Is Immigration the Solution to Population Ageing ?

Population ageing took place, without any exception, in all industrialized countries all along the XXth century. Initially it was not a problem for European societies because it had a positive effect on economic growth. Today, Eurostat estimates that the over 64 population is very likely to rise from 15% to 22% y 2025 and this will cause a shrink of the working-age population of over 50 million people by 2050 and even if this process will slow at some point almost certainly, there is yet no indication that we will reach that point soon. Both population decline and ageing arise from two irreversible changes in human society. Life expectancy increased progressively during the XXth century and is about 78 years today, and family size has fallen drastically to about 2 children or less.

In Europe, while fertility has dropped to unprecedentedly low levels, the ageing of population is reaching particularly alarming proportions. In some countries, fertility has dropped so much that mortality rates are even higher than birth rates, resulting in a population decline. To conduct our study of the impact of immigration on population ageing we will need some macroeconomic data such as the Potential Support Ratio (PSR), also called “dependency ratio”, corresponds to the relation between the proportion in working-age group (15-64) and the population of 65 years or older. According to the evolution of the PSR, some necessary increase of the European population will be rather large, others gigantic.

For instance, to maintain constant the European Union population (337 million people) by 2050 we will need nearly 1 million new immigrants per year (47 million y 2050). However, to keep working-age population we will require almost 1.8 million immigrants per year, or 80 million by 2050. If we consider now the necessity to keep the potential support ratio at todayʼs level, we will need more than 16 million (almost half of the Canadian population) additional immigrants per year in Europe by 2050. With 700 million new immigrants in Europe, 75% of the population of the European Union would be of immigrant descent.

Even in the absence of new medical breakthroughs, longevity is projected to increase. Among all the demographic variables, international migration is the only one which could be instrumental facing population decline and ageing in the short or medium term. United Nations report concerning population ageing adverts that “The prospects of population decline and population ageing during the coming decades, and particularly the rapid and extensive reduction of the potential support ration in many countries, raise a number of crucial issues in the areas of employment, economic growth, health care services, pensions and social support services”.

Because the developed countries experience and will experience population decline, we will witness to a dramatic repositioning of countries and regions according to their relative population size. Without any doubt, the current demographic situation and its future evolution, will induce reassessments of economic, political and social programmes or policies, including those concerning international migration. Hence, we should be concerned by the robustness of the data regarding the phenomenon of population ageing, the economic and social consequences of such demographic trends, the effectiveness of migration as a solution and finally alternative policies.

I. Immigration is the only suitable solution to population ageing In an article published in the Parliament Magazine, it is reported that an ageing population is the most pressing issue the EU now faces and will have to face. However, this issue is rather controversial due to some aspects. The population ageing and fertility decline is heterogeneous from country to country in the European Union. While Ireland, France and the United Kingdom of Great Britain and Northern Ireland have managed to maintain their population levels without massive immigration, Mediterranean countries such as Italy, Greece or Portugal will soon need immigrants.

In this sense, Population Division of the United Nations Department of Economic and Social Affairs (UN DESA), a body of the UN Secretariat, provides the international community with scientifically objective and up-to-date information on population and its development. The reportʼs key concern is whether replacement migration is an effective solution to both population declining and ageing. It comes to the conclusion that “Replacement migration refers to the international migration that would be needed to offset declines in the size of population and declines in the population of working age, as well as to offset the overall ageing of a population.”

The Organization for Economic Cooperation and Development (OECD) has also published a report on international migration in Europe and made some remarks that cannot be ignored : increasing participation of migrants in the work force is important firstly in terms of labour force, but also because it serves to raise workersʼ contribution to welfare costs associated with healthcare and retirement. Moreover, migration has boosted female participation to the labour force (migrants provide child care assistance).

In his article “Immigration Can Alleviate the Ageing Problem” (2008), Prof. Joan Muysken uses the results of a macroeconomic model to underline the impact of ageing population and immigration on economic growth and conclude immigration can make a positive contribution as long as immigrants have the possibility to find work. He pointed out, for example, the fact that the EU has recently adopted and promoted a new policy on immigration with the introduction of a “Blue Card” (equivalent to the American “Green Card”) for highly skilled immigrants and seasonal workers. This policy aims at solving a growing shortage in highly-skilled workers in some European countries.

The report “Communication from the Commission – Policy Plan on Legal Migration” about the impact of immigration on European market states that “Some Member States already experience substantial labour and skills shortages in certain sectors of the economy, which cannot be filled within the national labour markets. This phenomenon concerns the full range of qualifications – from unskilled workers to top academic professionals.” (EU, 2005a, p.4) Therefore the European immigration policy regarding the “blue card” may be too restrictive to maximise the positive effects of immigration in the light of the phenomenon of ageing population. In fact, it is also very important to attract immigrants who have not yet graduated from universities as long as their potential is on average not below that of EU countries.

It is extremely important when considering an increase of the migration rate, that immigrants should find quickly and easily a paid employment, so that what they produce can be consumed by the growing retired population. Jobs for immigrants can be available in some sectors where natives donʼt use anymore o look for a work (construction, cleaning, domestic activities and personal care, etc…). Without international migration, all countries with fertility rates below replacement level will experience population decline.

In certain countries, the projected declining population from 2000 to 2050 will be as high as one quarter or even one third of the entire population. Logically, the lower the level of fertility decline, the more dramatic will be the ageing of the countryʼs population. One of the principle consequences of this phenomenon is the reduction of the PSR. Consequently, it would be much more difficult and onerous for the working-age population to continue supporting the needs of the retired population. For instance, when considering the public programmes or taking into account private expenses, medical care and education expenses, the costs are more than two times greater to support a retired person (65 or older) then to support a young person (20 years or less).

By 2050, some countries such as Italy or Portugal will have roughly one fifth to one quarter of their population having migrated post 1995. In the absence of migration, the workingage population will decline faster than the overall population. As a consequence, the amount of migration necessary to prevent a decline of the working-age population is larger than that for the overall population. Hence, the post-1995 migrants and the descendants would represent between 26 and 39 % of the population in 2050 in order to maintain stable potential support rations in those European countries where fertility is progressively declining.

The crucial point is that migration can be an effective solution to Europeʼs ageing population. There are two capital conditions that must be satisfied to get a positive impact of immigration on economic growth. The first is that immigrants should get employed in order to stimulate the economy. The second is that the proportion of low-skilled natives should be higher than the same proportion within the immigrants to prevent rising unemployment. Thus, policies on immigration should not only focus on quantity, rather principally on the employability of immigrants. Nevertheless, sustaining high inflows of migrants and social integration remain problems that have to be solved.

II. The illusion of the “immigration power”

In his report Do We Need Mass Immigration ? (2003), Anthony Browne affirms that the principal reason why immigrants are not going to fix an ageing population is because they, like anyone else, will ultimately age too : “The impact of immigration in mitigating population ageing is widely acknowledged to be small because immigrants also age. For a substantial effect, net inflows of migrants would not only need to occur on an annual basis, but would have to rise continuously.” Also the Council of Europe in a report published in 2000 states that “Migration flows cannot in future be used to reverse trends in population ageing and decline in most Council of Europe countries. The flows required would be too large and it would be impossible to integrate them into the economy and society.”

For example, to contrast the effect of a very rapidly ageing society in South Korea, almost 6 billion people would have to move in the country by 2050, or the entire population of the world! If we consider the amount of migration required to face population ageing, we should take into account larger magnitudes. By 2050, the proportion of post-1995 migrants would range between 59 and 99 %. These perspectives seem really unlikely to become reality and this is the reason why population ageing appears inevitable in low-fertility countries. American demographer Ansley Coale in 1957 published a study which had the aim of determining which are the principle factors of population ageing and decline.

His work shows that the process of population ageing that occurred in Europe during the XXth century and is still continuing today results almost exclusively from a fertility decline. When fertility is high, the phenomenon is known as positive population momentum. On the contrary, if new generations are smaller than their parentsʼ generations, we experience negative population momentum (Preston, 2001). He says that “Those who wish to argue for a higher level of immigration must base their argument on the benefits of a larger population, not upon the illusory “younging power” of high immigration. (…)

While there are undoubted benefits in maintaining net overseas migration, migration cannot stop the ageing of the population.” Immigration is impotent when it comes to stop ageing because if you compare average age of immigrants and natives there is a very little difference. Moreover, if immigrants birth rates are very high compared to those of European natives, they are expected to low progressively. In fact, there is evidence that foreign-born women with high fertility rates adapt relatively quickly to fertility patterns of the country where they move.

David Coleman, in the article “Replacement Migration”, or why everyoneʼs going to have to live in Korea, explains that the major problem of immigration is that “Europe already receives many more immigrants that it knows what to do with. Regular labour migration is managed by work permit and by free movement in the EU. But most migration is unrelated to economic needs : asylum claimants, spouses and dependents. European public opinion does not on the whole welcome large scale migration.”

In fact, more than 10% of European workforce has no job and immigrants (especially women) are less likely to find a job than natives. Furthermore, we should not forget the social troubles that can derive from a massive immigration without a correct integration. “There is a reluctance on the part of both leaders and people to dilute or to complicate the society by bringing in people of different cultures, different races. (…) Itʼs not just bloodlines but also language, culture, the way you communicate with each other.”

Therefore, in spite of growing general concerns about the dramatic situation of European demography, the management of immigration has always been one of the most sensitive and controversial areas of policy. The reasons behind such complexity in fixing a communitarian legislation on international immigration are due to the very different approaches that coexist within the EU in term of regulating immigration. Indeed, immigration has remained until today one of the last questions resulting of a national competenceʼs exclusiveness. EU member states donʼt seem to agree on leaving the European Commission to acquire the control of the issue.

III. Alternative policies to combat population ageing

We should keep in mind that current system of providing health and income services for retired people has been based on an age structure with a PSR of 4 to 5 people in working-age for each older person. Therefore, if the age of retirement does not change in the next years, the PSR is expected to decline to about 2. This kind of decline urges reconsideration of the modalities of the current system of pensions and health care for retired people. An alternative way to maintain the potential support ratios would be accruing the upper limit to the working-age population. An increase of the retirement age is probably the most adequate and less expensive solution to keep consumption from falling. Event though, it is is necessary to calculate an increase in the retirement age of at least five years in order to have concrete results.

Therefore, if retirement ages remain where they are today, the only option to reduce the decline in potential support ratio would be increasing the working-age population favouring international migration. Increasing significantly the upper limit of the working-age to attain a sufficient PSR would simultaneously reduce the number of non-working people and increase the working-age group. Another possible option would be to increase labour-force participation in order to accrue contributions from employers and workers, and accordingly lower the benefits for retirees. Increasing fertility could be the more efficient response to population ageing and its impact on European economy. In order to do so, one possibility is to adopt measures to redistribute at a part of national consumption to childrearing.

This would create the conditions to incentivise birth rate growth. However, we should consider that increasing fertility will take at least 25 years period to be effective. In fact, very few people start work before 25 years and in the meantime, measures to increase birth rate will cost to the society and have a negative impact on economies. Thus, even if this solution appears suitable to combat population ageing, very few specialists believe it is likely to be adopted in the next years.

One further solution that should be considered to solve the problem of population ageing is the increase of the tax base which would allow to finance pensions system as well as social measures to integrate immigrants to the society. This could be done through an augmentation of the number of hours worked. For example, Europeans work on average less hours than Americans. Others ways which could contribute to increase the tax base are the reduction of the informal labour marketʼs size and of sickness absence.

As we saw previously, the major cause of growing population ageing is very low birth rates. Effective responses exist such as making the workplace, tax system ad gender relations more favourable to women, so that they can balance work and family. It is therefore important to develop a welfare system based on equity rather than equality. New challenges concerning demographic evolution in European countries will require a long-term perspective of economic, social and political reassessment.

It is important not only to focus on exclusive demographic considerations. “Immigration policies should be governed by political and humanitarian objectives, and not by demographic considerations” UK government. Therefore it is a big mistake to think in terms of solving the problem of an ageing society. Browne “ An ageing society is not something we can escape, but it is something we can adjust to.”

When population ageing firstly appears, the increasing costs related to this phenomenon were compensated by the diminution of the costs for children. Nowadays, the increase of life expectancy, associated with lower fertility rates, is posing serious problems to European countries and welfare model. The extensive immigration since the end of the World War II has not had significant effects on reducing these difficulties. Immigration should not be seen as the sole cure for an ageing population ageing declined fertility rates. This process can be combated by favouring immigration, but only to a very limited extent.

Hence, immigration policies should integrate some aspects of restoring an active labour market, along with education to lower the unemployment rate and prevent young people, both immigrant and native, from leaving school. In fact, there is no single solution, at least in the next years, to manage the economic impact of population ageing. It is very likely that the most convincing policies would be a combination of all the solutions abovementioned.

Exclusive immigration policies could be really dangerous if no social measures are adopted in order to integrate growing foreign-born population. Indeed, as the United Nations report suggests, “international migration can provide countries of destination with needed human resources and talent, but may also give rise to social tensions. Effective international migration policies must therefore take into account the impact on both the host society and countries of origin.”