www.seo.nl – e.berkhout@seo.nl - +31 20 525 1630

Mind the gap!General effects of ageing on labour supply and the

possible role of labour migration

Skillsnet conference, CedefopThessaloniki, 21/22 feb. 2008

Ernest Berkhout

Contents

European trends 2005-2050 ageing population migrating labour

Consequences for the labour market potential ‘employment gap’ who suffers? what can be done?

Possible role of migration public misconceptions on ‘migration’ labour migration & skills

Ageing

Four projections Eurostat, 2005-2050 baseline projection low growth high growth no migration

based on fertility rate, death rate migration rate

40

50

60

70

80

90

mill

ion

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

High growth/Low growth Base projection No-migration

Age <15

jongeren

220

240

260

280

300

320

mill

ion

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

High growth/Low growth Base projection No-migration

Age 15-64

jongeren

80

100

120

140

160

mill

ion

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

High growth/Low growth Base projection No-migration

Age 65+

55

58

61

64

67

perc

ent

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Base projection No-migration Low growth High growth

Working age as % of total population

0-4 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80+

Baseline 2005 Baseline 2050

Population distribution

0-4 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80+

Baseline 2005 Baseline 2050

Population distribution

Potential

employment

ageing most pronounced in ‘no migration’ scenario

migrants are relatively young

Employment gap

gap = [demand for labour – supply of labour] demand total population constant supply working age population 15-64

decling

Assumptions: constant labour productivity constant demand (per capita) constant inactivity rate migration along Eurostat projections 2005-2050 migrant supply fits demanded type of labour

exactly

55

58

61

64

67

perc

ent

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Base projection No-migration Low growth High growth

Working age as % of total population

Employment gap (pure ageing effect)supply demand differenc

eto close the

gap

2005 2050 2050 2050

Population (x1000)

453,831

Working age rate

67.2%

Potential employment 15-64 (x1000)

305,076

Employment rate

63.6%

Real employment (x1000)

194,028

Employment gap (pure ageing effect)supply demand differenc

eto close the

gap

2005 2050 2050 2050

Population (x1000)

453,831

constant

Working age rate

67.2% 56.7%

Potential employment 15-64 (x1000)

305,076

257,144

Employment rate

63.6% 63.6%

Real employment (x1000)

194,028

163,543

Employment gap (pure ageing effect)supply demand differenc

eto close the

gap

2005 2050 2050 2050

Population (x1000)

453,831

constant constant

Working age rate

67.2% 56.7%

Potential employment 15-64 (x1000)

305,076

257,144

Employment rate

63.6% 63.6%

Real employment (x1000)

194,028

163,543 194,028

Employment gap (pure ageing effect)supply demand differenc

eto close the

gap

2005 2050 2050 2050

Population (x1000)

453,831

constant constant constant

Working age rate

67.2% 56.7%

Potential employment 15-64 (x1000)

305,076

257,144 -48,208

Employment rate

63.6% 63.6%

Real employment (x1000)

194,028

163,543 194,028 -30,485

Employment gap (pure ageing effect)supply demand differenc

eto close the

gap

2005 2050 2050 2050

Population (x1000)

453,831

constant constant constant

Working age rate

67.2% 56.7%

Potential employment 15-64 (x1000)

305,076

257,144 257,144

Employment rate

63.6% 63.6% 75.5%

Real employment (x1000)

194,028

163,543 194,028 -30,485 194,028

Employment gapEmployment gap (x1000 persons)

Employment rate needed to close the

gap

Ageing effect only 30,485 75.5%

Baseline growth 30,216 75.5%

No migration scenario

30,904 77.7%

Low growth 25,915 75.4%

High growth 36,972 76.0%

But…

labour productivity will rise considerable differences within EU25 closing employment gap ≠ solving all ageing

problems! rate 65+/65- still higher financing pension schemes higher demand for health & recreation

so: figures should only be treated as indicative!

Who suffers?

countries with older population… .. and low net migration

(because migrants are mostly 15-64)

83768273

807380728168

83687967

78658165

70647564

73638263

69617360

72586757

6352

0 20 40 60 80

Denmark

Netherlands

Sweden

United Kingdom

Austria

Portugal

Ireland

Germany

Czech Republic

Luxembourg

EU-25

France

Spain

Belgium

Greece

Italy

Hungary

Poland

Employment rate 2005 Baseline scenario 2050

83768273

807380728168

83687967

78658165

70647564

73638263

69617360

72586757

6352

0 20 40 60 80

DenmarkNetherlands

SwedenUnited Kingdom

AustriaPortugal

IrelandGermany

Czech RepublicLuxembourg

EU-25France

SpainBelgiumGreece

ItalyHungary

Poland

Employment rate needed to close the gap

Employment rate 2005 Baseline scenario 2050

0 5 10 15 20 25

SpainCzech Republic

ItalyPortugal

PolandGreece

GermanyAustriaEU-25Ireland

HungaryFrance

BelgiumUnited Kingdom

NetherlandsLuxembourg

SwedenDenmark

Employment gap in % of total employment needed

Baseline scenario 2050 No migration 2050

What can be done? 1. stimulate population growth higher employment rate:

2. more people 3. more hours/week 4. stop working at higer age 5. ‘parttime-pensioner’ vs. all-or-nothing

6. labour productivity increase 7. outsourcing (production abroad) 8. (even more) immigration of labour (f.i.

temporary)

if all else fails: lower GDP per capita

The role of migration

Eurostat projection assumptions 2005-2050 positive in all EU-25 countries

relatively low in NMS in NL about 30,000 per year

But what exactly is ‘migration’?

“Help, immigration rises!” …

… or not?

-30.000

0

30.000

60.000

90.000

120.000

150.000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Immigration Emigration

… or not?

16,80427,887

43,118 40,372

53,873

24,332

-317

-16,216-6,612

50,838

-27,428

-30,000

0

30,000

60,000

90,000

120,000

150,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Net migration Immigration Emigration

so….

Immigration = structural inflow

Emigration = structural outflow

NET MIGRATION = resulting sum of both flows

CBS: “Immigranten zijn personen die zich vanuit het buitenland in Nederland vestigen en in de Gemeentelijke Basisadministratie persoonsgegevens (GBA) zijn ingeschreven. Inschrijving in de GBA vindt plaats indien de verwachte verblijfsduur in Nederland in het halfjaar volgend op de vestiging ten minste vier maanden bedraagt. “Dus exclusief de meeste seizoenmigranten!

Which countries of birth highest net inflow 2007?

Poland +6,770 +5,330 Rumania & Bulgaria +5,823 +610 Germany +3,284 +2,553 China +1,566 +659 MEE (excl. Poland) +1,401 +879 Former Soviet-Union +1,366 United Kingdom +1,360

Wich countries highest net outflow 2006?

Netherlands -35,800 Antilles/Aruba -1,200 Angola -1,100 Somalia -800

Surinam, Morocco, refugee countries, Spain, Turkey

Net migration: change of character

-4000

-2000

0

2000

4000

6000

8000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Antilles & Aruba Surinam Morocco Turkey Poland

Immigrants & skill groups

Source: L. M. Kahn, ‘Immigration, skills and the labour market’’, Journal of Population Economics, 2004

Immigrants & skill groups

JapanTurkeyPolandHungaryItalyCzech RepublicSpainPortugalDenmarkNetherlandsUnited KingdomBelgiumIrelandFranceGermanySwedenAustriaUnited StatesCanadaSwitzerlandLuxembourg

0 10 20 30 40 50

among low-skilled among high-skilled country average

% foreign born

Source: OECD (Database on immigrants & expatriates, 2005)

NMS migrant similar or hihger educated

Source: OECD (Database on immigrants & expatriates, 2005)

Portugal

Spain

Netherlands

Italy

Belgium

Ireland

France

Denmark

United Kingdom

Germany

Luxembourg

Sweden

Austria

0 1 2 3 4

among low-skilled among high-skilled country average

% born in new member state

Early experiences within EU migration

UK, IRL & Sweden no restrictions since May 1st, 2004 age 20-40, high education level working in lower job levels inclined to return if no work no rise in social security schemes

But what if economic downturn? no empirical facts yet…

Foreign labour in practice… language!

security (-) customer contacts (-)

job motivation (+) housing! (-) cultural differences

adaptation (-) creativity, ‘best of both worlds’ (+)

price (+) family reunification (-) young & high skilled in low skilled jobs (-/+) seasonal peaks very important (+/-)

…and possible solutions

language Swedish nurses: language course in Poland

housing commitment tempwork agencies-communalities fight illegal labour

cultural differences …

price will rise inevitably

family reunification less likely then before, distances in EU small

www.seo.nl – e.berkhout@seo.nl - +31 20 525 1630

Mind the gap!General effects of ageing on labour supply and the

possible role of labour migration

Skillsnet conference, CedefopThessaloniki, 21/22 feb. 2008

Ernest Berkhout