Immigration can help Europe bridge the demographic deficit

Opinion piece (Financial Times)
02 May 2024

The radical right is likely to make big gains in the European parliament elections next month, with the “great replacement’ theory — that liberal elites are promoting immigration from outside Europe to undermine ethnic and cultural homogeneity — becoming increasingly influential.

Many politicians on the centre-right have chosen to pander to this civilisational rhetoric, rather than confront it, with Ursula von der Leyen dubbing the European Commission’s migration post “the Commissioner for Promoting the European Way of Life”. 

The practical problem with this lurch to the nativist right is that Europe is ageing rapidly, and fewer immigrant taxpayers mean higher taxes for remaining workers to pay for pensions, healthcare and other public services for the elderly. Less well understood is the limited extent to which free movement of people within Europe and higher employment rates for older workers and women will help to raise incomes and offset ageing. 

As the number of Europeans taking advantage of free movement has fallen off, employers have begun looking to workers from outside Europe to fill vacancies. The trade-off between ethnic homogeneity and prosperity is set to become more acute over the next decade. 

Only an extra 200,000 EU citizens have taken advantage of free movement rights since 2019, netting out people who have returned to their home country. The difference in wages between newer and older member states has fallen substantially, and is likely to fall further in the future, if relatively fast growth forecasts in central and eastern Europe are right. This has reduced incentives for Europeans to move.

Cajoling existing European residents to work harder and longer would help, but it is unlikely to be enough to offset the ageing process. The number of EU citizens aged over 65 is forecast to grow by 25mn by 2040, even including trend immigration rates. Meanwhile, the number of Europeans aged between 15 and 64 is projected to fall by 20mn.

Could people not work until they are older? Many European countries have announced that retirement ages will rise in the future, but there are limits. While life expectancy has risen, most Europeans will suffer from a serious medical problem by their mid-60s.

The number of working age Europeans peaked in 2009. The subsequent recovery in labour demand after the eurozone crisis led to sustained growth in job vacancies. This pushed up the number of non-EU nationals in work. The process accelerated after the pandemic, where a surge in retirements, ill health, people switching jobs and emigration led to big rises in jobs taken by workers from outside Europe. 

Most politicians on the centre-left and right recognise that immigration is needed to ease demographic pressures, and have sought to focus on tougher asylum rules, hoping that stricter border enforcement will provide cover for higher regular immigration. Even Italy’s rightwing prime minister, Giorgia Meloni, has increased the number of work permits for non-EU foreign workers. But radical right parties are increasingly challenging the mainstream consensus.

All this poses a dilemma that is particularly acute for politicians on the centre-right. They can challenge the nativists, asking tough questions about labour shortages and the effect on the quality of health and elderly care systems without higher rates of immigration from countries outside Europe. Or they can seek to borrow the nativists’ tunes, but at the risk of being overtaken by them, as has happened in Italy, the Netherlands and France.

Those of us who welcome the economic and cultural vigour that immigrants bring should hope they find some courage.

John Springford is an associate fellow at the Centre for European Reform