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Growth potential of EU human

resources and
policy implications for future
economic growth
Working Paper 3/2013
Jrg Peschner &
Constantinos Fotakis

Social Europe
Growth potential of EU human resources

Europe is confronted with important socio-economic challenges due to demographic ageing and the decline
of the working-age population. Their impact on the size and structure of the European workforce represents
one of the key challenges in this context. The paper focuses on what the demographic shift could mean for
future employment growth over the period 2010-2060. The proposed methodology makes use of Eurostat's
demographic projections (convergence scenario, Europop2010). It employs a set of assumptions related to
future growth of the active population, building a high (maximum) and low (minimum) activity scenario. The
paper then explores the potential of employment growth in the years ahead subject to these human
resources constraints.
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Luxembourg: Publications Office of the European Union, 2013
ISBN 978-92-79-32715-5
ISSN 1977-4125
doi: 10.2767/79370
European Union, 2013
Reproduction is authorised provided the source is acknowledged.

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Growth potential of EU human resources

Table of Contents
Summary ........................................................................................................ 4
1. Introduction................................................................................................. 5
2. A brief demographic profile of Europes workforce ............................................. 7
3. A quantitative assessment of the impact of workforce contraction on the growth
potential of the economy. .................................................................................. 9
3. 1 The analytical framework ......................................................................... 9
3. 2 A stylised model.................................................................................... 10
3.3 What are the perspectives in terms of future potential employment growth at EU
level?......................................................................................................... 14
3.4 Can Europe sustain employment and GDP growth in the years ahead? ........... 15
4. A brief assessment of relevant policy measures............................................... 23
4.1 Policies to increase overall employment..................................................... 23
4.1.1 Increasing working hours ................................................................... 24
4.1.2 Increasing labour market participation of age groups beyond age 65 .......... 26
4.1.3 Maximising the potential contribution of migration ................................. 28
4.1.4 Mobility: a barely tapped source of growth ........................................... 31
4.1.5 Reducing qualification mismatches ...................................................... 33
4.2 Policies to increase productivity................................................................ 34
4.2.1 Higher productivity through better education ........................................ 35
4.2.2 Higher productivity through training .................................................... 38
5. Conclusion and policy implications................................................................. 39
Bibliography .................................................................................................. 42
Annex 1: Modelling educational progression ....................................................... 46
Annex 2: Findings at EU Member State level ...................................................... 47

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Growth potential of EU human resources

Summary
Europe is confronted with important socio-economic challenges due to demographic
ageing. Their impact on the size and structure of the European workforce represents
one of the key challenges in this context. The paper focuses on what the demographic
shift could mean for future employment growth over the period 2010-2060. The
proposed methodology makes use of Eurostat's demographic projections (convergence
scenario, Europop2010). It employs a set of assumptions related to future growth of
the active population, building a high (maximum) and low (minimum) activity
scenario. The paper then explores the potential of employment growth in the years
ahead subject to these human resources constraints.
The analysis shows that some of the economically strongest EU Member States will
find themselves confronted with serious employment growth constraints due to labour
supply bottlenecks already within the next 5 years, even under extremely high activity
assumptions. Several other Member States will face labour constrains over the next
decade. Given the strong inertia of demographics, even total EU employment will
start shrinking in 10 to 20 years from now. Labour supply constrains will arise
considerably earlier in the case of highly educated workers.
The authors conclude that if European economies are to continue growing at a
welfare-maintaining pace, the focus must be on productivity growth which will remain
the only renewable source of economic growth in the long run. EU productivity growth
will have to more than double within the next decade compared to the last two
decades' relatively modest performance. How could these important productivity gains
be generated in a socially sustainable manner? The paper makes use of model
simulations to investigate this question focussing in particular on the potential
impact of skills development and higher education.

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Growth potential of EU human resources

1. Introduction
The importance of the size and quality of human resources for competitiveness and
economic growth has attracted particular attention both in economic literature1 and in
policy making. It is generally acknowledged that the path of economic growth of a
country is critically affected by the size, quality, and utilisation of its human resources.
In the most recent years, the link between human resources and economic growth has
gained further attention in most industrialised countries due to the accelerated pace at
which the workforce is ageing and declining. This is taking place in an increasingly
competitive global economic environment which necessitates ever-faster structural
adjustments across economic sectors and the labour force.
At global level, Europe is at the forefront2 of these demographic trends. Following a
period of almost 40 years of declining demographic dependency, often referred to as
the period of demographic dividend3 ,Europe is currently entering a period of
workforce ageing and increasing demographic dependency as the baby-boom
generation progressively exits the labour market and joins the ranks of dependent
population.
Although at first glance the economic downturn and its depressing impact on economic
growth and labour demand in particular appear to defer the growing demographic
pressure on labour supply, this is not confirmed by the analysis of demographic
trends. More specifically, the quantitative analysis presented in this paper clearly
shows that given how inert the ageing phenomenon is, this postponement effect is
relatively small and does not substantially affect the demographic challenges ahead.
Some of the best performing EU economies, namely Germany, the Netherlands,
Finland and Austria, are already facing labour supply bottlenecks due to the speed at
which their workforces are ageing and the lack of labour reserves.
A number of important challenges arising from the on-going economic crisis are in
direct interaction with the process of workforce ageing. In particular, during the last 5
years, there were substantial job losses in many of the traditional, labour-intensive
sectors, in particular construction, manufacturing and trade. However, studies on
Europes future skills needs4 indicate that demand for specific skills in the most
dynamic sectors may continue to rise in the future, while demand for labour in a range
of low-productivity sectors may keep declining. However, as age and education level
appear to be critical factors for promoting skill and geographical mobility, it becomes
increasingly difficult for policy makers to promote the employment of low skilled
workers made redundant in declining sectors of the economy.
This implies that even if there were to be a strong recovery in the years ahead, it
would be practically impossible for many of the workers made redundant in these
sectors to get an equivalent job since many of them show skills profiles which are
different from those needed in the most dynamic sectors of the economy. This leads to
the conclusion that a rapidly contracting and ageing workforce during a period of rapid
structural change in the economy (and labour demand in particular) may imply a
growing risk of labour mismatches which could worsen skill bottlenecks and hinder
efforts to reduce unemployment.

1
For a literature overview on the link between Human Resources and Economic Growth see Platt et al (2012),
Wilson/Briscoe (2004).
2
Japan is confronted with more advanced ageing of its workforce while South Korea, the Russian Federation, United States
and China are among the major global economic powers that will also face increased demographic pressure over the years
ahead. For more info see: UN World Population Prospects, the 2012
Revision http://esa.un.org/unpd/wpp/ExcelData/population.htm
3
Bloom et al (2003), Coomans (2012), p. 200.
4
See for example CEDEFOP (2012).

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Another growing concern relates to the chronically high youth unemployment


observed in many member-States across the EU. It represents a serious risk for the
future labour market performance of these generations both in terms of labour market
participation and productivity.
These considerations show the need for a more systematic study of workforce
contraction and its policy implications on future employment and economic growth.
Defining an effective policy approach requires a profound understanding of the
evolving demographic trends and their interactions with the on-going structural
changes in the economy.
This paper aims to contribute to this important policy debate by exploring a wealth of
reliable information on the future size and quality of the EU labour market. The
projection methodology used purposely avoids the hurdles of forecasting future
economic trends. Instead, it makes use of a maximum and a minimum activity
scenario based on socio-demographic projections and assumptions about qualitative
population characteristics. This allows to get a clear insight on Europes potential to
sustain employment growth during the period from 2010 to 2060 under different
hypotheses about future economic performance.
The findings suggest that, even in the most optimistic activation scenarios, workforce
decline is practically unavoidable and that this will induce a decline in total
employment at EU level within a time horizon already between 10 and 20 years. How
policy makers will respond to short term and longer term policy priorities within this
challenging policy context will be of critical importance for Europes future employment
and economic growth.
The quantitative analysis proposed in this paper provides policy implications clearing
this context. Over the next decade, investment in human resources development,
activation policies can and should help cushion the impact of both structural
unemployment and labour force decline to the largest possible extent. It could help
both to reduce unemployment and drive a faster economic recovery. However, the
analysis shows that for the most dynamic EU countries like Germany, Austria, Finland
and the Netherlands, this would not be enough, particularly if the economic outlook
over the next decade becomes more favourable.5 The shrinking workforce will hinder
employment growth unless spectacular progress is made in a range of relevant
policies including further to activation policies, substantially higher investment in
human resources development incentives for higher intra-EU mobility and more
effective economic migration and integration policies.
With employment set to decline in the long term, the paper provides evidence that
Europes future welfare will increasingly rely on its potential to strongly accelerate
productivity growth, at least until the effects of demographic transition on the EU
workforce is expected to end, at some time beyond 2050. In the multi-polar and
highly competitive globalised economy of tomorrow, it will be of utmost importance for
Europe to retain and further develop its competitive edge by investing in innovation,
education and skills and the range of relevant policies necessary to sustain high
productivity growth in the years ahead.
Following an introduction of the key issues related to the demographic challenge and
the future availability of human resources, section 2 provides a brief demographic
profile of Europes workforce. Section 3 focuses on the potential for future
employment growth testing the sustainability of the available human resources at
different levels of future employment growth. It assesses what productivity gains will
5
The analysis in chapter 3.4 shows that it will be difficult for these Member-States to sustain an annual employment rate
of 1 %, equal to the EU average attained during the period 2000-2008, even for 5 years.

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be necessary to sustain a hypothetical 2 % annual GDP growth path. Section 4 briefly


assesses potential policy action to increase employment (4.1) before focusing on
human resource policies aiming at higher productivity (4.2). It provides model-based
evidence on the means by which a different educational mix and better skills formation
can increase productivity growth. Section 5 concludes with policy-relevant
implications. Country fiches in the annex illustrate the findings of the analysis at
Member State level.

2. A brief demographic profile of Europes workforce


According to Eurostats Europop2010 demographic convergence scenario,6 the EU
working age population (aged 20-64 years) attained its maximum of 304 million in
2012. It is now starting to decline, setting off a long period of higher demographic
dependency. Today, there are some 1.6 dependent people in total per person aged
20-64 years in the EU-27; by 2060 the ratio will have risen to almost 2.
Graph 1: Long-term development of demographic dependency, EU-27
Annual changes in total demographic dependency rate (TDR),
where
ratio of total population / working-age population (aged 20-64)
0.8

TDR

is

the

% p.a.

>0: increasing demographic dependency

Zero-migration-scenrio

0.6
0.4
0.2
Convergence scenrio
0.0
-0.2
-0.4
-0.6
-0.8
-1.0

<0: demographic dividend

Sources: Eurostat Europop2010 population projection; before 1990: UN population estimates per country;
illustration follows Coomans (2012), p. 199-200.

As people in the baby-boom generation get older, the demographic dividend which has
been positive over the last 40 years will turn negative for at least an equally long
period, see Graph 1. By 2030 the EU working age population will already have shrunk
by 13 million, or more than 4 %.

For details on Europop2010 consult Eurostat on:


http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Population_projections.

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Graph 2: The impact of demographic ageing on the working age population, EU-27
Change of working age population since 2010 (%)

change by age group since 2010 (%)

2030, change from 2010 (%)

2020, change from 2010 (%)


0
50-64
-5
-10

35-49

-15
20-34

2060

2055

2050

2045

2040

2035

2030

2025

2020

2015

2010

-20
-20

-10

10

20

Source: Eurostat Europop2010 population projection, convergence scenario

Besides the quantitative effects of ageing on the workforce, one should also take into
account its structural effects; i.e. the changes it brings about in the workforce age
structure. This is particularly important since different age groups have different
characteristics in terms of activity rates and education levels. Although the decline in
size of EU working age population is just starting, the effects due to changes in the
age structure of workers are already visible. This is because the bulk of baby boomers
are by now part of the 50+ age group while the younger age cohorts are considerably
smaller. This is important for at least two reasons. Firstly, the 50+ age group is
traditionally less active than the prime age group. Secondly, since younger age groups
tend to have higher education, the falling numbers of new entrants to the labour
market considerably reduce the capacity of labour supply to adjust to the rapidly
changing skills needed, particularly in the high-skill segment.
Analysis produced jointly by the European Commissions Directorate-General for
Employment and Social Affairs (DG EMPL) and the OECD shows that the proportion of
skilled workers among retirees will be significantly higher over the next decade
compared to the previous one due to the progressive retirement of the baby boomers.
New entrants to the labour force with tertiary education are projected to decrease
from 3.5 entrants for each retiree to 1.4. As a consequence, despite progress made in
terms of education levels, the study foresees a skills squeeze in the EU due to
demographic ageing.7 Hence, the size of the highly skilled labour force is expected to
increase much more slowly than before.8 The risk of a skills squeeze is a growing
policy concern since signs of economic recovery and emerging new employment
opportunities often go hand in hand with difficulties in satisfying the need for new
skills in the fastest growing sectors of the economy. In turn, concerns over labour
demand become predominantly qualitative rather than quantitative in nature.9 Several
recent studies converge to the conclusion that skilled employment will keep growing in
the decade ahead.10

OECD (2013, yet unpublished).


OECD (2012), 41, 45.
9
CEDEFOP (2012).
10
CEDEFOP (2010); World Economic Forum (2010).
8

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3. A quantitative assessment of the impact of workforce


contraction on the growth potential of the economy.
3. 1 The analytical framework
The proposed methodology aims to explore how Europes future human resources will
be able to sustain employment growth under different employment growth scenarios,
in particular: How long could Europe as a whole - and each of its Member-States sustain employment growth at annual levels ranging between 0-1.5% before reaching
maximum capacity? And then, what would that imply for Europes economic growth in
a situation where employment cannot grow any more or even declines? What levels of
productivity growth will be required to keep the EU economy growing? To investigate
these questions the proposed methodology avoids the uncertainties associated with
the traditional econometric exercise of active population forecasting. Economic
behaviour is treated as a parameter of the model rather than its outcome. Instead,
the proposed model delimits the range of feasible future active population growth
paths by defining a low (minimum) and a high (maximum) activity scenario.
This approach does not contest the strong interaction between the demand and the
supply side in the labour market. The choice of this methodology is justified by the
fact that it is extremely risky to rely on modelling of long-term economic trends or to
anticipate future policy-making and its outcome. Instead, the proposed model is based
on the idea that it is possible to set up a space of possible future active population
growth scenarios which is delimited by an upper and a lower frontier.11 More
specifically:
The low activity rate scenario reflects a continuation of the current particularly
unfavourable labour market situation. It describes a situation of persisting economic
stagnation with no growth in activity and in which changes in activity rates relate only
to (structural) demographic effects.
In contrast, the high activity rate scenario assumes an exceptionally favourable
economic outlook allowing for an extremely high mobilisation of human resources in
the EU. This requires a number of very optimistic assumptions about future labour
market participation behaviour. More specifically, the high activity scenario shows how
many more people would participate in the labour market if the unused pools of
human resources (namely women and older workers) could be better utilised and if
the foreseen progress in education is fully reflected in terms of gains in participation
(a well-educated and skilful workforce helps to improve both activity and employment
rates). Obviously, the size of those benefits would also depend on a variety of factors,
in particular: the global economic environment which affects the demand side of the
economy, the effectiveness of policy making12 and the overall competitiveness of the
economy including the optimal functioning of the domestic labour market. Therefore,
the high activity scenario should be seen as an extreme situation combining all
favourable trends on both the demand and the supply side.

11

To be methodologically in line with the EU2020-target to achieve a 75% employment rate for people aged 20-64 by
2020, it is first assumed that employment and active population growth can only come from the population aged 20-64.
The assumption will be relaxed in section 4.1.2. below.
12
The high activity scenario assumes maximum policy outcomes also including the possibility of new policies which
nevertheless do not require a change in the Eurostat definition of working age population. However, the potential from a
further increase in the retirement age is treated separately in chapter 4.1.2.

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3. 2 A stylised model
The following technical assumptions are applied to the low and the high activity
scenario:
Low activity scenario
The low activity scenario takes account only of the demographic effects as projected in
the convergence scenario of Europop2010. That is, it includes the impact of workforce
contraction and the effect of the changing age structure on activity, keeping all other
factors unchanged. This implies that activity rates by age group, sex and educational
attainment level are kept constant at 2011 levels. No further progress is assumed, so
changing overall activity rates only reflect structural changes (in age, sex and
educational structure). This appears realistic for the low activity scenario since the
activity rates at the starting year 2011 reflect a labour market situation at the peak of
the economic crisis.
High activity scenario
Alongside the purely demographic effects set out by Eurostats Europop2010
convergence scenario, the high activity scenario includes highly optimistic assumptions
on future behavioural changes in terms of higher activity rates. More specifically:

Educational progress is taken on board using Coomans method (see Annex 1


for details). Most Member-States have seen an increase in the number of
highly educated young people at the expense of those holding basic degrees,
while the share of medium educated people has stayed relatively stable. Based
on the educational progression seen over the period 2000-2011 for those aged
between 25 and 34, we include a log-linear projection of the observed trend
into the coming decades.
Graph 3a shows that higher education has a measurable positive effect on
labour market participation. Looking at the activity rates, there is a 10
percentage point difference between high and medium-skilled people and a
13 percentage point gap between medium and low-skilled people.

Graph 3a: Activity rates by educational attainment level, 20-64 age group, EU-27
90
85
80
75

LOW educated
MEDIUM educated

70

HIGH educated

65
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Eurostat EU Labour Force Survey (EU LFS)

Therefore it appears safe to assume that the trend towards a higher proportion
of highly educated people will continue to have a positive impact on activity

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rates and hence on the size of the active population. However, following the
log-linear trend prolongation, the pace at which the number of high-skilled
(low-skilled) workers is projected to grow (decline) from now on will be much
slower than it used to be in the recent past.
Graph 3b: Projection of total workforces educational attainment structure, based on
computed educational progression of the 25-34 age group, EU-27

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario, method based on Coomans (2012), p. 202/203.

Graph 3b shows the projected share of the total working age population
holding high, medium and low educational degrees, following from the
educational progression of the age group 25-34 years. The impact of progress
in education on activity is shown separately in Graph 7. Note that no further
educational progression is assumed for the age cohorts aged 35 years and
older. If one combines the age- and gender-specific activity rates by
educational attainment level with the projected population shares, this results
in an increase of the overall EU activity rate from 75.7 % today to 77.7 % by
2040. This would be purely the effect of education, not combined with other
effects (i.e., net of progress made in female and older workers participation).

The female convergence effect is a purely behavioural assumption on activity.


It is assumed that by 2030 female activity rates will converge to male levels for
every age group and educational level. The chart shows the female
convergence effect, (net of other effects such as higher activity of older
workers, higher education).

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Graph 4: Female activity rate assumed to attain male activity rates by 2030 for each
age group and educational attainment level: activity rates in %

90
80
70
60
50
40

Males, age 20-64


Females, age 20-64

30

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario

A further behavioural assumption includes the older-workers-effect:

Graph 5: Scenario of progression in the activity rate of older workers (age 55-64) to
60 % by 2030, activity rate in %

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario

The high scenario assumes a 20 percentage-point increase of the activity rate


among older workers by 2030. If there is an overlap with the female
convergence effect (i.e. for women aged 55-64) it is assumed that the two
effects cumulate. The chart shows the isolated older workers effect, i.e., net of
other effects (higher female participation, higher education).
The resulting high and low scenarios for the EU labour force growth are illustrated in
Graph 6 in terms of number of people and in percentage of working age population.
Graph 6 shows that in the low scenario, where the only changes are due to
demographics, the decline in the labour force already starts in 2013. According to this
scenario (with no progress in activity rates), by 2020, Europe will have lost 4 million
active population compared to 2011. However, in the context of a more favourable
economic environment and a more effective activation strategy reflected in the high
activity scenario, Europe could mobilise some 14 million additional workers by 2020

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and another 9 million by 2030, countering the effects of the shrinking and ageing
workforce and maintaining positive growth of its active population until 2030. In fact,
the activity rate would shift to 81% by 2020 and around 87% by 2030 and after.
Graph 6: EU-27, high and low activity scenarios of future activity growth

EU-27
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

306

Active Population,
Low activity scenario

Active Population,
High activity scenario

millions

Past employment

% of Working Age Population (20-64 years)


85.0

286

266

80.0

246
75.0
226

70.0
206

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

65.0

2000

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

186

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario

The assumptions on activity rates among women and older workers are purely
mechanical. Nevertheless, as the high activity scenario combines and accumulates a
number of beneficial effects on activity resulting in activity rates close to 90%, it could
well be seen as the upper threshold of what is possible. The gap between high and low
activity scenarios then provides a measure of the maximum gains in activity to be
expected under a very favourable economic and policy environment.

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3.3 What are the perspectives in terms of future potential employment


growth at EU level?
After setting out the higher and lower scenarios of potential growth in the EU labour
force (active population), the next step is to examine the sustainability of employment
growth on the basis of this set of labour force growth constraints. To answer this
question, we looked at the sustainability of four different employment growth
scenarios ranging from 0 % p. a. to 1.5 % at 0.5 %-pt. intervals.
Graph 7: EU-27, high and low scenarios of future growth of active population

EU-27
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

306

Active population
Low activity scenario

Active Population,
High activity scenario

millions

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)


85.0

286

Employment
growth
scemaro :

266

80.0

1.5% p.a.
246

1% p.a.
0.5% p.a.
none
EU2020

226

75.0

70.0
206

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

65.0

2000

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

186

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario

Taking the scenario of low activity growth (red continuous line), we can see that, even
at 0 % employment growth, the EU employment level will cross the low activity
scenario level by 2040. This implies that if the future activity outlook is best described
by the low activity scenario then all unemployment could have been absorbed by 2040
due to workforce decline. However, this is quite improbable since this would require
absence of labour market mismatches. In reality, one would expect to see growing
labour mismatches as the economy approaches its activity limits. In such a case,
employment in volume will start shrinking much earlier than in 2040. At 0.5 %
employment growth, the lower scenario limit will be reached by 2024. The remaining
two scenarios of higher employment growth at 1 and 1.5 % correspond to even
shorter periods of sustainable employment growth (2019 and 2017, respectively).
Nevertheless, in practice it would be rather improbable to have a situation where
relatively high employment growth - at or higher than 1 % - would be paired with
such a pessimistic assumption on activity13 since in practice labour shortages tend to
encourage activity.

13

That would imply that strong demand for workers would attract many unemployed people, yet people that have been
inactive to date would still stay away from the labour market.

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Turning to the high activity scenario (blue line), it is projected that, with employment
growth at 1 %,14 the limit of active population will be reached around 2030. However,
attaining such a dramatic improvement in terms of activity rates as set out in the high
activity scenario would be extremely difficult given the extremely generous nature of
the assumptions made.
As a result, it is a question of years rather than generations until the workforce decline
will start inhibiting employment growth. The situation is likely to be even more
restrictive than follows from the simplistic approach presented so far. More
specifically:

The high activity scenario cumulates various effects which overlap in reality15
and is therefore to be seen as an upper, almost ideal, limit of what is possible
in terms of active population growth.
At aggregate EU-27 level, both scenarios implicitly assume perfect mobility of
workers across the borders of the 27 Member States - a very generous
assumption given the low levels of intra-EU mobility seen so far (section 4.1.4).
As said earlier, the methodology employed here assumes that all unemployed
people constitute a readily employable reserve of workers who could
immediately respond to the arising labour market needs. This, however, is a
highly optimistic assumption. The rapid structural changes in the economy
imply that labour demand is changing quickly while labour reserves find it more
and more difficult to respond due to their skill (and age) profiles. Skills
mismatches are the result. They imply that an increase in labour demand will
not automatically lead to an equivalent reduction in unemployment (section
4.1.5).
Finally, the relatively high employment growth rates observed until 2008
(about 1% per year) were fuelled both by a strong global growth and an
increasingly plentiful supply of labour (as children of the baby-boomers and
migrants entered the job market); this in turn promoted economic activity
expansion; In the future, in case of a strong recovery of labour demand, labour
scarcity may represent a much stronger constraint for employment growth due
to the advancement of workforce ageing and shrinking.

Relaxing the above assumptions would lead employment growth constraints to


materialise much earlier and much more profoundly than those depicted by both
activity scenarios.16

3.4 Can Europe sustain employment and GDP growth in the years
ahead?
A sustainable pattern of employment growth in the long run would theoretically
require the active population and employment to grow at similar rates, a condition
which, as we showed in the earlier section, will be practically impossible to fulfil in the
future, even under very generous assumptions.17

14
1 % employment growth is equal to the annual average growth rate observed during the period 2000-08 (before start of
the crisis) and also to the rate needed to attain the EU 2020 employment objectives.
15
For example: the older worker effect and the gender effect are assumed to cumulate for older women. Also, although
higher female labour market participation is partly due to better female education, both effects are taken separately and
hence cumulative in the high scenario.
16
In that sense, even the low activity scenario could be seen as a rather favourable limit.
17
Sustaining the EU working age population growth could require a doubling of net annual migration inflows over the next
decade and even higher net inflows thereafter.

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Graph 8 illustrates the employment growth constraint and its implications for GDP
growth. It depicts the situation shown in Graph 7, but in terms of (per-annum) growth
rates rather than levels. The graph is divided into three parts. The first part on the left
illustrates the pre-crisis situation in terms of employment (green line) and productivity
(red line) growth rates. It shows that between 2000 and 2008 Europe achieved
average annual employment growth of 1 %. Together with an average annual
productivity gain of approximately 1 %, this led to annual average GDP growth (dark
blue) of 2 %. The economic downturn has interrupted this relatively stable pattern of
growth. Between 2008 and 2011 (middle part of the Graph 8) both employment and
productivity growth collapsed18 with employment growth turning negative and average
productivity growth averaging at a mere 0.4 % p.a.
The third part of the graph refers to the future. Based on the scenarios of high and low
activity rates presented in section 3.2, it aims to provide an answer to the question
posed at the beginning of this section: Can Europe sustain employment and GDP
growth in the years ahead? More specifically: will it be possible for the EU economy to
sustain 2 % annual GDP growth in the future as it did between 2000 and 2008?
The projection illustrated in Graph 8 (at right) assumes that, from 2012 onwards, a
sustainable employment growth path (green line) of 1 % will be achieved at first.
2 % GDP growth, the level deemed necessary to maintain current welfare standards,
would require annual productivity growth of 1 % from 2012 onwards (red line). In
other words, productivity growth is a residual variable equal to the difference between
the GDP growth target (blue line) and employment growth (green line). The
continuation of the 1+1=2 average annual growth path observed between 2000 and
2008 will be possible as long as employment growth is not constrained.
However, as employment growth will start falling due to the declining working-age
population, productivity growth will have to grow faster in order to compensate, i.e.,
to keep GDP growth at 2 %. This is projected to happen by 2020 in the low activity
scenario and 2031 in the high activity scenario. Hence, the duration of the period
during which Europe will still be able to maintain its 1+1=2 growth path depends on
two labour sources:

Firstly, it depends on the size of the active population. This will have to take
account of both the accumulated stock of unemployed at the starting point and
projected demographic developments that determine future balances between
labour market entries and exits. The evolution of the low activity scenario
illustrates the potential of labour resources in that respect.

Secondly, it depends on how successful policies will be in further increasing


employment and activity rates across all ages, genders and education levels.
The high activity scenario outlines an upper limit of what could be obtained if
policies of this kind were to be highly successful. The difference between the
two scenarios represents this policy component. It offers the feasible outcomes
depending on the extent to which the available human resources are mobilised.

18

It is worth noting that this fall in productivity is to some extent due to short-term job protection measures which diverted
some of the pressure on employment towards cuts in hours worked to prevent an even steeper employment decline.

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Graph 8: Future employment growth potential and levels of productivity growth


required to sustain 2 % GDP growth in EU-27

3.0
2.5

Projected employment growth rate, low activity scenario

Projected employment growth rate, high activity scenario

Productivity growth required to have 2 % GDP growth, low activity scenario

Productivity growth required to have 2 % GDP growth, high activity scenario

GDP growth assumed

Past employment growth

Past productivity growth

Past GDP growth

avg 2000-2008

avg
20082011

2.0

annual growth in %

productivity growth needed


to sustain 2% GDP growth
(low sc.)

1.5
1.0

High activity scenario


future employment
growth potential:
+1% possible until 2019
(low sc.)

0.5
0.0
-0.5

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-1.0
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario

Under the low activity scenario (green line), Europe could sustain an employment
growth path at 1 % no longer than 2019 despite its current high levels of unused
labour reserves. The declining working-age population would actually drag
employment growth down to negative values as from 2021. In turn, Europe would find
it difficult to sustain 2 % GDP growth after 2020 since it would be impossible to
sustain positive employment growth any longer. Compensating for this drop in
employment would require a dramatic increase in productivity growth (red line) from
1 % to as much as 2.5 % already required by 2021.
In the case of the high activity scenario, policies providing for a maximum utilisation
of the available human resources (dashed green lines) would extend the possibility for
growth at the1+1=2 % growth pattern for 12 more years, that is, from 2020 as set
out in the low scenario to around 2032 in the high scenario. Hence, mobilising unused
human resources could provide the European economy with an additional decade of
employment growth needed to sustain GDP growth at 2 %. However, it will be
practically impossible to sustain this growth path beyond 2032. The predicted
workforce decline will require ever higher rates of productivity growth (red dashed
line) to sustain positive GDP growth. In fact, even assuming the high activity scenario,
productivity growth rates would have to be at levels up to 2.5% annually in the long
run, more than twice as high as in the pre-crisis period up to 2008.Those would still
have to be combined with employment rates beyond 85 %, as seen in Graph 7 above
(right).
Although the situation varies considerably between EU Member States and even
regions within Member States,19 the pattern of future workforce shrinking is a common
challenge affecting all Member States - with differences in terms of intensity and

19

Peschner (2011 and 2012) looks into Europes NUTS-2 regions. He shows that even under very optimistic assumptions
about employment performance in those regions which have lagged behind so far, the EU would still have to multiply precrisis-level productivity gains over the decades to be able to compensate for the inevitable overall employment losses.

September 2013 I

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timing. We have made use of the same methodology as above for each individual
Member State in the country fiches set out in Annex 2.
Graph 9a brings together the most salient information from the country analysis: it
shows how long each EU Member State could sustain a rate of employment growth at
1 %. The length of the red bars indicate the number of years between the low and
high activity scenario or, in other words, the extra period of time a country will gain if
it employs effective activation policies to make the best use of its unused labour
reserves.
The chart shows a diverse situation in terms of future workforce constraints. A first
grouping of countries, and in particular Germany, the Netherlands, Finland, Austria
and Bulgaria20, face more immediate risks of labour supply bottlenecks because of
their very limited unused labour capacities and a rapid decline of working-age
population as projected according to Europop2010.
In this context, the labour market situation in Germany is the most interesting case,
both due to its advanced ageing pattern and to its impact on the European economy
as a whole. The decline of the working-age population in Germany has been underway
for a number of years. In addition, German labour market figures show relatively low
levels of unemployment. As a result, further activation policies show relatively limited
potential to generate further active population growth so that the difference between
the two scenarios is less pronounced. The results indicate that Germany could not
sustain a 1 % employment growth path beyond 2019 even with maximum activation
of its unused reserves, see Graph 9b. Over the next decade Germany will find it
difficult to sustain employment and its GDP growth path without recourse to much
higher inflows of foreign workers and a substantial increase in its annual productivity
growth (the Netherlands, Finland and Austria face similar challenges). As a result, for
a 2% GDP growth, necessary productivity growth levels in Germany would peak at
levels around 3% annually in both scenarios, three times the pre-crisis productivity
growth levels.

20

Despite above-average unemployment, Bulgaria faces similar workforce shortages. It could sustain employment growth
at 1 % until 2020 at best. The working-age population is set to continue to shrink particularly quickly in that country.

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Graph 9a: Critical year after which 1 % employment growth will not be possible any
more, EU countries
2040

2035

Critical year,
high activity
scenario

2030

2025

Critical year,
low activity
scenario

2020

Netherlands
Germany
Malta
Austria
Finland
Bulgaria
Czech Republic
Romania
Denmark
Poland
Slovenia
EU-27
Belgium
France
Estonia
Italy
Latvia
Hungary
United Kingdom
Lithuania
Sweden
Portugal
Slovakia
Greece
Luxembourg
Spain
Cyprus
Ireland

2015

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection,
convergence scenario

Another, more diversified, group of Member States have relatively larger reserves of
unused labour capacity (longer bars in Graph 9a). These are countries with either a
relatively favourable demographic profile in terms of workforce growth (Ireland, UK,
Belgium, Cyprus, Luxembourg) and/or countries with substantial pools of unused
labour capacity due, for instance, to low female participation or faster educational
progress (as in the Mediterranean countries). These countries could extend their
labour supply potential considerably through more effective activation policies.

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Graph 9b: Future employment growth potential and levels of productivity growth
required to sustain 2 % GDP growth, example of Germany

4.0

Projected employment growth rate, low activity scenario

Projected employment growth rate, high activity scenario

Productivity growth required to have 2 % GDP growth, low activity scenario

Productivity growth required to have 2 % GDP growth, high activity scenario

GDP growth assumed

Past employment growth

Past productivity growth

Past GDP growth

avg 2000-2008

3.0

avg
20082011

annual growth in %

2.0

1.0

High activity scenario

0.0

-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-2.0
Source: Own calculations based on Eurostat EU-LFS and Eurostat Europop2010 population projection,
convergence scenario

Labour market constraints appear more striking when focusing specifically on highskilled labour needs. This is of critical importance given that high-skilled employment
is a decisive determinant of economic growth due to its direct link with productivity,
investment and total employment.21 How long could Europe sustain a 1% growth path
of highly educated employment against the background of a rapid shrinkage of the
highly educated workforce?
Graph 9c is based on the low activity scenario.22 The black squares indicate the year
after which a total employment growth path of 1 % stops being feasible. These points
correspond to the lower end of the bars of Graph 9a. The bright circles indicate the
same figure, but only for highly educated workers employment. The graph shows that
employment growth at 1 % for the highly educated will be inhibited well before the
entire workforce becomes scarce although educational progress is projected to
continue. This is because the demand for the highly educated is considerably stronger
than average labour demand and the corresponding unused labour resources are
therefore much more limited.23

21

See section 4.2 below.


We limit the analysis here to the low activity scenario. This is because in the vast majority of Member States the
bottlenecks in terms of highly skilled workers appear already within the current decade and therefore the results in the case
of high activity scenario would not be substantially different. .
23
In 2011, average unemployment amongst the highly educated was 5.6 % whereas total unemployment was 9.7 %
according to Eurostat EU Labour Force Survey.
22

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Graph 9c: Critical year after which 1 % employment growth will not be possible for
total and for highly educated employment: EU countries in the low activity scenario

2045
2040

critical year, total


critical year, high-skilled

2035
2030
2025
2020
2015
Malta
Czech Republic
Germany
Austria
Finland
Bulgaria
Hungary
Netherlands
Italy
Cyprus
Romania
EU-27
Belgium
France
Ireland
Poland
Slovenia
Portugal
Slovakia
Estonia
Denmark
United Kingdom
Spain
Sweden
Greece
Latvia
Lithuania
Luxembourg

2010

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projections,
convergence scenario

In most EU Member States the bottlenecks for the highly educated arise within the
current decade, several years before total employment growth at 1 % becomes
unsustainable. It is particularly interesting to see that this kind of labour constraint
also happens to countries with relatively larger overall labour reserves, such as
Ireland, Cyprus and Spain. This is mainly because the economic crisis had less of an
impact on the employment/activity of highly skilled people than the corresponding
averages. In turn, due to the long economic crisis, the majority of Member States
have accumulated a human resources buffer which is mainly composed of mediumand low-skilled workers. This buffer does not exist to that extent for high-skilled
workers.24 In most EU Member States employment rates among the highly educated
are currently above the pre-crisis level. Hence, in the absence of adequate and proactive human resources policies, a lack of skilled labour could constitute an early
brake on growth even for countries that have significant labour reserves. It should be
underlined that this holds also true from the perspective of productivity growth: If the
economy grows and absorbs the unused labour capacity, the average skill level in
employment will decrease.
Scarcity of labour, particularly of the highly skilled, has the potential to impede future
economic growth. However, it is often argued that, although GDP may stagnate or
even decline, demographic ageing could result in an increase in per capita income.
There is no evidence to support this rather simplistic view. Quite the contrary: looking
at the next four decades, the way in which the total population is expected to evolve
relative to the working age population is likely to add to rather than solve the problem
in most EU Member States.

24

The bottleneck at the high-skill end is actually a combination of two competing factors. On one hand, as mentioned
above, education attainment keeps rising and the overall supply of skilled labour grows at the expense of low-skilled labour.
However, this is more than offset by the fact that most unused labour capacity (the unemployed) are less-well educated. If
and when the EU economy restarts its growth and demands more labour, it will be constrained by the available unused
manpower as it is low-skilled.

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This is because in most Member States the decline of the working age population will
start much earlier than the decline of the total population. Graph 10a provides
evidence of this phenomenon. The red dots indicate the year when the working age
population will start to decline. The opposite end of the blue bar shows when the total
population will start to decline. A red dot on top of a blue bar shows that the total
population will start shrinking earlier than the population at working age. This is true
only for Hungary, Lithuania and Romania. At EU level, the gap separating the two
events is 30 years. The EU total population will continue to increase and is set to
decline only from 2043, while the working age population will start to decline in 2013
already. This time differential will mean that, for a relatively long period, a declining
working-age population will have to generate income for an increasing total
population, reflecting higher rather than lower economic dependency and thus more
pressure on future productivity gains.

Graph 10a: Starting years of decline of total population and working age population

2060
2050
trend in
total population
starts shrinking

2040
2030

trend in
WAP starts
shrinking

2020
2010

both total
population
and WAP were
already shrinking
shrinking in 1992

1990

EU-27
Belgium
Bulgaria
Czech Republic
Denmark
Germany
France
Ireland
Greece
Spain
Estonia
Italy
Cyprus
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
Finland
Sweden
United Kingdom

2000

Source: Own calculations based on Eurostat Europop2010 population projection, convergence scenario

Graph 10b shows the current situation in the EU-27, whereby 2 % average annual
GDP growth is currently equivalent to a necessary 2.3 % growth in GDP per capita as
the total EU population is growing by some 0.3 % per year. However, the difference
will narrow in future decades (see thin blue line) and turn negative only after 2040. As
a result, the pressure on productivity will become even stronger as the total EU
population continues to grow (see thin orange lines). Only after 2040 will the decline
in total population give relief, and even then, it will not exceed 0.2 percentage points
by 2060. Hence, the result in per-capita terms stays the same as in nominal terms:
productivity in the EU will have to grow twice as quickly as it grew before the crisis in
order to counterbalance the impact of a declining workforce on economic growth.25

25

Even for countries that are already facing small gaps between total and working age population decline, such as the
Baltic States and Germany, this lower economic dependency will not provide real relief when the current high levels of
public indebtedness are taken into account. During the crisis, average government gross debt in the EU-27 soared to 82 %
of GDP. Government debt will have to be repaid over the coming years. If the population shrinks, the per capita debt
burden will be heavier when repayment is due. Hence, at given employment levels, higher productivity growth is needed to
sustain welfare levels and pay down the accumulated debts.

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Graph 10b: Future employment growth potential and levels of productivity growth
required to sustain 2 % GDP growth at EU27 taking into account total population
change
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Productivity growth required, taking into account population change
4.0

3.0

2.0

1.0

0.0

-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

-2.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projections,
convergence scenario

The analysis so far showed that for a number of EU Member States, including
Germany, Europes largest economy, and for Europe as a whole, it may be impossible
to reach a sustainable path of employment growth at 1 % due to labour force
shortages that will become apparent already before the end of this decade. Policies
that seek to expand labour supply will be particularly important in the next decade to
make best use of the available human resources. Looking further into the future, the
analysis indicates that even if successful labour supply policies are introduced within
the next decade, they will not prove sufficient for sustaining employment growth in
the EU over the longer term due to the shrinking workforce. The results suggest that
Europes GDP growth will depend largely on its ability to strongly accelerate
productivity growth over the coming decades.

4. A brief assessment of relevant policy measures


4.1 Policies to increase overall employment
However, from short to medium-term perspective, policies to increase overall
employment can and should help offset the labour force decline to the largest possible
extent. They could also contribute to a faster economic recovery.
It is still crucial to introduce an effective policy mix involving investment in human
resources development, activation, incentives for higher intra-EU mobility and
effective economic migration. Nevertheless, these policies should be carefully
assessed, taking into account the specific characteristics of each economy and the
realities of an ageing workforce. The brief overview of policies discussed in this section
is far from exhaustive, providing only some critical input to this important policy
debate.

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4.1.1 Increasing working hours


One frequently mentioned policy measure is to increase working hours. This appears
quite relevant since productivity as represented in the above analysis is defined as
per-capita production, i.e.,
(1) P = GDP / person employed.
Technically, this is
(2) P = Ph * h / employed,

with Ph = GDP / h

i.e., the product of hourly productivity (Ph) and the total hours worked (h) per person
employed. Therefore, one could consider relieving the pressure on per-capita
productivity P by just working longer hours (increase h). Without discussing the idea
at length, some reservations on this approach deserve mentioning.
The first concern is with regard to its feasibility. Actual weekly working hours have
had a strong tendency to decline since decades. Reversing the trend will be extremely
difficult as it is anchored in gradual but fundamental changes in the world of labour
which have been taking place in recent decades. These include higher proportions of
women and older workers in the workforce, new types of labour contracts, technical
innovations and the increasing significance of part-time work. Many of these changes
have been beneficial for the quality of work, flexibility and higher productivity.
Graph 11: Actual weekly working hours in main job in the EU - statistical breaks
(marked in red) in 1995 (EU15), 2005 (EU25), 2007 (EU27) 39.5
39.0
38.5
38.0
37.5
37.0

1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

36.5

Source: Eurostat EU LFS

Secondly, increasing working hours appears to be a finite rather than a sustainable


source of higher production in the long term. Even if the EU could succeed in
increasing weekly working hours over the coming decades from, say, 37 to 38 hours
per week on average, this could happen only once. From the political perspective, a
subsequent increase from 38 to 39 hours would be even harder to achieve.
Thirdly, there is strong theoretical and empirical evidence that Ph and (h/employed)
are not mutually independent. Increasing labour units by simply letting people work
longer may increase production per worker but, all things being equal, may also result

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in lower hourly productivity Ph, following Gossens law of a productive factors


decreasing marginal productivity. Studies find evidence for this micro-theoretic
restriction.26 In fact, evidence provided by the International Labour Organization
suggests that factors related to the quality of work such as physiological aspects,
motivation and work organisation have an impact on individual productivity as the
number of hours worked changes.27
Finally, there could be a similar effect as regards the number of people in
employment. If an increase in h were to be at the expense of employment growth to a
certain extent, this would imply that P in equation (2) would grow less than
proportionally to h. Graph 12 shows the average proportional employment gains per
year between 2000 and 2008 (excluding the crisis) for EU-27 Member States (blue
curve). The red curve depicts the difference between the annual average percentage
change in P and the change in Ph - which according to (2) is equivalent to the change
in the number of hours worked per person employed. There is a negative crosscountry correlation between the two.
Graph 12: Employment change and changes in working hours per person employed
between 2000 and 2008, annual average in EU countries
Correlation: -0.4
4.0%

0.6%

empl

0.4%

3.0%

Diff (shift working hours)

0.2%

2.0%

0.0%
-0.2%

1.0%

-0.4%
0.0%

-0.6%
-0.8%

-1.0%

-1.0%
-2.0%

-1.2%

United Kingdom

Finland

Sweden

Slovakia

Slovenia

Romania

Poland

Portugal

Austria

Malta

Netherlands

Hungary

Luxembourg

Latvia

Lithuania

Italy

Cyprus

Spain

France

Ireland

Greece

Estonia

Denmark

Germany

Bulgaria

Czech Republic

EU-27

-1.4%

Belgium

-3.0%

Source: Own calculations based on Eurostat EU LFS, National Accounts

This finding is far from suggesting causalities, and evidence on that point is anything
but clear.28 But particularly in the case of older workers or women, where employment
gains have been by far the strongest, it becomes intuitive: In order to attract those
groups for the labour market, they would need to be offered attractive working
conditions, including part-time work, gradual phasing out and the possibility to
combine working life with family commitments - all resulting in reduced working time.
In conclusion, the quantitative evidence supporting the hypothesis of a positive
relation between hours worked per worker and production per capita as suggested by
equation (2) has not yet been firmly established. Depending on many parameters,
namely in relation to the job and workers profiles, working longer hours may have
quite a diverse impact on labour market participation or/and hourly productivity. For
26

Golden (2005) presents evidence on p. 5.


For an overview: International Labour Organization (2004).
28
In fact, there are also studies finding that reducing working hours could bring about employment losses via adaptations
of wages (increasing labour costs). See, for example, Steiner and Peters (2000) for Western Germany.
27

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older workers or other categories of workers with a high dependency on working time
flexibility, such policy may prove counter-effective. In turn, increasing working hours
across the board may not have the expected positive effects on per-capita productivity
since parts of the positive impetus may be absorbed by counter-effects on hourly
productivity or employment. There are also questions about how feasible it would be
to implement since it would entail reversing decades-long trends in established work
organisation and production processes. Finally, increasing working hours, even if
successful, is not a permanent source of growth.

4.1.2 Increasing labour market participation of age groups beyond age


65
The analysis presented in this paper so far has defined the working age population as
the number of people aged between 20 and 64. This definition was introduced in the
EU at the launch of the Europe 2020 strategy back in 2010, when the EU defined its
75 % employment rate objective for the 20 to 64 year-olds. However, recent policy
initiatives to activate older workers and, in particular, legislation introduced by some
Member States to increase the statutory retirement age for state pensions beyond the
age of 65,29 have also drawn policy attention to the labour market outcomes of those
aged over 65. In fact, maximising the benefits of living longer while being more active
was one of the concerns addressed by the European Year for Active Ageing and
Solidarity between Generations (2012).30
Currently, the EU average employment rate for older people (those aged 65 to 69)
does not exceed 10 %. As more numerous and better educated baby boom generation
has just started to enter this age group, their potential contribution to the labour
market may increase considerably in the coming decades. This is why many policy
makers are increasingly interested in this age group. Recent experience is
encouraging. After the launch of the Lisbon strategy, in the years between 2000 and
2010, Member States made considerable efforts to improve older peoples labour
market outcomes. As can be seen in Graph 13, there are reasons for optimism when
looking at people aged between 55 and 64 years, for whom the Lisbon target is a
50 % employment rate. Employment in that age group has grown by more than 9
million in the EU-27 (over 7 million for EU-15). Employment policies targeted at older
people were successful, although the target was not fully met. Research carried out by
the European Commission has also shown that a number of policy measures to
activate older workers could continue to be effective tools to further shift older
peoples employment rates in the future.31

29

According to MISSOC (Mutual Information System on Social Protection), Bulgaria, Finland, France, Germany, Ireland,
Italy, Poland, Sweden, and the UK have either introduced or envisage pensionable ages beyond 65 years for at least part of
the workforce. See http://www.missoc.org/MISSOC/comparativeTables.
30
European Commission (2012:7), p. 28.
31
See European Commission (2011:1), p. 221 229, on for a simulation with DG EMPLs Labour Market Model, particularly
on the impact of increasing statutory retirement ages, reducing labour costs for older workers, and training subsidies.

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Graph 13: Older workers employment rate, EU27


%
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0

From 55 to 64 years
From 65 to 69 years

10.0
5.0
0.0

Source: EU-LFS

However, recent experience shows that it could be more difficult to activate people
aged over 64. It would be excessively optimistic to assume that policies designed to
increase activity among 65 to 69 year olds could have equivalent success to those
achieved for people aged 55 to 64. Even if they were equally successful, the relief
would be relatively insignificant and would, in any case, be of a temporary nature
given the intensity and lasting pattern of the working population ageing trend. This
conclusion is illustrated in Graph 14 in which employment refers to the age group
between 20 and 69 years. It assumes that there will be a 20 percentage point
increase in activity for both men and women between 65 and 69 to catch up by 2030
(the same as illustrated above for the 55-64 age cohort).
The thin lines indicate the changes resulting from the inclusion of people aged
between 65 and 69 in the working age population group. Given the low numbers of
people employed in that age group, the redefinition of the workforce would not result
in a visible change in the employment growth path. The low activity scenario is
therefore practically identical to the approach presented above for the 20 to 64 yearsold workforce because it does not contain the older workers or the gender effect. In
the high activity scenario, Europe would gain two more years of sustainable 1 %
employment growth, making it possible until 2034 instead of 2032. In conclusion,
activating people aged 65 and older may have a positive effect on employment
growth, but given its relatively limited impact, it can only be seen as part of a
comprehensive policy package.

September 2013 I

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Graph 14: Future employment growth potential and levels of productivity growth
required to sustain 2 % GDP growth in EU-27 taking into account population aged
65 to 69 years
including 65-59
including 65-59
including 65-59
including 65-59
GDP growth assumed
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario

4.0

High activity scenario


without the 65-69 year-olds

3.0

2.0
High activity scenario
including
the 65-69 year-olds,
(+20%-pt activity rate)

1.0

0.0

-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

-2.0
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projections,
convergence scenario

4.1.3 Maximising the potential contribution of migration


The high activity scenario in Graph 6 assumes that maximum use will be made of the
available human resources will be attained by 2030. An implicit part of the assumption
for reaching this high activation level would be to substantially improve the labour
market performance of third-country migrants already legally residing in the EU.
Migration inflows has been the main source of EU population increase in the past
decade with a substantial contribution to both employment and economic growth
during the period 1996-2008 and limited impacts on domestic wages and
employment.32 However, since 2008 the economic crisis has considerably deteriorated
the labour market outcomes of the migrant workers. In 2012, there were some 14.8
million non-EU nationals of working age (20 to 64 years) living in the EU-27 and these
offer considerable human resource potential.33 According to the Labour Force Survey,
only 57 % of them were employed, compared to a 69 % of nationals in the EU
countries. The gap is particularly significant for migrant women: only 47 % are
employed, compared to 63 % of the EUs native female population.
32
33

European Commission (2008), p. 15.


See also Vasileva (2012).

September 2013 I

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The speed of the process of labour market integration represents another challenge.
There are important differentials in employment rates when comparing recently
arrived migrants with those already established for a number of years. Here again an
important gender dimension is observed. According to the Labour Force Survey,
Employment rates for migrant women established for less than 3 years in the country
of destination are as low as 29% while migrant women with more of 3 years of stay
attain an employment rate of 47.9%.
Another important challenge relates to the labour market outcomes of the migrants
descendants, which represents a key indicator for the integration of migrants in the
host societies. Migrants - both native-born offspring of migrants and foreign-born who
immigrated before adulthood - account for almost ten per cent of young adults (aged
20-29) in the labour market. Evidence from the OECD has shown that children of
immigrants tend to have much lower employment outcomes than the native children
in most countries.34 This, according to OECD analysis, is only partly due to their lower
educational attainment since a substantial gap remains even when education is
controlled for.
Graph 15 illustrates a very diverse picture in terms of integration across individual EU
Member States.

Graph 15: Employment rates of nationals and people from third countries in the EU27, 2011
Extra EU-27

Declaring country

90
80
70
60
50
40
30

Source: Eurostat EU LFS

The graph shows very significant differences among the Member States regarding
their ability to integrate the immigrant workforce pointing to the complexity of factors
affecting the process of integration.
These are some of the key issues which need to be tackled in order to attain the
activity level set for 2030 in the high activity scenario. Closing the employment rate
gap between third-country and EU workers would result in 10 million more people in
employment and an overall employment rate increase of 0.8 percentage points. It
could also provide strong arguments for those in favour of higher migration inflows as
a way to address the ageing challenge. This debate has often been polarised, yet it is
high on the political agenda.
34

Liebig and Widmaier (2009).

September 2013 I

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Many experts and policy-makers in Europe and across the industrialised world
converge to the idea that opening pathways for economic migration through a better
analysis of the present and future labour market needs and a more effective selection
and monitoring of migrant inflows could substantially improve the labour market
outcomes of future migrant inflows.35
The impact of migration on employment and GDP growth of the receiving country
depends a lot on migrants skills and on their compatibility and complementarity to the
domestic labour supply. The idea of complementarity does not restrict policies towards
more low-skilled migrants per se36, but there is evidence that better migrant skills
contribute to a better economic and labour market development.37 A simulation with
DG EMPLs Labour Market Model confirms these theoretical considerations. Taking
France as an example, additional migration flows to increase the domestic population
by 5 % would boost employment in the long run by 6 %, labour productivity by 3 %
and GDP and capital formation by no less than 9 % and 12 %, respectively, if the
additional migrants were only to be high skilled people. Highly skilled migration would
help to both boost employment and increase productivity, fuelling both sources of
growth in the long run. However, if those migrants were to be low-skilled, investment
would actually shrink by 3 % following a fall in labour productivity. This effect would be
combined with relatively moderate employment growth (+4 %) while GDP would grow
by a mere 2 %.38
Demand for highly skilled labour has been increasing and is projected to continue to
increase over the years to come. According to estimates from the European Centre for
the Development of Vocational Training (CEDEFOP), although overall job openings in
the EU will nearly stagnate in the current decade, demand for highly skilled workers
will increase, while demand for low-skilled workers will further decline, by more than
20 %.39
More targeted approaches to attract highly skilled migrants will therefore be needed.
However, establishing an optimal selection mechanism does not appear enough for
improving the labour market outcomes of migrant inflows. Analysing the differences
between Member States seen in Graph 15, Coomans40 underlines the particular role of
policy environment and traditions of the host countries in terms of labour market
functioning. He points to the quality of integration policies and emphasises the
importance of a non-discriminatory deployment. The latter refers to a process of
mutual adaptation between migrants and host societies whereby newcomers and
native population learn to accept and live with one another. These aspects determine
the extent to which such policy approach could be effective or not in the long run.
However, relying on migration inflows alone cannot provide a sustainable answer to
the EU workforce shrinking. This would imply an ever-increasing pace of migrant
inflows to compensate for the decline of working age population. Besides, early waves
of migrant workers would progressively leave the labour market, populating, in their
turn, the older dependent population. A mechanical estimation of the inflows required
by 2060 to preserve economic dependency over time produces a figure of more than
40 million.41
35

See OECD's International Migration Outlook 2013 p. 43-53


European Migration Network: Satisfying labour demand through migration. Synthesis report 2011 p.108.
36
Low-skilled labour working in domestic services helping to allow high-skilled labour (women, in particular) to deploy
would be complementary to the domestic skills needs.
37
European Commission (2008), Chapter 2, esp. p. 50-54.
38
Simulation results for other countries go in the same direction. The model supports 14 countries in total. See section 4.2
and the references there for details on the Labour Market Model, particularly the capital- skills-complementarity, which is
important in explaining these results.
39
CEDEFOP (2010), p. 100.
40
Coomans (2012).
41
Economic dependency ratio being defined as the number of non-employed in total population. See Peschner (2012), p.
219.

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Taking all these considerations into account leads to the conclusion that migration
policy alone cannot be the answer to the workforce decline and its expected impact on
employment and growth in the long run. But it can and should be part of the
comprehensive policy response to address the challenge. It requires further efforts for
making best use of the potential of migrants already living legally in the EU. It also
requires opening pathways for new migrant workers, not only on the basis of specific
labour vacancies but also on the basis of much broader human capital criteria. An
increased and more skilful mix of migrant inflows would have better labour market
integration potential and could help attenuating the impact of domestic workforce
ageing at least for the next two decades.

4.1.4 Mobility: a barely tapped source of growth


Mobility is one of EU citizens fundamental rights. Economically, mobility between
regions and countries can be a very important guarantee of optimal resource
allocation across Europe as people could go where there are vacancies that offer the
best fit for their specific skills. In its 2011 European Employment and Social
Developments report, the Commission examined the driving forces and the economic
and labour market influences on mobile workers in Europe, both in sending and in
receiving countries.42 The report concluded that there was an overall positive effect of
mobility flows on economies of receiving countries, despite some caveats43 and that
there were some risks for the sending countries but overall no massive brain drain44.
To better show how mobility could contribute to better resource allocation and help
European regions grow faster, Graph 16 plots those NUTS-2 regions that combine low
unemployment and high employment rates (i.e. regions of potential demand, coloured
blue) against those where unemployment is high and employment low (potential
regions of supply, coloured red). In a hypothetical world without language barriers and
other cultural or administrative obstacles, workers from excess labour supply regions
would move to where there is demand, increasing overall employment and
contributing to a more sustainable long-term EU employment growth path.

42
43
44

European Commission (2011:1), Chapter 6.


Ibidem, p. 280.
Ibidem, p. 281.

September 2013 I

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Graph 16: Employment / Unemployment gaps in the EU in 2010

NUTS-2 regions combining: employment rate 65 %, unemployment rate 10 %


employment rate 75 %, unemployment rate 6 %

Source: Eurostat EU LFS, DG EMPL mapping

However, the reality is more complex and mobility one of the least exploited sources
of employment growth. Less than 3 % of the EUs working-age population are
currently mobile EU citizens. Progress in the last decade has been modest, despite
enlargement. The number of people in the EU coming from outside the EU is still much
higher (almost 5 %) than the number of mobile EU citizens.
It is hardly possible to estimate the potential to employment from further advances in
policy making in this field. However, given how polarised labour market conditions
have become in the EU over the last 5 years and without underestimating the
emerging brain drain issues in some EU regions, there is evidence that mobility could
still make a very significant contribution to overall employment and GDP growth. In
fact, Peschner has shown that even within a country (where language barriers are less
important), current mobility patterns across Europe impede in most cases rather than
fuel population dynamics and employment growth in the regions.45

45

Peschner (2012), p. 225.

September 2013 I

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Graph 17: EU-15 and EU-27 population aged 20-64 years by citizenship, 2011
7%

2005

6%

2011

5%
4%
3%
2%
1%
0%
EU15

EU10

EU2

Extra
EU-27

EU27

EU27

EU10

EU2

EU15

Extra
EU-27

citzenship
residence

Source: Eurostat EU LFS

4.1.5 Reducing qualification mismatches


In the analysis presented in section 3 it was implicitly assumed that there are no
labour mismatches. This means that the stock of unemployed people would be ready
for recruitment once labour demand is getting stronger. However, this is not true,
particularly in the aftermath of a deep economic crisis when skill mismatches tend to
persist.
The Commissions annual report Employment and Social Developments in Europe
2012 devotes a chapter to the skills mismatch challenge in Europe. It sets out plenty
of evidence about the determinants, the impact and the policies to address skills and
qualification mismatches.46 According to the report, there is evidence that overqualified people work below their potential in their current job due to some kind of
productivity ceiling.47 Likewise, as regards under-qualified workers, their productivity
is found to lag behind that of matched colleagues in the same job.48 One conclusion is
that qualification mismatches entail economic and welfare costs.49
It is difficult to quantify how much productivity growth would increase if jobs and
workers qualifications were better matched, but the effect is significant, especially in
the context of the current labour market situation. The sources listed in the report
provide evidence that both over-and under-qualification are common in Europe.
Further sources hint at similar conclusions.50
More specifically, there is evidence that over-qualification becomes all the more
significant in times of recession and poor labour market conditions. It reflects a
mismatch between jobs and skills as well as regional disparities. In periods of weak
labour demand, high- and medium- educated people will compete with people holding
low levels of education for jobs below their actual skills level. This effect might explain,
at least in part, differences in the employment rates between workers of different
education levels. Data from the EU Labour Force Survey confirms that the
phenomenon of over-qualification has become more pronounced over the last decade.
46

European Commission (2012:1), Chapter 6, pp. 351 and following.


European Commission (2012:1), p. 365.
Ibidem.
49
Ibidem, p. 364.
50
According to the 5th European Working Conditions Survey (2010) by the European Foundation for the Improvement of
Living and Working Conditions, 13 % of workers in the EU-27 claim that they need further training to cope well with duties
whereas the proportion of workers who are convinced that they have the skills to cope with more demanding duties is
around one third. Both figures have remained stable since 2005. Increasing the skills of under-qualified workers to help
them better meet the current requirements of their jobs would directly lead to better job performance and higher
productivity in their current jobs. Eurofound (2010), question 60. Weblink:
http://www.eurofound.europa.eu/surveys/smt/ewcs/ewcs2010_08_02.htm.
47
48

September 2013 I

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Half of all workers in elementary occupations held at least upper secondary education
in 2011 (classifying them as medium- or highly skilled), a gradual increase by 10
percentage points since 2000.51 Likewise, OECD studies suggest that, across OECD
countries, more than one third of workers could actually be over-qualified.52
Reducing over-qualification could bring benefits in terms of both employment and
productivity growth. If there were to be more favourable prospects for the labour
market, overqualified workers would find it easier to get highly skilled jobs. In turn,
this would reduce over-qualification and lead to productivity gains. It could also lead
to a better allocation of human resources with more job opportunities for low-skilled
workers.

4.2 Policies to increase productivity


The analysis presented in section 3 showed that the declining workforce will
progressively constrain employment growth. In the long run, the economy will
increasingly rely on productivity gains. Strong productivity gains will have to be made
in the decades to come if Europe is to maintain sustainable economic growth. The
impact of higher education on activity rates is depicted in Graph 7 above. In this
context, no qualitative (productivity) consideration was taken into account. However,
there are strong indications that higher education would strongly promote stronger
productivity growth. The main objective of this section is therefore to highlight the role
of education and skills in generating those productivity increases.
Using DG EMPLs Labour Market Model (LMM), we look at two specific measures
seeking to increase workers productivity: We simulate the impact of an increase in
skills towards higher education (section 4.2.1) and the impact of subsidising higher
investment in firm-sponsored training (4.2.2) on the labour market as well as on GDP
and productivity. LMM is a general equilibrium model for policy simulation with a
special focus on the labour market.53 LMM currently supports 14 countries. For the
analysis presented in the following, France is taken as the reference country.
The two measures presented here are only showcase for policies to improve
productivity gains from both from the supply (higher education) and the demand side
(support firm-sponsored training) perspective of the labour market. In fact, it is
important to include labour demand and job production in a comprehensive policy
strategy towards more and better jobs. There must be jobs matching the better
educated and well-skilled workforce, and investing in skills and education does by no
means reduce the necessity for structural reforms on both product and labour
markets. In fact, both better skills and more jobs are necessary conditions towards
higher productivity and faster economic growth. However, elaborating on job
production is beyond the scope of this paper.54

51

Eurostat EU LFS, table lfsa_egised. See http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database.


Quintini (2011).
53
LMM was developed for DG EMPL by the Institute for Advanced Studies (Vienna) and the University of St. Gallen. It is a
multi-generation general equilibrium model which allows for equilibrium unemployment as it takes on board imperfections
on the labour market such as mismatches. It describes explicitly firms motivation to offer vacancies and workers
consideration to search for jobs and takes on board the complex wage bargaining process. Its strength lies in this kind of
micro-economically founded modelling of labour supply and demand behaviour, but also in its detailed depiction of the
respective countries labour and institutional framework relevant for the labour market. In addition, LMM includes education
as major determinant for investment and growth. For a non-technical description see European Commission (2010),
Chapter 2, Annex 2 on pp. 113 and following. See the reports by the model's developers in Berger et al (2009), especially
part II; Berger et al (2012).
54
The European Commission, using the LMM, has recently elaborated on the impact of measures to lower labour cost
(shifting labour tax towards VAT) in order to support job production, see European Commission (2012:1), chapter 4, p.
275-279.
52

September 2013 I

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4.2.1 Higher productivity through better education


At the beginning of their careers, each person analysed in the LMM decided
individually on the educational level they wished to choose. In doing so, they weigh up
the costs of higher education against its merits, including higher life-time income.
Using the French example, the aim of the exercise is to see what the transmission
channels of higher education into the labour market and the economy will be.
The starting point is Frances particular situation in terms of labour force bottlenecks
and the extent to which Coomans method55 predicts that education levels will
increase. Graphs 3b and 7 above are replicated for France:

Graph 18: France, high and low scenarios of future growth of active population
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

37

millions

% of Working Age Population (20-64 years)

35

85.0

33
Employment
growth
scemaro :

31

80.0

1.5% p.a.

29

1% p.a.
0.5% p.a.
none
EU2020

27

75.0

25
70.0
23

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

65.0

2000

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

21

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario

The situation resembles that in the EU-27 as a whole. In the low activity scenario, a
1 % employment growth path will no longer be possible already around 2020. After
that, a stagnating working-age population will drag down employment growth. In the
maximum potential scenario the bottleneck will materialise around one decade later.
The effect that education has on activity is significant but moderate compared to the
assumed behavioural changes of women and older workers in the high activity
scenario.

55

See Annex 1 for further information.

September 2013 I

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Graph 19: Future employment growth potential and levels of productivity growth
required to sustain 2 % GDP growth, France

2.5

Projected employment growth rate, low activity scenario

Projected employment growth rate, high activity scenario

Productivity growth required to have 2 % GDP growth, low activity scenario

Productivity growth required to have 2 % GDP growth, high activity scenario

GDP growth assumed

Past employment growth

Past productivity growth

Past GDP growth

avg 2000-2008

2.0

avg
20082011

annual growth in %

1.5

1.0

High activity scenario

0.5

0.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-0.5
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario

Around 2021, employment growth will stagnate around zero, so that 2 % economic
growth would require a level of productivity growth of around 2 % per annum - more
than twice its average pre-crisis productivity growth rate.
Graph 20: Projection of change in total workforces educational attainment structure,
based on computed educational progression of the 25-34 age group, France
Population by educational attainmelt levels

160
140
120
100
80

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projection,
convergence scenario

The projected educational change underlying the education effect is also very similar
to that projected for EU-27 above. Medium education would be relatively stable while
the number of highly skilled people would increase by 40 %. At the same time there
would be a decline in the number of low-skilled workers, falling by some 40 % by
2030. By 2040 these relative changes would be around 50 %.

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Looking at the longer term, these relative changes resulting from the Coomans model
imply that the proportion of highly skilled workers in total working age population
would rise from 31 % today to around 45 % in 2040 (+15 percentage points, whereas
the number of low-skilled workers would decline from 26% today to around 15 % (11 percentage points). For medium-skilled workers there is a slight decrease from
43 % to 40 % (-3 percentage points).
For the simulation the endogenous skills decision variable is switched off and
replaced by an exogenously determined change in the skills mix which resembles the
relative change assumed for France up to 2040 as just described (resulting from the
Coomans model). In other words: The changes in the skills mix are technically
considered as a policy shock that would have an impact on both the labour market
and the real economy. In LMM, people (with perfect foresight) decide about which
educational step to take at the beginning of their careers. It is assumed that 15 %
(3 %; 11 %) of them decide to change their education plans towards high (away from
medium; low) education. The new skills mix is assumed to stay constant over
generations so that in the very long term the total workforce will have adapted
correspondingly. The comparative-static model results describe the very long term
effects, i.e., the impact of the skills change on macroeconomic and labour market
magnitudes in a new long-term steady-state equilibrium. Those results are described
in Graph 21.
LMM takes on board a capital-skills complementarity which suggests that higher
education will promote higher overall productivity and higher investment - the main
drivers for higher output. Looking at the high-skilled segment, the following
observation holds (for the other skill groups the reverse is true): given the increased
stock of high-skilled people, higher demand would match higher supply only at lower
wages. Labour productivity for the high-skilled would decline. This is a technical effect
resulting from the massively increased headcount of high-skilled employment.
However, overall productivity clearly increases due to the changed composition of
skills, which pulls up overall wage levels and capital formation and, in turn, leads to
higher production and higher total employment. GDP gains would be considerable,
12 % higher than in the initial steady state. However, such a change in young peoples
educational choice would require a relatively long period before it would have any
significant effect on the total workforce and on the wider economy.

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Wage rate

Employment

Graph 21: Changing educational mix towards high skills, Labour Market Model
simulation exercise for France, relative change in %

High-skilled
Medium-skilled
Low-skilled
Total
High-skilled
Medium-skilled
Low-skilled

Labour
Productivity

Total
High-skilled
Medium-skilled
Low-skilled
Total
Investment
GDP
-40% -30% -20% -10%

0%

10%

20%

30%

40%

50%

Source: Own calculations based on DG EMPL's Labour Market Model

A policy of this kind may only deliver its full benefits over a time frame of 30 years.56
If so, a 12 % long-term increase in Frances real GDP would be equivalent to some
0.4 % higher real GDP-growth per annum. This would be a substantial gain in terms of
Frances long-term growth potential. After such measure the necessary productivity
shift would still be considerable in order to maintain Frances sustainable long-term
GDP growth path, as demonstrated in Graph 19. However, one has to consider that
Coomans model (with its log-linear trend-prolongation of high and low-skill shares),
implies a rather modest, i.e., less-than-linear further increase in levels of education;
and that such measure can only be part of a broader policy approach to shift
productivity.
4.2.2 Higher productivity through training
Improving skills to increase productivity is not restricted to formal higher education. A
comprehensive policy package to strengthen skills would also include non-formal lifelong learning and training measures. For example, using LMM, it can be shown that
government investment in training measures can have similarly beneficial effects on
capital formation, employment and GDP as has better education, with some structural
differences. Again, we use France as a template.
We assume moderate government spending of 0.1 % of GDP (corresponding to an
annual amount of some EUR 2 billion in France) to subsidise firm-sponsored training.
This sponsorship would be neutrally financed by lump sum transfers from households.
Such spending would deliver the steady-state results displayed in Graph 22.57

56

LMM assumes a discrete skills decision, i.e., agents decide only once, only at the beginning of their working life. Under
such assumption the transmission may take much longer than 30 years. However, one could assume that more cohorts
than just the youngest could be targeted at a time.
57
The European Commission has already provided evidence based on LMM simulations that support employer-sponsored
training in Germany, restricted to older workers. See European Commission (2011:1), Chapter 5, Section 4.1.3.

September 2013 I

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The employment impact of the subsidy is strongest for low-skilled workers because a
given amount of subsidy reduces labour costs relatively more if wages are low. The
incentive effect for employers to open up more vacancies is therefore the strongest in
the case of the low-skilled. The massive employment effect on low-skilled workers
causes their average labour productivity to decline despite increasing individual
productivity (which increases due to higher training participation).
Overall, the picture is similar to that
subsidy strengthens skills formation
productivity, despite a less favourable
As a result, investment and GDP go up

resulting from higher education: The training


on the job, triggering higher overall labour
educational mix among the employed workers.
by some 0.13 % to 0.14 %.

In conclusion: Investment in higher education contributes both to higher productivity


and to higher capital formation. On the other hand, informal skills formation will also
pay: Government support of workers training in a wider life-long learning policy mix
can boost employment opportunities, particularly for the most vulnerable people,
induce firms to invest directly in workers individual skills, and attract more people to
join the labour market as wage levels increase. In other words, human capital
investment, be it in higher education or training, strengthens both sources of growth:
employment and productivity.

Employment

High-skilled
Medium-skilled
Low-skilled
Total

Wage rate

High-skilled
Medium-skilled
Low-skilled
Total

Labour
Productivity

Graph 22: Government spending of 0.1 % of GDP on workplace training, Labour


Market Model simulation exercise for France, relative change in %

High-skilled
Medium-skilled
Low-skilled
Total

0.40%

0.35%

0.30%

0.25%

0.20%

0.15%

0.10%

0.05%

0.00%

-0.05%

-0.10%

Investment
GDP

Source: Own calculations based on DG EMPL's Labour Market Model

5. Conclusion and policy implications


The challenge
The analysis of future demographic and labour market scenarios presented in this
paper clearly indicates a growing EU labour supply challenge as the working age

September 2013 I

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Growth potential of EU human resources

population will keep shrinking over the next 40 years. The quantitative evidence
shows that in less than 20 years EU employment will almost inescapably start
declining in volume due to the intensity of workforce shrinking, It is worth noting than
even when assuming just a modest economic recovery at 1%, workforce decline
appears to drive some of the strongest EU economies including Germany, Austria, The
Netherlands and Finland into serious labour supply constraints already by the end of
the current decade.
Several other Member States and the EU as a whole will face similar difficulties a few
years later. As seen in Graph 7, sustaining an average level of 1 % employment
growth until 2030 at EU level would require that the EU employment rate grows from
the present level of 68 % towards a level well beyond 85 %. This requirement exceeds
the quite optimistic EU2020 employment rate target by 10 percentage points. This
practically full employment state would require a number of impressive policy
achievements in terms of activation policies and progress in education, it would not
allow for any gender gap in activity and imply a quantum leap in older workers labour
market participation. However even if all these assumptions were fulfilled: shortly
after 2030, employment will still start declining since it would not be possible any
more to compensate for the workforce shrinking through increases of the employment
rate. It appear evident that in the absence of employment growth, the only source of
economic growth could come from productivity gains which then will have to more
than double compared to the levels obtained during the decade before the economic
crisis, to compensate for the foreseen decline in employment growth.58
Undeniably, in the current policy context unemployment represents the main EU
concern obscuring by its intensity any other policy issue. However, policy making
should not undermine the labour supply challenges presented in this analysis. A
meaningful policy strategy should try to address both the short and long term policy
concerns:
In the short and medium run: keep employment growing as long as possible
It is a crucial condition for economic growth to keep employment growing in the short
to medium term, making best use of the available human resources. Increasing
employment and participation rates will help extending the period of employment
growth for the next 10-15 years.
A range of activation policies targeting at pools of unused labour capacities and at
extending working life are very important at the short to medium term. The paper
elaborates explicitly on the potential of women and older workers as these groups
represent important targets for activation policies.59 The analysis shows that they
could provide a substantial contribution to further employment over the next years. In
the same context it will be crucial to also address policy areas of higher political
sensitivity:
There is clear evidence that geographical mobility could make a very significant
contribution to overall employment and GDP growth - without underestimating the
emerging brain-drain problems mobility can bring about for some regions. Economic
58

Looking at past trends reveals the extent of the challenge: Real labour productivity growth per person employed in the
EU since 1995 was moderate (+1.1% a year on average) - significantly lower than in the US (+1.7 %). Van Ark et al
(2013) confirm that past (pre-crisis) slow economic growth in the EU was mainly due to weak productivity performance,
particularly in the service sector. They underline the significance of future productivity growth for Europe's economic
performance but insist that "a weak outlook for population growth, together slow productivity growth, lack of ICT
contribution to productivity growth, weakness in productivity growth in service sector and rising cost levels, doesnt bode
well for the future growth performance of the economy" (p.17).
59
The European Commission has repeatedly set out the core of its EU2020 strategy. Fighting labour market segmentation,
investing in skills and focusing on sectors with the highest growth potential such as health and social care, ICT and the
green economy are all part of the employment package. See European Commission (2012: 2 to 6).

September 2013 I

40

Social Europe
Growth potential of EU human resources

migration represents another essential element of the policy response to address the
challenge of workforce decline. It requires a thoroughly new policy approach at EU
level aiming both at making best use of the potential of migrants already living legally
in the EU while opening clear and stable pathways for new migrant workers on the
basis of specific labour vacancies but also on the basis of much broader human capital
criteria60. A successful economic migration policy will also require a range of policy
measures including effective monitoring of labour market needs, effective systems to
recognise skills, successful policies against discrimination and a range of other actions
to integrate immigrants faster in the labour market and the host society.
In the long run: Higher productivity gains over human capital investment
Those activation policies are not to be seen as renewable sources of employment
growth. In the simplified model presented above, they will stop contributing to
economic growth once employment and activity touch their assumed maximum levels.
However, they will provide some more time to implement the range of necessary long
term reforms and investments on human resources development, technology and
innovation in order to attain the substantially higher levels of productivity growth
required in the long run, most probably before 2030, when the shrinking of the
workforce will eliminate any possibility of further employment growth. Then
productivity growth will remain the only possible source of sustainable economic
growth in the EU.
Without undermining other factors contributing to productivity growth61, the role of
human resources will remain of critical importance. Historically, Europes long tradition
of high quality workers has been one of its key economic assets. In the highly
competitive globalised economy of tomorrow, it is of utmost importance that Europe
retains this competitive edge by investing in the development of skills and education.
Model simulations presented in section 4.2 show that these policies can contribute to
making up for the productivity gains needed in the coming decades. In this context,
securing a continuous supply of highly skilled workers in the years ahead is a strategic
priority for Europe. This is even more important since Europe will not be able to
compete with the emerging economies on the global markets in a range of labour
intensive, low-productivity sectors for both demographic and economic reasons.
Furthermore, improving work organisation and investing in a better work environment
are also sources of both higher labour market participation and higher productivity
growth. Similar win-win effects for both employment and productivity growth are
achieved when fighting over-qualification and promoting mobility.
In general terms, there is evidence that good human resource policies lead to both
better employment performance and higher productivity.62 Besides they help
containing the depreciation of human capital. This represents a major concern
particularly for the younger generations in times of long-lasting economic downturn.63

60

As for instance in the case of Canada.


Examining the range of policies aiming at increasing productivity outside the context of labour market is beyond the
scope of this paper.
62
Based on a sample of some 1.000 firms in the US, Huselid (1995) finds evidence that investments in [strong human
resource practices] are associated with lower employee turnover and greater productivity and corporate financial
performance (p. 667).
63
For example, see Mincer and Ofek (1982).
61

September 2013 I

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Social Europe
Growth potential of EU human resources

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September 2013 I

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Social Europe
Growth potential of EU human resources

Annex 1: Modelling educational progression


Educational progress is projected by extrapolating past trends in the educational
structure of the working age population, i.e., the proportion of people holding high,
medium and low educational attainment according to the Labour Force Survey.
Following Coomans,64 the proportion of people aged between 25 and 34 holding high
and low degrees are projected using log-linear trend-prolongation of the respective
series between 2000 and 2011 for each sex. The share of medium education is the
residual. The result is that if there has been an increase in the recent past in the
proportion of highly skilled people (fall in the share of low skilled), log-linear
projection will result in the continuation of this trend, albeit at a slower pace. The
chart shows the approach for the EU-27.

Graph 23: Proportion of people holding low and high educational degrees by sex,
Aged 25-34 years, EU-27

MALES

FEMALES

0.45

0.45

0.40

0.40

historic values

projected share
of HIGH skilled

0.35

historic values

0.30

projected share
of HIGH skilled

0.35
0.30
0.25

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2002

2000

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2010

historic values

0.15
2000

0.15

projected share
of LOW skilled

0.20

2008

projected share
of LOW skilled

historic values

2006

0.20

2004

0.25

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop2010 population projections,
convergence scenario; following Coomans (2012)

The procedure is done separately for men and women. It is assumed that older
cohorts (aged 35 and older) will not make any further educational progress. For
example: the proportion of 35 to 44 year-old women in t with higher degrees is the
same as the respective share of the 25 to 34 year-olds in t-10.

64

Coomans (2012), p. 202 203; the method is also used in Coomans (2005), applied to regions.

September 2013 I

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Social Europe
Growth potential of EU human resources

Annex 2: Findings at EU Member State level


The growth potential of EU human resources and policy implications for future
economic growth

Graphs for each Member State:


Page 1:
Employment growth potential in the High and the Low Activity Scenarios
Productivity increases necessary to attain 2 % economic growth assuming
potential employment growth in the High and Low Activity Scenarios
Page 2:
Assumptions employed on:
the structure of the working age population with respect to educational
attainment (to give the education effect);
female activity rates to catch up to those of men by 2030 (gender effect);
older workers activity rates to increase by 20 Percentage points by 2030
(older workers effect).

September 2013 I

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Social Europe
Growth potential of EU human resources

Belgium
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

6.8

Active population
Low activity scenario

Active Population,
High activity scenario

millions

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)


83.0

6.3
Employment
growth
scemaro :

5.8

78.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

5.3

73.0

4.8
68.0
4.3

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

63.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

3.8

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
2.5

avg
20082011

avg 2000-2008
2.0

future scenario

1.5

1.0

0.5

0.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-0.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

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Social Europe
Growth potential of EU human resources

Belgium
Population by educational attainmelt levels, with and without computed educational progression

130

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

120
110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

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Social Europe
Growth potential of EU human resources

Bulgaria
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

5.1

millions
94.0
4.6

% of Working Age Population (20-64 years)

89.0

84.0

Employment
growth
scemaro :

4.1

79.0
1.5% p.a.
3.6

1% p.a.
0.5% p.a.
none
EU2020

3.1

74.0

69.0

64.0
2.6
59.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

54.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

2.1

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
8.0

avg
20082011

avg 2000-2008
6.0

future scenario

4.0
2.0
0.0
-2.0
-4.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-6.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

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Social Europe
Growth potential of EU human resources

Bulgaria
Population by educational attainmelt levels, with and without computed educational progression

110

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

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Growth potential of EU human resources

Czech Republic
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

6.9

millions

% of Working Age Population (20-64 years)


88.0

6.4

Employment
growth
scemaro :

5.9

83.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

5.4

78.0

73.0

4.9

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

68.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

4.4

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
5.0

avg
20082011

avg 2000-2008
4.0

future scenario

3.0
2.0
1.0
0.0
-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-2.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

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Social Europe
Growth potential of EU human resources

Czech Republic
Population by educational attainmelt levels, with and without computed educational progression

130

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

120
110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

53

Social Europe
Growth potential of EU human resources

Denmark
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

91.0

millions

% of Working Age Population (20-64 years)

3.3

89.0

87.0
3.1
Employment
growth
scemaro :
2.9

85.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

2.7

83.0

81.0

79.0

77.0

2.5

75.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

73.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

2.3

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
3.0

avg
20082011

avg 2000-2008

2.5
2.0

future scenario

1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-2.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

54

Social Europe
Growth potential of EU human resources

Denmark
Population by educational attainmelt levels, with and without computed educational progression

130

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

120
110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

55

Social Europe
Growth potential of EU human resources

Germany
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

96.0

millions

% of Working Age Population (20-64 years)

48
91.0

Employment
growth
scemaro :

43

86.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

38

81.0

76.0
33
71.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

66.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

28

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
4.0

avg
20082011

avg 2000-2008
3.0

future scenario

2.0

1.0

0.0

-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-2.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

56

Social Europe
Growth potential of EU human resources

Germany
Population by educational attainmelt levels, with and without computed educational progression

110

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

57

Social Europe
Growth potential of EU human resources

France
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

37

millions

% of Working Age Population (20-64 years)

35

85.0

33
Employment
growth
scemaro :

31

80.0

1.5% p.a.
29

1% p.a.
0.5% p.a.
none
EU2020

27

75.0

25
70.0
23

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

65.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

21

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
2.5

avg
20082011

avg 2000-2008
2.0

future scenario

1.5

1.0

0.5

0.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-0.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

58

Social Europe
Growth potential of EU human resources

France
Population by educational attainmelt levels, with and without computed educational progression

160

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

59

Social Europe
Growth potential of EU human resources

Ireland
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

3.1

Active population
Low activity scenario

Active Population,
High activity scenario

89.0

millions

2.9

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)

84.0

2.7

Employment
growth
scemaro :

2.5

79.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

2.3

2.1

74.0

69.0
1.9
64.0
1.7

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

59.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

1.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
5.0

avg
20082011

avg 2000-2008

4.0
3.0

future scenario

2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-5.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

60

Social Europe
Growth potential of EU human resources

Ireland
Population by educational attainmelt levels, with and without computed educational progression

160

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

61

Social Europe
Growth potential of EU human resources

Greece
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

6.8

millions

% of Working Age Population (20-64 years)


83.0

6.3

Employment
growth
scemaro :

5.8

78.0

1.5% p.a.
5.3

1% p.a.
0.5% p.a.
none
EU2020

4.8

4.3

73.0

68.0

63.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

58.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

3.8

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
4.0

avg
20082011

avg 2000-2008

3.0
2.0

future scenario

1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-7.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

62

Social Europe
Growth potential of EU human resources

Greece
Population by educational attainmelt levels, with and without computed educational progression

130

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

120
110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

63

Social Europe
Growth potential of EU human resources

Spain
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

30
89.0

millions

% of Working Age Population (20-64 years)

28
84.0
26
Employment
growth
scemaro :

24

79.0

1.5% p.a.
22

1% p.a.
0.5% p.a.
none
EU2020

20

74.0

69.0
18
64.0

16

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

59.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

14

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
4.0

avg
20082011

avg 2000-2008
3.0

future scenario

2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-5.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

64

Social Europe
Growth potential of EU human resources

Spain
Population by educational attainmelt levels, with and without computed educational progression

140
130
120
110
100
90
80
70
60
50
40

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

65

Social Europe
Growth potential of EU human resources

Estonia
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

0.82

Active population
Low activity scenario

Active Population,
High activity scenario

millions

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)

0.77

85.0

0.72

Employment
growth
scemaro :

0.67

80.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

0.62

75.0

0.57
70.0
0.52

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

65.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

0.47

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
7.0

avg
20082011

avg 2000-2008

6.0
5.0

future scenario

4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-3.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

66

Social Europe
Growth potential of EU human resources

Estonia
Population by educational attainmelt levels, with and without computed educational progression

120

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

67

Social Europe
Growth potential of EU human resources

Italy
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

37

Active population
Low activity scenario

Active Population,
High activity scenario

millions

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)


80.0

35

33
Employment
growth
scemaro :

31

75.0

29

1.5% p.a.

27

1% p.a.
0.5% p.a.
none
EU2020

25

70.0

65.0

23
60.0
21

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

55.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

19

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
3.0

avg
20082011

avg 2000-2008
2.5

future scenario

2.0
1.5
1.0
0.5
0.0
-0.5
-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-1.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

68

Social Europe
Growth potential of EU human resources

Italy
Population by educational attainmelt levels, with and without computed educational progression

160

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

69

Social Europe
Growth potential of EU human resources

Cyprus
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

millions

92.0

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)

0.55

87.0

0.50
Employment
growth
scemaro :

0.45

82.0
1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

0.40

77.0

0.35

72.0
0.30

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

67.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

0.25

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
4.5

avg
20082011

avg 2000-2008

4.0
3.5

future scenario

3.0
2.5
2.0
1.5
1.0
0.5
0.0
2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-0.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

70

Social Europe
Growth potential of EU human resources

Cyprus
Population by educational attainmelt levels, with and without computed educational progression

Educational
2010=100 progression: Population by educational attainmelt levels

180

Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

160
140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

100

90
80
70
60
50
Males, age 20-64
40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

Females, age 20-64


2000

30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

71

Social Europe
Growth potential of EU human resources

Latvia
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

1.5

millions

% of Working Age Population (20-64 years)


86.0

1.4

1.3
81.0

Employment
growth
scemaro :

1.2

1.1

1.0

1.5% p.a.

76.0

1% p.a.
0.5% p.a.
none
EU2020

71.0

0.9
66.0
0.8

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

61.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

0.7

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
8.0

avg
20082011

avg 2000-2008
6.0

future scenario

4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-10.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

72

Social Europe
Growth potential of EU human resources

Latvia
Population by educational attainmelt levels, with and without computed educational progression

130

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

120
110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

73

Social Europe
Growth potential of EU human resources

Lithuania
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

2.1

millions

87.0

% of Working Age Population (20-64 years)

2.0
1.9
82.0
1.8

Employment
growth
scemaro :

1.7

77.0
1.5% p.a.
1.6

1% p.a.
0.5% p.a.
none
EU2020

1.5

72.0

1.4
1.3

67.0

1.2

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

62.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

1.1

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
8.0

avg
20082011

avg 2000-2008
6.0

future scenario

4.0

2.0

0.0

-2.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-4.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

74

Social Europe
Growth potential of EU human resources

Lithuania
Population by educational attainmelt levels, with and without computed educational progression

120

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

75

Social Europe
Growth potential of EU human resources

Luxembourg
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

millions

85.0

0.36

0.31

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)

80.0

Employment
growth
scemaro :
1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

0.26

0.21

75.0

70.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

65.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

0.16

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
4.0

avg
20082011

avg 2000-2008
3.0

future scenario

2.0
1.0
0.0
-1.0
-2.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-3.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

76

Social Europe
Growth potential of EU human resources

Luxembourg
Population by educational attainmelt levels, with and without computed educational progression

180

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

160
140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

77

Social Europe
Growth potential of EU human resources

Hungary
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

millions

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)

6.0
79.0

5.5
Employment
growth
scemaro :

74.0

5.0

1.5% p.a.

4.5

1% p.a.
0.5% p.a.
none
EU2020

69.0

64.0

4.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

59.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

3.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
4.0

avg
20082011

avg 2000-2008
3.0

future scenario

2.0

1.0

0.0

-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-2.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

78

Social Europe
Growth potential of EU human resources

Hungary
Population by educational attainmelt levels, with and without computed educational progression

140
130
120
110
100
90
80
70
60
50
40

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

80

75
70
65
60
55
50
45

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

Females, age 20-64

30

2004

35
2002

Males, age 20-64

2000

40

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

79

Social Europe
Growth potential of EU human resources

Malta
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

0.26

Active population
Low activity scenario

Active Population,
High activity scenario

millions

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)


86.0

0.24
81.0
0.22

Employment
growth
scemaro :

0.20

76.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

0.18

71.0

0.16

66.0

0.14

61.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

56.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

0.12

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
3.0

avg
20082011

avg 2000-2008
2.5

future scenario

2.0
1.5
1.0
0.5
0.0
-0.5

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-1.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

80

Social Europe
Growth potential of EU human resources

Malta
Population by educational attainmelt levels, with and without computed educational progression

200

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

180
160
140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

60
50

40
30
20

Low activity scenario

10
0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

81

Social Europe
Growth potential of EU human resources

Netherlands
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

92.0

millions

% of Working Age Population (20-64 years)

9.9

90.0
88.0

9.4
86.0

Employment
growth
scemaro :

8.9

84.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

8.4

7.9

82.0
80.0
78.0
76.0

7.4
74.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

72.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

6.9

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
3.0

avg
20082011

avg 2000-2008
2.5

future scenario

2.0
1.5
1.0
0.5
0.0
-0.5
-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-1.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

82

Social Europe
Growth potential of EU human resources

Netherlands
Population by educational attainmelt levels, with and without computed educational progression

Educational
2010=100 progression: Population by educational attainmelt levels

130

Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

120
110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

100

90
80
70
60
50
Males, age 20-64
40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

Females, age 20-64


2000

30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

83

Social Europe
Growth potential of EU human resources

Austria
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

88.0
5.3

millions

% of Working Age Population (20-64 years)


86.0
84.0

4.8

82.0

Employment
growth
scemaro :

80.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

4.3

78.0
76.0
74.0

3.8
72.0
70.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

68.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

3.3

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
3.0

avg
20082011

avg 2000-2008
2.5

future scenario

2.0
1.5
1.0
0.5
0.0
-0.5

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-1.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

84

Social Europe
Growth potential of EU human resources

Austria
Population by educational attainmelt levels, with and without computed educational progression

120

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

110
100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

85

Social Europe
Growth potential of EU human resources

Poland
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

85.0

millions
24

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)

80.0
22
Employment
growth
scemaro :

20

75.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

18

70.0

16

65.0

14

60.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

55.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

12

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
5.0

avg
20082011

avg 2000-2008
4.0

future scenario

3.0
2.0
1.0
0.0
-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-2.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

86

Social Europe
Growth potential of EU human resources

Poland
Population by educational attainmelt levels, with and without computed educational progression

180

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

160
140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario


Low activity scenario with olderworkers-effect

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

87

Social Europe
Growth potential of EU human resources

Portugal
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

millions

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)


87.0

6.3

Employment
growth
scemaro :

5.8

82.0

1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

5.3

77.0

72.0

4.8

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

67.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

4.3

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
4.0

avg
20082011

avg 2000-2008
3.0

future scenario

2.0
1.0
0.0
-1.0
-2.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-3.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

88

Social Europe
Growth potential of EU human resources

Portugal
Population by educational attainmelt levels, with and without computed educational progression

180

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

160
140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

80
70
60
50
40
30
20
10
0

%
Low activity scenario
Low activity scenario with olderworkers-effect

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

89

Social Europe
Growth potential of EU human resources

Romania
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

14

millions

% of Working Age Population (20-64 years)


81.0

13

12
Employment
growth
scemaro :

76.0

11
1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

10

71.0

9
66.0
8

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

61.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
10.0

avg
20082011

avg 2000-2008
8.0

future scenario

6.0
4.0
2.0
0.0
-2.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-4.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

90

Social Europe
Growth potential of EU human resources

Romania
Population by educational attainmelt levels, with and without computed educational progression

160

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario


Low activity scenario with olderworkers-effect

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

91

Social Europe
Growth potential of EU human resources

Slovenia
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

1.4

Active Population,
Education Effect

Past employment

84.0

millions

% of Working Age Population (20-64 years)


82.0

1.3
80.0
Employment
growth
scemaro :

1.2

78.0

1.5% p.a.
1.1

1% p.a.
0.5% p.a.
none
EU2020

1.0

76.0

74.0

72.0

70.0
0.9
68.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

66.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

0.8

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
5.0

avg
20082011

avg 2000-2008
4.0

future scenario

3.0
2.0
1.0
0.0
-1.0
-2.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-3.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

92

Social Europe
Growth potential of EU human resources

Slovenia
Population by educational attainmelt levels, with and without computed educational progression

140
130
120
110
100
90
80
70
60
50
40

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

60
50

40
30
20
10

Low activity scenario


Low activity scenario with olderworkers-effect

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

93

Social Europe
Growth potential of EU human resources

Slovakia
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

3.7

millions

% of Working Age Population (20-64 years)

3.5

86.0

3.3
81.0

Employment
growth
scemaro :

3.1

2.9

2.7

2.5

1.5% p.a.

76.0

1% p.a.
0.5% p.a.
none
EU2020

71.0

2.3
66.0
2.1

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

61.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

1.9

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
8.0

avg
20082011

avg 2000-2008

7.0
6.0

future scenario

5.0
4.0
3.0
2.0
1.0
0.0
-1.0
2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-2.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

94

Social Europe
Growth potential of EU human resources

Slovakia
Population by educational attainmelt levels, with and without computed educational progression

140
130
120
110
100
90
80
70
60
50
40

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

70
60
50
40
30
20
10
0

Low activity scenario


Low activity scenario with olderworkers-effect

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

95

Social Europe
Growth potential of EU human resources

Finland
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

3.3

millions

88.0

% of Working Age Population (20-64 years)

86.0

3.1

84.0
Employment
growth
scemaro :

2.9

2.7

2.5

82.0

1.5% p.a.

80.0

1% p.a.
0.5% p.a.
none
EU2020

78.0

76.0

74.0
2.3
72.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

70.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

2.1

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
3.0

avg
20082011

avg 2000-2008
2.5

future scenario

2.0
1.5
1.0
0.5
0.0
-0.5
-1.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-1.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

96

Social Europe
Growth potential of EU human resources

Finland
Population by educational attainmelt levels, with and without computed educational progression

110

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

100
90
80
70
60
50
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario


Low activity scenario with olderworkers-effect

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

97

Social Europe
Growth potential of EU human resources

Sweden
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

5.8

Active population
Low activity scenario

Active Population,
High activity scenario

millions

94.0

5.3

Active Population,
Education Effect

Past employment

% of Working Age Population (20-64 years)

89.0

Employment
growth
scemaro :
1.5% p.a.
1% p.a.
0.5% p.a.
none
EU2020

4.8

4.3

84.0

79.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

74.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

3.8

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
3.5

avg
20082011

avg 2000-2008
3.0

future scenario

2.5
2.0
1.5
1.0
0.5
0.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-0.5

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

98

Social Europe
Growth potential of EU human resources

Sweden
Population by educational attainmelt levels, with and without computed educational progression

Educational
2010=100 progression: Population by educational attainmelt levels

160

Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

140
120
100
80
60
40

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

100

90
80
70
60
50
Males, age 20-64
40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

Females, age 20-64

30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

120
100

80
60

Low activity scenario

40
20

Low activity scenario with olderworkers-effect

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

99

Social Europe
Growth potential of EU human resources

United Kingdom
Potential development of employment at given growth scenarios
Assumption: Further shift of activity rates, different scenarios
Working age
popul. (age 20-64)

Active population
Low activity scenario

Active Population,
High activity scenario

Active Population,
Education Effect

Past employment

40

millions

91.0

% of Working Age Population (20-64 years)

38

36
86.0

Employment
growth
scemaro :

34

1.5% p.a.
32

1% p.a.
0.5% p.a.
none
EU2020

30

28

81.0

76.0

26

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2000

2002

71.0

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

24

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Future employment growth potential and levels of productivity growth required to


sustain 2% GDP growth
Projected employment growth rate, low activity scenario
Projected employment growth rate, high activity scenario
Productivity growth required to have 2 % GDP growth, low activity scenario
Productivity growth required to have 2 % GDP growth, high activity scenario
GDP growth assumed
Past employment growth
Past productivity growth
Past GDP growth

annual growth
in %
3.0

avg
20082011

avg 2000-2008
2.5

future scenario

2.0
1.5
1.0
0.5
0.0
-0.5

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

-1.0

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

100

Social Europe
Growth potential of EU human resources

United Kingdom
Population by educational attainmelt levels, with and without computed educational progression

140
130
120
110
100
90
80
70
60
50
40

Educational
2010=100 progression: Population by educational attainmelt levels
Population 20-64,
HIGH educated (ISCED
5-6)
Population 20-64,
MEDIUM educated
(ISCED 3-4)
Population 20-64,
LOW educated (ISCED
1-2)

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Female and male activity rates, "gender effect" scenario: females' activity rate
catches up to male activity rate by 2030 for each age group and educational attainment level

90

80
70
60
50
Males, age 20-64

40

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

Females, age 20-64


30

Any remaining difference in 2030 is due to different age structure development (while educational
structure is static in "gender effect" scenario).
Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

Older workers (age 55-64) activity rate in the low activity scenario and
in the low activity scenario including the imputed older-workers-effect

90
80
70
60
50
40
30
20
10
0

Low activity scenario


Low activity scenario with olderworkers-effect

Source: Own calculations based on Eurostat EU LFS and Eurostat Europop 2010 population projection

September 2013 I

101

Social Europe
Growth potential of EU human resources

KE-EW-13-003-EN-N

European Commission
Growth potential of EU human resources and policy implications for future
economic growth DG EMPL Working Paper 03/2013
Luxembourg: Publications Office of the European Union, 2013
2013 102 pp. 21 29.7 cm
ISBN 978-92-79-32715-5
ISSN 1977-4125
doi: 10.2767/79370
This publication is available in electronic format in English.

September 2013 I

102