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September 8, 2008 - Richard Donkin
The latest population projections issued by the European Union's statistical office highlight the delicate balancing act that defines national policies on employment, immigration and social services.
Eurostat forecasts that the population of the EU's 27 full member countries will rise from 495m on January 1 2008 to 521m in 2035, declining to 506m in 2060.
From 2015 the number of deaths across the community is projected to outnumber the number of births. This means that immigration would be responsible for any future population growth from that date onwards up to 2060. The forecasters, however, do not expect migration to make up the net imbalance, hence their prediction of mid-century population decline.
What should we make of these predictions? How should governments and employers respond? Are the forecasts going to be accurate? Any forecast can only extrapolate predictions from trends at a given point in time. It cannot take account of changing government policy, economic fluctuations and changes in social habits.
We have already seen financial incentives in Germany and Spain designed to encourage couples to have more children. Such polices could spread elsewhere, particularly in countries that have hitherto proved sensitive to high immigration.
In the UK, immigration has been encouraged as an economic benefit, boosting both the workforce and fertility rates. Thus the British population is expected to grow from its current level of 61m to 77m over the next 50 years.
Germany, however, which operates a tougher stance on immigration, is likely to see its population decline from its current level of 82m to 71m by 2060.
Incentives alone are unlikely to reverse such trends. This leaves immigration as a prime tool of economic and social policy. The way this tool is manipulated reflects both the sensitivity of public opinion and the political hue of national regimes.
In the UK, for example, a Conservative administration could be expected to introduce much tougher immigration controls than those exercised by the past three Labour administrations.
This is not just a matter of political ideology but also of economic expediency. If unemployment rates continue to rise, the economic benefit of immigration in filling jobs and pegging down wage inflation is lost. As migrant workers begin to join the ranks of the unemployed they add to pressure on public services and the social security system.
This is why forecasting is so important. But long term social and economic planning is difficult when economic growth begins to stall as is happening in much of Europe just now.
In Spain, where construction work has almost ground to a halt, among the hardest hit workers are Morrocan immigrants who are strongly represented in the building industry.
The construction downturn illustrates the interconnectedness of labour supply and economic growth since Spain's house-building boom was founded in part by demand for new homes among immigrant workers. An amnesty in 2005 granted work permits and residency to 700,000 illegal immigrants, leading to a subsequent demand of more than 150,000 new homes a year from this group alone.
But such demand is unsustainable. Once the migrant worker's family is housed, its housing need has been fulfilled. A more sustainable demand, ironically, has resulted from Spain's increasing divorce rate responsible for generating an additional 140,000 house sales a year in 2006.
That rate too is likely to decline as hard-pressed couples decide that sticking together may be a more tolerable option than an expensive divorce when money is tight.
While European governments tinker with their immigration policies in an uncertain economic climate there is a more pressing need to make the best of their existing populations and that means extra investment in training and education.
Governments must target such efforts at the worst affected ethnic groups, such as Spain's Morrocan construction workers if they are to stave off the social and political consequences of concentrations of unemployment among disadvantaged communities.
The European Union has responded to previous recessions with packages of regional aid. Today, however, there is a greater need for focused investment among specific groups of people. The danger of such measures, of course, is that they can lead to resentment among the more established population, particularly among those who are also suffering the effects of economic decline.
Concentrating financial investment in retraining on sectors such as construction, however, could overcome arguments of "special treatment." But it might not be the whole solution.
If such measures were adopted in the UK they would prove highly beneficial to Polish and central European construction workers, many of whom are now in a position to return to their home countries. In such a scenario Poland could benefit economically from the UK's loss.
That might be bad news for the UK but good news for the EU in general. A stronger Polish economy would be good for inter-European trade. Besides, some would view such a consequence as natural justice. If skills are the backbone of any economy it does not seem equitable that one country should prosper from another's investment in its own people.
This is the reality of open migration policies. People will and must go where their economic and social interests are best served. This means that governments and employers must work harder in attracting the right people for their workforces. This is the reality of Europe's future war for talent.
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