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Europe’s Ticking Demographic Time Bomb

The days of Europe’s highly vaunted cradle-to-grave social welfare state are numbered.

by
Soeren Kern

Bio

March 8, 2011 - 12:05 am
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Europe’s population is shrinking and aging so much so fast that a major decline in European living standards is now statistically inevitable within the next 15 years, according to data contained in a publication titled “The EU in the World: A Statistical Portrait.” The 113-page report — published by the European Union’s official statistics agency known as Eurostat — shows that Europeans increasingly are relegating themselves to the global margins, as their relative share of global wealth and trade shrinks. The main culprit is the refusal by Europeans to produce more children.

Eurostat estimates that the world’s population reached 6.9 billion people at the beginning of 2010. Asia accounts for more than 60 percent of the total (China, 20 percent and India, 18 percent). By contrast, the European Union’s 500 million people account for 7 percent of the world’s total population, and the United States with its 320 million inhabitants currently makes up 5 percent of the world total.

But the Eurostat data also show that while the world’s population increased by more than 130 percent since 1960, Europe’s population increased by only 25 percent during that same period, and will peak in 2025 before embarking on a permanent downward trajectory. By comparison, the U.S. population increased by 70 percent over the past 50 years and is expected to continue growing at a healthy pace well beyond 2050.

The report also shows that most of Europe’s population growth over the past decade has been due to mass immigration from mostly Muslim countries, and not to natural population growth by native Europeans. The data show that Europe’s population growth due to net immigration (the difference between immigration and emigration from an area) was more than twice the rate of natural population growth.

By contrast, Eurostat data show that America’s total population growth over the past decade has been more than four times greater than the rate experienced by Europe, and natural population growth has consistently been more than six times higher than the European rate.

At the same time, the Eurostat data show that Europe’s population is aging at a rapid rate. This will increase the old-age dependency ratio to unsustainable levels in the near-term future. The old-age dependency ratio shows the level of financial support for the retired population (aged 65 years and over) provided by the working age population (those aged between 15 to 64 years).

More specifically, the Eurostat data show that the European Union had a 26.1 percent old-age dependency ratio (population aged 65 years and over as a percentage of the population aged 15-64) in 2010, a figure that is forecast to jump to 31.5 percent in 2020, 38.7 percent in 2030, 46.1 percent in 2040, and a whopping 50.6 percent in 2050. According to Eurostat: “The EU-27’s old-age population will increase to such an extent that there will be fewer than two persons of working age for each person aged 65 or more by the year 2050.”

By way of comparison, the United States had an old-age dependency ratio of only 19.4 percent in 2010, a figure that is forecast to rise to 24.9 percent in 2020, 31.7 percent in 2030, 34.0 percent in 2040, and 35.1 percent in 2050, well below every single EU country.

Consider Germany, which currently ranks as the most populous country in Europe and the fourth-biggest economy in the world (China recently leapfrogged Germany to become the world’s third-largest economy). According to projections by the German Federal Statistics Office, the German population is forecast to shrink by as much as 20 percent by 2060.

Germany’s population of 82 million in 2008, the largest in the European Union, will decline to between 65 million and 70 million over the next five decades. By 2060, 34 percent of the population will be older than 65 and 14 percent will be 80 or more, up from 20 percent and 5 percent, respectively, in 2008.

The number of pensioners that will have to be supported by working-age people could almost double by 2060, the report says. While 100 people of working age between 20 and 65 had to provide the pensions for 34 retired people last year, they will have to generate income for between 63 and 67 pensioners in 2060, it says.

The German statistics office’s projection assumes a birth rate of 1.4 children per woman through 2020, an increase in life expectancy to 85 years for men and 89.2 years for women by 2060, and net immigration of 100,000 people per year.

“While the number of older people increases, fewer and fewer people will be of an age at which they can work. This will have consequences for the social security system,” the report says.

“Germany will clearly decline as an economic power, especially in comparison to up-and-coming nations such as China and India,” reports the Mannheim Research Institute for the Economics of Aging.

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