European Economic and Social Committee
Workhop on“How to encounter demographic change?
Comparison between the EU and Japan?”
AGEING, AND SHRINKING POPULATION:CHALLENGES AND OPPORTUNITIES FROM BUSINESSESPERSPECTIVES

Eve Päärendson
President of theContact Group on Japan ofthe EESC
Vice-President of Employers´GroupEurope and Asia: ageing anddeclining populations• Within 20 years in Europe and Asia in several
countris the largest population short will beover 65, and average age approaching 50• 29% of Europe´s population projected to be65 and older by 2050

The EU´s demographic challenge* Since 2010, decline of the working-age population:over 3 million workers less by 2020, 50 million less by 2060
* In Europe between 2007 and 2060, demographic change is
projected to lead to a fall in average potential economic
growth rates from 2.4% to 1.3%

Impacts of the ageing population• Labour market• Productivity• Economic growth• Social security and public finances• Structure of consumption and production ofgoods and services, housing• Work and family life
• Education• Development of technology etc

Challenges of demographicageing:• fostering intergenerational solidarity,• ensuring adequate and sustainable pensions,• dealing with pressure on public budgets,• supporting more elderly people, with lesspeople in employment• reforming of healthcare systems in order toincrease cost‐effectiveness of healthcare
services

How to compensate the drop in theworking age population?
• To ensure that full potential of labour market is exploited:• To increase labour productivity,• To raise employment rates (older workers (55‐64), young people,
women, mothers with children, immigrants), including by working
longer: extending working hours, discouraging early exit from thelabour market, raising retirement age)
• Invest in education, skills and training (including re‐training) :– Equip Europeans with competences & skills needed at labour
market– Partnership between education systems and companies– Innovation, entrepreneurship• Job opportunities for older people

Tackle demographic ageing:
MAIN CHALLENGES:• Ensuring long‐term sustainabilityof public finances• Dealing with the reduction in thesize of the labour force• Reforming pension and healthcare systems, to make themfinancially sustainable• Taking into account flexicurity
principles in implementing
necessary structural reforms• Increase the supply of skilledworkers• Reconciling work and private lifein the context of demographic
ageingPublic finances• Ensuring long‐term sustainabilityof public finances→• Social protection systems will
have to compensate forincreasing numbers of people inretirement and less people
working• Age related public expenditure is
projected to increase on averagein the EU by 4,75% of GDP
between 2007 and 2060. The
largest increase in spending(2,4%) will be on pensions,alongside smaller increase forhealth and long‐term care
• Public finance deficits at 7% of
GDP on average, and debt levels
at nearly 80% of GDP

Reduction in the size of labour force• Since 2008 to 2060 the old‐age
dependency ratio, (over 65s relative
to the working age population), will
double•From 2010 the working‐age• EU average unemployment ispopulation will decrease, 3 million
10%
less potential workers by 2020, and• Unemployment of young people
over 50 millions by 2060
20% (2010), in some countries as•
Modernisation of social protection
high as 40%
systems , development further ofactive labour market policies, sothat people are encouraged toreturn to the labour market• Increasing efficiency of educationand training systems to give accessto lifelong learning opportunities toworkers of all age groups – training ,reskilling (updating of old skills)
Dealing with the reduction in the• sizeof labour force→

Reduction in the size of labour force
Dealing with the reduction in the• size•of labour force→
Statistics••

Unemployment of young people 20%(2010), in some countries 40%
In 2008 the EU average employment
rate for older workers (55‐64) 45,6%.
In some member states 70%, and in ••some only 29%.

Employment rates of older workers
should be increased (discouraging &removing incentives for early exit fromthe labour market, providing incentives
for people to stay longer on the labour
market & for companies to employ andkeep older workers)
Intergenerational approach is important
As the size of the working‐age
population declines, the source ofeconomic growth will come mainly fromproductivity• Member states should foster
innovation, propomote
entrepreneurship, encourage
investments in human capital andlowering barriers on both productand labour markets.

Sustainability of pension and healthcare systems
Reforming pension and health caresystems, to make them financiallysustainable→The model:
25 years at school,
40 at work and
20 on pension is no longer working•

In order to maintain the current ratio oflabour force to general population by
2050 the pensionable age would haveto increase by 12 years in Japan, 11 in
Korea, 10 in Italy and Spain, 9Germany and 6 years in France. In theUK and the USA a 3‐year increase
would be sufficient.

TASKS:• To raise the retirement age isnecessary to solve the budgetary andlabour market consequences ofageing• Occupational pensions andindividual private pensions for
decreasing pressure of the statepension system and offer extra
income in retirement• Increase of efficiency of health caresystems• Longer working lives are necessary

Flexicurity• Taking into accountflexicurity principles→• Flexicurity should leadto modern and effective
labour laws,
comprehensive lifelong
learning, effective
active labour market
policies and modernsocial security systems

Supply of skilled workers• Increase the supply of skilledworkers→
Some statistics:

High‐qualified third‐country workers
make up:
1,72% of total of the employed
population in the EU, comparedwith
9,9% in Australia,
7,3% in Canada,
3,2% in the US and
5,3% in Switzerland
At the same time, around 400000
Europeans with scientific skills live
and work in the United States• High unemployment (10%) co‐exist with unfilled vacancies ‐mismatch of skills.
• Supply of skilled workers andupgrading the skills of theEuropean population is needed,• Cooperation between
educational institutions andcompanies• Legal economic migration canhelp in alleviating immediatelabour shortage in Europe.
Europe should improve its record
in attracting qualified migrants

Reconciling work and private life in
the context of demographic ageing• Reconciling work andprivate life in the context
of demographic ageing→
Important element, since it has
impact to birth rates:‐ Europe´s essential birth rate (2%) isonly in acceeding country –Iceland.
‐ Ireland, Norway, Finland, Sweden,France, UK, Denmark – 1,8&over‐ Poland, Czech Rep, Slovakia,Lithuania, Slovenia, Hungary,Latvia (less than 1,3)

• Work and private life
balancing policies taking
into account bothcompanies andemployees´ needs• Leaver arrangements,
childcare facilities,
flexible working
arrangements(teleworking)Opportunities in an Era of
Demographic Change
Ageing society brings new opportunities in thefield of :– Recreation services & other services– Medical field & pharmaceutics– Technological developments (robotics)– Housing (smart houses)– ICT solutions for older people– E‐healthcare system etc

Upcoming EESC´s activities related
to demographic change
European Year of Active
Ageing 2012

• European Year of Active
ageing 2012 – the EESC
will launch its opinion

THANK YOU FOR YOURATTENTION!

Eve Päärendson
eve@employers.ee
www.eesc.europa.eu