Growth potential of EU human resources and policy implications for future economic growth
Europe is confronted with important socio-economic challenges due to demographic ageing and the decline of the working-age population. Their impact on the size and structure of the European workforce represents one of the key challenges in this context. The paper focuses on what the demographic shift could mean for future employment growth over the period 2010-2060. The proposed methodology makes use of Eurostat's demographic projections (convergence scenario, Europop2010). It employs a set of assumptions related to future growth of the active population, building a high (maximum) and low... (minimum) activity scenario. The paper then explores the potential of employment growth in the years ahead subject to these human resources constraints. The analysis shows that some of the economically strongest EU Member States will find themselves confronted with serious employment growth constraints due to labour supply bottlenecks already within the next 5 years, even under extremely high activity assumptions. Several other Member States will face labour constrains over the next decade. Given the strong inertia of demographics, even total EU employment will start shrinking in 15 to 20 years from now. Labour supply constrains will arise considerably earlier in the case of highly educated workers. The authors conclude that if European economies are to continue growing at a welfare-maintaining pace, the focus must be on productivity growth which will remain the only renewable source of economic growth in the long run. EU productivity growth will have to more than double within the next decade compared to the last two decades' relatively modest performance. How could these important productivity gains be generated in a socially sustainable manner? The paper makes use of model simulations to investigate this question – focussing in particular on the potential impact of skills development and higher education.