Abstract:

One of the most important political challenges that the European Union (EU) is facing in the next decades results from the demographic changes. There is strong evidence that the aging trend of Europe's population will continue. On the one side life expectancy is growing, on the other side the natural change as the primary source of the population growth is decreasing. Since the beginning 1990s net migration is contributing more and more to EU’s still growing population. But in the long run, net migration is not high enough to replace the decreasing natural change. The overall shrinking workforce has to finance the growing share of retirees via public redistribution measures. This puts the political decision makers under the pressure of a new "magic quadrangle": The working population is expecting growing income and protected labour markets against immigrants, whereas the retired population is demanding a high standard of wellbeing that is guaranteed by a comprehensive social security system that puts pressure on the governments to extend the social welfare for the elderly because of their growing voting power. In addition, this situation will become more difficult because the global competition is reducing the option of increasing taxes and social security contributions, and the extremely increased public debt – resulting from the current economic and financial crisis – is reducing the governments' ability to further develop the social welfare systems. It has to be questioned whether and if yes what policy options are available to escape or at least mitigate the demographic depression. Several studies show that the political challenges with increased longevity, shrinking natural change, exploding public pension and health care expenditures, and increased pressure on labour markets from global competition require the agreement on a “new deal” between policy, business, workers, and retirees. All social groups have to be prepared to take sacrifices to save the economic, social and political stability of the EU.

Keywords: Demographic change, aging, migration, social security, European Union