[music] Hello, and welcome to the ILO's Future of Work Podcast. I'm Sandra Kuchen. [music] Europe and Central Asia are undergoing a rapid and profound demographic transformation. Fertility rates are low, people are living longer, and in some countries, especially in Eastern Europe, skilled workers are leaving to seek opportunities elsewhere. As a result, the region's working-age population is shrinking.
By 2050, the ILO expects the labour force to lose 10 million workers, not because of job cuts, but because fewer young people are entering the labour market to replace an aging population that is retiring. This shift raises big questions for the future of work. How can economies adapt when there are fewer people of prime working age? How can societies avoid compromising living standards and maintain social justice? A new ILO working paper takes a close look at these issues.
I'm joined today by two of its co-authors, Sabrina De Gobbi, senior economist at the ILO Regional Office for Europe and Central Asia, and Stefan Kühn, senior economist in the ILO research department. Sabrina and Stephan, welcome to the podcast. Thank you, Sandra. Thank you, Sandra. Stefan, let's start with you. What can you tell us about this major demographic change facing Europe, and what does it mean for the labour market? Europe and Central Asia are both facing aging populations because of the slow population growth.
Plus, the aging population means that the labour force is projected to decline significantly. For the entire region, it's 10 million by 2050. That has major consequences for sustainability of social security systems because of the rising dependence ratio, meaning the number of people who are in employment compared to those who are not. At some point, people retire, especially those above 65 are much less likely to be working. In Europe, the share of those who are 65 and older in the population,
15 plus, stands today at 1:4, and that number is projected to rise to 1:3. What's the consequence to worry about besides the sustainability of social security systems? It's labour shortages; that companies are unable to find workers, especially in certain sectors that might face an increase in demand, such as care. Then in Central Asia, because you've talked about the picture in Europe, but the ILO's working paper also looks at Central Asia. There, the story is somewhat different, isn't it?
Indeed, in Central Asia, the population growth rate is still fairly strong. The region is unlikely to see an actual decline in the labour force, but the labour force participation rates are nevertheless expected to decline significantly, which means that the dependency ratio is going to rise as well. Even though the region now still has a young population, by 2050, that's not going to be like that anymore. By 2050, the region is going to face issues that Europe is already facing today,
and they need to prepare, especially to get the still large youth population in good employment and a productive employment. Sabrina, given what Stefan told us, what can be done to cope with the issue of a shrinking labour force? Sandra, societies need to strategize. They can start by trying to expand the labour force participation levels of some currently underrepresented groups. I can list five of them. Women, older workers, who are workers aged 55 years
and above, persons with disabilities, the youth, who are young people aged 15 to 24 years, and migrant and refugees. That sounds like a good idea, but if these groups of people are currently underrepresented, how realistic is it to achieve higher participation? What would it take to make that happen? It's not easy, and it's not going to happen overnight. However, if effective policies are adopted, in particular through social dialogue, which is dialogue between governments,
employers, and workers, it can happen. I can give you examples of measures for the five categories that I mentioned earlier. Women who are often employed in unpaid work would benefit from measures providing childcare services and parental leave. Older workers would tremendously benefit from lifelong learning programs, particularly to boost their digital skills, that are a little weak compared to younger groups of the population. In general,
anti-discrimination policies are needed for persons with disabilities, but also for older workers and women. It's much easier now to employ persons with disabilities than it was in the past, thanks to digital technology, including AI and telework, but they still face lots of discrimination. The youth, a large number of them are not in education, training, and employment, so training is particularly relevant,
as well as better school-to-work transition. Last but not least, well-managed migration policies would certainly facilitate the inclusion in the labour market of migrants and refugees, which is highly desirable because they can be extremely helpful, particularly in some key areas of our economies where labour shortages are anticipated, like the care economy. Increasing participation of these underrepresented groups
is one important part of the picture. What are some of the other areas governments and societies can focus on to deal with a shrinking labour force? Higher longevity and better health conditions make older workers stay longer in the labour market. As a matter of fact, in Europe, already a few countries have increased the official retirement age limit. For example, it's already at 67 years in Italy and Greece, and it is at 69 in Denmark.
In this country, the age limit was set through social dialogue agreement. Now, older workers may want to stay in the labour market even longer than those formal age limits, and they should be not only allowed, but encouraged to do so. This can happen through special measures, for example, by allowing flexible work arrangements whereby they can work fewer hours per week or where jobs can be adjusted to their specific physical needs.
Stefan, what about boosting productivity to address labour shortages? I'm also thinking about what role artificial intelligence and other technologies could play. Sabrina, you just referred to AI, but if we're thinking about the larger picture of productivity, we often hear that AI and automation will also replace many jobs in the future. In that context, could a shrinking workforce actually be less of a problem and maybe even a good thing? You're right. Productivity is the silver bullet to solving some of the issues related to the aging societies
because rising productivity allows living standards to continue to increase even in face of rising dependency ratios. Here, AI holds both promises but also risks. The promises are that, one, it can raise productivity, but it can also specifically raise productivity of older workers, because one usually says older workers have a hard time adapting new technologies, but AI is exactly that. It's a natural language, so you just tell it, using your experience, what you want, and it's going to solve the technological problem for you.
Now, the big risk is that the returns from AI and automation cannot be captured for the benefits of the social security system because they are monopolized. That's the big challenge that will need to be addressed in order to make AI also helpful in the context of dealing with aging. Lots of ideas here and food for thought. I'd like to ask both of you, what role can policies and social dialogue play to make demographic transitions like this manageable and even turn them into opportunities? -Policy and social dialogue needs
to be forward-looking. Aging is something we know it's coming. It's not very fast, but it's coming, and it's not preventable. It's going to happen, at least up to 2050. That's for sure. We need to be ready for the changing world of work that we can fully utilize the potential from new technologies and also the changing composition of the workforce that can also be fully utilized by the enterprises. Sabrina? The ILO is well known for its labour standards-setting function. In 2013, the International Labour Conference
adopted a resolution on employment and social protection in the new demographic context. The principles and content of that resolution is still valid nowadays, and, in fact, that's what we are discussing here now. Among other things, the resolution says that the challenges raised by demographic change can be turned into opportunities if effective policies are adopted, in particular through social dialogue.
Social dialogue has come up a lot in this discussion. You refer to it in the paper as all these ideas that you're giving out, as hopefully being a springboard for social dialogue to happen on this topic. It's going to happen. We know it's going to happen. We know that we have aging societies across Europe and Central Asia. What role can social dialogue play to really address the issue? In Denmark, as I mentioned, the retirement age limit has been increased to 69.
That is not an easy issue, or it's not an easy decision for society to accept. Nonetheless, through social dialogue and exactly thanks to social dialogue, that age limit has been increased without tensions in society. Stefan, is there something more you would like to add? The share of older workers continues to increase, and we have seen, in the past, a lot of ageism
or age discrimination whereby enterprises like to lay off older workers first at some point. That will have to change, because otherwise, the enterprises will run out of workers. Social dialogue is key to identify the conditions, how older workers can be kept productively employed for longer. That, listeners, brings us to the end of this podcast. Thank you, Sabrina de Gobbi and Stefan Kühn, for joining us today and for sharing these insights. It's clear, listening to both of you, that although demographic change
is going to pose real challenges in Europe and Central Asia, and of course elsewhere, there are solutions, and solutions that can sustain both growth and fairness. Thank you also to our listeners. If you'd like to learn more about this issue, you can read the ILO's new working paper on demographic change in Europe and Central Asia. You can also get updates on the ILO's work by following our social media channels at ILO on Facebook, LinkedIn, TikTok, and X, and @ilo.org on Instagram.
Please join us next time for another episode of the Future of Work podcast. Goodbye. [music]
