Almost all European countries are facing demographic aging and a decline in their working-age population (15 to 64). Between 2010 and 2023, the working-age population shrank by 2.5% in the eurozone and by 2% in France.
The decline in fertility rate – the average number of children per woman – will amplify this trend. By 2023, it will have fallen to 1.36 in Germany, 1.68 in France, 1.24 in Italy and 1.19 in Spain, whereas it should be slightly above 2 to ensure the replacement of generations.
We can therefore forecast a 17% drop in the working-age population between 2023 and 2050 in the eurozone, and 7% in France. The situation is totally different in the United States, where the population has been growing by 1% per year since 2018, with a recent acceleration due to immigration: 647,000 immigrants were registered in the US in 2021, 1.9 million in 2022, and the number is expected reach 3 million for 2023, a year which has also seen 878,000 naturalizations. In India, the working population has been growing by 3% per year since 2018, contributing almost half of the country’s economic growth over this period.
Read more Subscribers only Birth rates continued to fall in 2023 in aging France ‘Optimal population’
What strategy should Europe adopt in the face of this worrying demographic trend? One possible strategy is… resignation. It corresponds to the theoretical analysis known as “optimal population,” according to which a country that is about to experience a fall in its working-age population must, so long as the aging has not yet occurred, accumulate external assets, not in the form of public debt securities of other countries, but in the form of productive assets – investments in business and infrastructure – of countries that will remain young.
This will enable the aging country to offset or supplement the decline in its domestic income with capital income repatriated from the rest of the world, therefore avoiding a decline in its per capita income, even as its per capita production declines.
From 2023 Subscribers only France’s aging population is a challenge that goes far beyond the pensions issue
This is, for example, the strategy followed by Japan. For the past 10 years, the country has enjoyed a current account surplus averaging 2.9% of its gross domestic product (GDP). But only 15% of this current account surplus is due to the trade balance surplus. It essentially results from the capital income surplus, thanks to a considerable level of net foreign assets: $3.46 trillion (€3.235 trillion), or 64% of the country’s GDP!
Other examples of countries with substantial net foreign assets include Switzerland, Norway, Singapore, Saudi Arabia and Germany. All of these countries have adopted a strategy of accumulating net foreign assets, to support their capacity to consume, either when demographic aging occurs, or when their natural resources (oil, natural gas) can no longer be exploited.
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Source link : https://www.lemonde.fr/en/opinion/article/2024/06/19/patrick-artus-if-they-don-t-react-the-countries-of-southern-europe-will-bear-the-full-brunt-of-the-negative-effects-of-a-shrinking-working-age-population_6675206_23.html
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Publish date : 2024-06-19 18:30:07
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