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Speech - Investing in Europe's people is key to restoring prosperity
Commission Européenne - SPEECH/13/385 06/05/2013
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European Commissioner responsible for Employment, Social Affairs and Inclusion
Investing in Europe's people is key to restoring prosperity
2013 Demography Forum: Investing in Europe’s demographic future /
Brussels, 6 May 2013
Ladies and gentlemen,
It is my pleasure to welcome you to the Fourth Demography Forum.
People say that demography is about destiny, not policy. I disagree with this.
In recent years we have faced a combination of short term and long term challenges, demographic transformation being one of the most important among the long term ones.
And now we can say that our short term problems have aggravated the long term ones.
The social consequences of the crisis are probably well known.
Five years into the crisis, the EU economy has shrunk, the jobless number over 26 million, and a recovery is not yet on the horizon.
The situation is generating poverty and social exclusion.
Increasing inequalities within and between Member States undermine and weaken solidarity including at EU level.
It is breeding populism and a lack of confidence in our democratic institutions.
Added to the longer-term challenges I mentioned — falling birth rates, a shrinking working-age population and a growing retired population — this shows even more the complexity of the situation.
Currently we have 120 million retired people — a quarter of the EU’s population.
In 1990 there were four working-age people — those aged 15 to 64 — for every person 65 or over in the EU.
By 2010 that ratio had fallen to three to one.
By 2025, it is expected to be two to one.
And by 2060, those 65 and over are forecast to account for over 53% of the population.
The burden on the younger generation under this scenario would be unbearable!
Pensions account today for a very large percentage of public expenditure — 10% of GDP on average — though the figure varies considerably with the country, ranging from 6% in Ireland to 15% in Italy.
These imbalances make the EU vulnerable and weaken its growth potential. The Europe 2020 strategy recognised this by establishing an employment rate target of 75% to be reached by 2020
More general, the demographic challenge is not only affecting all EU Member States but many developed countries in other parts of the world.
Addressing ageing also holds one of the key top reaching Europe 2020's employment target of 75%.
We need to ensure people stay healthy for as long as possible and enabling them to remain active — in the community and on the labour market.
It means creating an environment where growing old does not necessarily mean being dependent on others.
If we are to achieve economic growth in the future, people’s working life will need to be longer.
Roughly half of all women and just over one third of all men aged 55 to 64 were not in employment in 2010, so the untapped potential among our older people is considerable.
Most people leave the labour market well before reaching the standard retirement age.
More people declare a willingness to do volunteer work than those who actually do.
And with a more age-friendly environment and modern assistive technology, many more older people could live independently and not have to depend on others.
2012 was therefore the European Year for Active Ageing and Solidarity between Generations.
It mobilised stakeholders and prompted action across Europe to help improve active ageing opportunities and strengthen solidarity between the generations.
At the beginning of the year the Commission published its White paper on Adequate, Safe and Sustainable Pensions.
The Ministers for Employment and Social Affairs agreed on Guiding Principles of Active Ageing, which outline policy in the field.
These Guiding Principles are not prescriptive but should serve as a checklist for national authorities and other stakeholders on what needs doing to promote active ageing.
During the Year, we developed an Active Ageing Index in cooperation with the United Nations Economic Commission for Europe.
The Index measures the untapped potential of older people in three areas — employment, living independently and participation.
It also measures to what extent the environment enables older people to live actively in old age.
Sweden, Finland and Denmark come on top of the Active Ageing Index for 2012.
But when the results are broken down by area, Ireland and Italy do best in harnessing older people’s potential through their participation in cultural and political activities.
The European Year has succeeded in fostering a new way of viewing older people and focusing on their potential.
It has shown that, given the right employment opportunities, older people can take charge of their lives, can contribute to society by helping relatives and friends or by volunteering, and can make a valuable contribution to the economy.
Ladies and gentlemen,
Ageing is the main demographic challenge, but far from the only one.
The crisis has strongly affected young people in both phases. This has led to very high unemployment among the young, the lack of stable income and therefore the difficulty for young people to establish a home. In these circumstances couples also delay having children. On top of this, a number of Member States such as Greece, Ireland, Portugal and Spain have seen an increase in outward migration.
In countries hit by the crisis, all these effects make a visible demographic impact.
To give young people the chance of a first work experience to get a foot-hold in the labour market, the Commission proposed a Youth Guarantee as part of our Youth Employment Package, and the Member States have endorsed it.
This should ensure that all young people up to the age of 25 receive a quality offer of a job, an apprenticeship or a traineeship or the chance to continue their education or training within four months of becoming unemployed or leaving formal education.
Youth Guarantee schemes will have a cost, but it will be much lower than the cost of doing nothing.
The 14 million young people who are neither in employment, nor in education or training are estimated to cost the equivalent of 1.21% of EU GDP.
That is an annual loss of €153 billion to the Member States.
The Youth Guarantee will therefore generate a positive return by improving the longer-term economic situation.
It is an example of a social investment — a concept I will come back to later.
We also need to increase labour-market access for women and the long-term unemployed.
Only 62% of women aged 20 to 64 are in employment in the European Union. In the USA, the figure is 65%.
Here again we see a great diversity within the EU. In particular Italy, Greece and some of the central and southern eastern Member States have low female employment rates. Member States will need to get their financial incentives right. But they will also need to do much more to allow for the reconciliation of work and family life. Creating and developing child care is key in this respect. Similar to the campaign for active ageing in 2012, it would be welcome to dedicate the same attention to the reconciliation of family and professional life.
The fact that the EU has an ageing population and shrinking workforce is not only due to living longer, it is also the consequence of the long term decline of fertility. This has somewhat improved in the decade before the crisis but showed fragility during the crisis.
How youth polices develop and what we do for ensuring gender balance will be very important in the coming years from this perspective.
The third dimension apart from living longer and having less children is a geographical one: mobility.
Intra EU mobility can in economic terms be a response to imbalances. But in demographic terms it could lead to imbalances and serious tensions. Many regions risk being caught in a downward spiral where population loss and ageing can aggravate the infrastructure gap with more developed regions; this in turn motivates young adults to leave. Such a downward spiral would bring about major problems of human capital and skill loss, population loss and ageing. In some countries, such as Latvia, Lithuania and Romania, mobility could thus become the most important demographic driver.
EU cohesion policy should be used to help addressing this situation through investment.
Ladies and gentlemen,
This brings me to my final point related to the need to invest socially.
Last September President Barroso said in his State of the Union address that “those European countries with the most effective social protection systems and with the most developed social partnerships […] are among the most successful and competitive economies in the world.”
There is a close correlation between well-designed social spending and competitiveness.
In the current climate, governments are seeking to consolidate their budgets and boost growth at the same time.
This makes social welfare spending a prime target for cuts, which is why it is important to spend not necessarily more, but more effectively.
Putting public workers out of work may reduce public spending on wages, but it will increase public spending on welfare benefits as well as resulting in a loss of tax revenue.
There is a risk of going into a downward spiral that frustrates the whole aim of budget consolidation.
Policy needs to take the longer-term challenges into account — like population change and the need to reduce pension expenditure by extending working life and raising the retirement age.
This means that some sound social spending must be viewed not as remedial action to compensate for social disabilities or to correct a dysfunctional labour market, but as a positive investment in the future.
That is the basic idea behind the Social Investment Package which the Commission adopted recently.
We believe this package will help Member States to develop more effective strategies against child poverty and homelessness. Both, of course, very closely connected with our demographic trends.
Member States need to shift their focus to investing in human capital and social cohesion.
The Package also offers guidance to Member States on how best to use EU financial support, and in particular the European Social Fund.
This is why the Commission considers it very important that a significant part of the EU cohesion funds is dedicated to investing in human capital and social cohesion.
Ladies and gentlemen,
In our interlinked economies, a social problem in one country can quickly become an economic problem for the others, just as social progress in one country will help boost economic growth in the others.
We must turn the challenges into opportunities.
Europe’s population is ageing and its workforce is shrinking, so we are certain to see labour shortages in the future.
However, we can restore and maintain prosperity in Europe if we invest in our greatest asset, our human capital.
Improving people’s professional and social skills, implementing strategies for active ageing, reconciling family and work, taking measures to boost youth employment are all an investment in our future economic prosperity and demographic balance.
This Forum is a good opportunity to exchange ideas and find common ground for solutions.
I look forward to hearing your ideas.