aging countries think about meeting the challenges.
One of the outcomes is that these countries invest their surplus capital abroad
(emerging markets) with the objective of earning returns that would fund their
welfare programs. This happens in various forms – private investments,
sovereign funds, development loans and others.
It is important to note that eastern Europe
is somewhat different. Many of them haven’t recovered well from the Soviet era
and are facing the challenges of emigration. These countries have an aging population
(with longevity which is lower than in the west) and low fertility. The largest
country is Russia which is a primary example. Russia’s life expectancy is just
70 years, its fertility rates are at 1.6 (it had dipped to 1.25 by 2000 and has
revived somewhat since then). The population has started to shrink and the
prognosis isn’t good.
Russia’s population could decrease by half
by the end of this century, according to a recent United Nations demographic
report.
Russia has grappled with a stagnating population
growth in recent years despite the government’s efforts to reverse the trend as
the country’s population ages and fewer people have children. In 2018, Russia’s
population declined for the first time in a decade to 146.8 million, while its
migration numbers hit a record low.
According to the UN’s “pessimistic”
forecast, Russia’s population will fall to 124.6 million by 2050 and to 83.7
million by 2100. The UN’s “optimistic” forecast said that Russia's population
could also increase to 147.2 million by 2050. The UN’s “average” estimate said
that Russia’s population would drop to 135.8 million by that year. The current
population of the Russian Federation is 145 million. Needless to say, it will
also be much more aged. The median age in Russia is 39.6 years already. At the
moment 18-19% of Russians are estimated to be over 65 years of age. This
proportion is likely to increase to 26-27%. The only reason that it is not
going to be higher is that life expectancy is not expected to rise much in
Russia.
The situation is not very different in
countries like Belarus, and others. They also face net emigration challenges.
Part 1 – The key parameters that influence shifts
Part 2 – What has been the Japanese Experience
Part 3 – Greying and aging before it gets rich
Part 4 – The two dominant economies of the world over the last 150 years
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