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Demographic challenges: jobs and welfare

  • Rome
  • 17 July 2023

        Italy’s demographic decline, while consistent with the trends of the principal advanced economies – described and analyzed in the latest issue of Aspenia – is cause for particular concern. Nation-wide, over the past three years, the number of actively employed people has dropped by 800,000 – a rate that will accelerate to a loss of six million working-age people by 2040.

        Such a dynamic poses the serious risk of a demographic trap; i.e., of reaching a level at which, as a result of the gradual impoverishment of the fertile-age population, nothing can be done to invert or mitigate the trend. Thus, fiscal reforms aimed at supporting families are a step in the right direction, to be completed with other instruments such as increased coverage for daycare centers and housing policies. With an average of children per woman that has hovered below 1.5 for 40 years, Italy has historically underestimated the demographic variable and now risks paying the price for it. Today’s national average stands at 1.24 children per woman; other countries, such as France, have introduced structural policies in support of raising the birthrate and have achieved averages of over 1.8. 

        The problem lies not so much in the number of children desired – Italy is in line with more fertile nations here – as in the number actually born. The factors in this discrepancy include economic and social barriers to achieving life goals. Resources committed to inverting this trend are to be seen as an investment, given that the demographic situation has an impact not only on society but also on an economic and industrial fabric in need of qualified human capital to confront the challenges posed by the ecological and digital transitions. If Italy, along with other European countries, struggles to leverage quantity, the main strategy for an ageing West that is losing demographic relevance in the world should be to focus on the quality of the workforce.

        The economic and fiscal problems associated with ageing and the shrinking population can be compensated by raising educational levels. Indeed, a well-trained population is more capable of contributing to economic growth, with much higher rates of job market participation for over-55ers in particular. Active ageing, moreover, not only increases the workforce but also reduces the burden on social welfare systems to provide assistance. Italy, whose population has an average schooling level below that of other advanced economies, needs to improve in this area if it intends to offset the effects of the demographic winter with the quality of human capital. The challenge is an open one that involves migration as well; the need to ensure a new population for an ageing Europe must go hand in hand with a commitment to forming the people arriving from younger but less educated continents, such as Africa.

        Moreover, as it strives to attract talent, the Old World risks finding itself squeezed out in the US/China contest for technological predominance. Beijing is leading a headlong digital drive in an attempt to create prosperity through technology before the effects of its population’s ageing (due to the one-child policy) are felt; Western democracies, on the other hand, have been dealing with this phenomenon for much longer. Yet it is important to consider how the drop in the birthrate has, over the past half-century, reduced the very importance of the West and the generation of global wealth; this has contributed to a series of phenomena such as consumerism aimed at increasing GDP as a result of population stagnation and the consequent erosion of savings, tax increases to sustain the rising number of pensioners and the reduced purchasing power of wages.

        Finally, not to be overlooked are the international tensions created by the divides separating the demographic dynamics of various regions. Thus, given the increasingly hostility-plagued world scenario, it becomes necessary to ensure that migratory flows do not end up generating ulterior friction. Building instead a new system of international relations capable of governing differences and enacting policies for collective growth and prosperity.