‘Demographic dependency’ casts shadow over employment report

EU Employment Commissioner Marianne Thyssen said, “Leaving our young people behind is putting at risk our own future, our growth, our welfare and our social model." [European Commission]

Young people in Europe will be squeezed by shrinking pensions and demographic change, adding pressure to under 25-year-olds who are already weighed down by a stubbornly high unemployment rate.

“Leaving our young people behind is putting at risk our own future, our growth, our welfare and our social model. We owe it to younger generations to give them everything we can,” Marianne Thyssen, the EU employment chief, said at a news conference Monday (17 July).

Europe’s employment rate is higher than before the economic crisis at 71.1% of people aged 20 to 64. Total unemployment stood at 7.8% in May, down from 8.2% at the end of 2016. But Thyssen emphasised that despite that overall positive trend, young people are still losing out.

People who are now young will face a “double burden” of higher pension contributions and will receive lower pensions when they’re older, according to the European Commission’s 2017 report on employment developments, which Thyssen presented Monday.

Thyssen referred to increasing “demographic dependency” and warned of a looming labour shortage: by 2060, the ratio of workers to pensioners will drop by half, to two people working for every pensioner in the EU.

“There is a big burden on youngsters and less on older ones in general,” Thyssen said.

Recent pension reforms in some EU countries might not be enough to reverse that trend.

“Further efforts may be needed to improve adequacy and intergenerational fairness, and secure a positive perspective for younger generations,” the Commission’s study says.

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A bad outlook for pensions would be an added blow after years of economic crisis that hit young people worse than other workers. Youth unemployment still hovers at 16.9% across the EU, much higher than the overall 7.8% figure for all age groups. New Commission data shows that people between ages 25 and 39 are twice as likely as older workers to have temporary jobs.

“We need more people in work. If we see we have 90 million people who are inactive and just 70% who are active, that’s not enough. We have to ask people to work more if they can,” she added.

“Productivity growth is likely to become the EU’s only source of economic expansion in the long run,” according to the Commission report.

It also criticised countries that currently overspend on pensions and don’t put enough money into programmes that might reduce youth unemployment. In nine countries—Greece, Latvia, Cyprus, Hungary, Italy, Malta, Poland, Portugal and Romania—more than 50% of social spending goes to public pensions.

“Such under-investment in the present and future workforce may prevent future working cohorts from being able to contribute to social security and become productive workers,” the study says.

Thyssen defended the EU “youth guarantee” programme that was set up in 2013 to help people under age 25 to find jobs within four months of leaving school or becoming unemployed. The EU court of auditors, a watchdog body for the EU institutions, branded the guarantee a disappointment because it did not meet expectations in its first two years. Just over half of all people who signed up to the programme in seven countries found jobs in 2014. The success rate improved by 9% in 2015.

But the programme cannot work unless national governments match it with labour market reforms, Thyssen said. EU member states are able to create more employment laws nationally than is possible on the EU level, she emphasised.

“We have to admit that in the beginning it started a little bit slowly. In some member states the structural reforms are in place and start bearing fruit, that’s why I think we have good reason to be hopeful,” she said.

The Commission has pointed to changes to Spain’s apprenticeship system and a growing number of local youth employment agencies in Germany as examples of structural reform that can help the EU programme work better.

Thyssen also said the Commission is monitoring results from a programme in Finland to give 2,000 people a universal basic income of €560 per month. But it would be up to member states to introduce those systems if they want to. The Commission is “far from” proposing an EU-wide universal basic income, she said.

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