Promoting the labour force participation and employment of older people in the EU
Introduction
The EU is undergoing a major demographic transformation.
People are living longer, and their health is improving. Life expectancy in the EU (currently at 78.9 years for men and 84.2 years for women) has been increasing, together with improvements in health and work capacity . At the same time, declining fertility rates contribute to an ageing population and a shrinking working-age population, which hampers the EU’s growth potential and jeopardises the sustainability of its social welfare model. However, over the past decade, the increasing employment of older workers (aged 55 to 64) has outweighed the impact of ageing on the labour supply.
In the coming decades, the size of the working-age population will continue to shrink despite expected increases in the participation and employment of older people .
The participation rate of people aged 20 to 64 is expected to rise from 79.4 % in 2022 to 82.7 % in 2070, mainly driven by the impact of pension reforms and the gradual growth of the labour force participation of older women (from 59.1 % in 2022 to 72.6 % in 2070) due to the stronger labour market attachment of current younger female cohorts . This augmentation is expected to generally translate into higher employment rates of older workers (from 62.3 % in 2022 to 72.3 % in 2070). However, in most Member States, the rise in the activity of older individuals will not be sufficient to counteract the impact of an ageing population on the labour supply. The EU labour force is expected to decline by 0.3 % each year over the projected period. The bulk of this change is expected to take place by 2045 .
However, the increased labour force participation and employment of older individuals can mitigate the impact of demographic change on labour supply and contribute to tackling historically high labour and skills shortages across the EU .
Higher labour force participation can be a way to counteract the impact of ageing and contribute to fiscal sustainability and to the adequacy of pensions, together with technological advances (including in artificial intelligence), improvements in labour productivity, more flexibility in working hours, and the legal immigration of skilled workers. While the activity rates of groups currently under-represented in the labour market, such as women, people with lower levels of educational attainment, young people and older people, have been steadily improving, gaps remain, indicating room for potential improvement (see Chapter 1). Policies across Member States support the employment of these groups to achieve the EU headline target of a 78 % employment rate in the EU by 2030 and the associated national targets.
The untapped potential of older people to contribute to labour supply in the EU is substantial.
The three groups with the largest untapped labour market potential in the EU are women, low-skilled people and people between 55 and 64 years old. If the Member States with lower-than-average activity rates for these population groups were to raise their activity rates to the EU average for each subgroup, an additional 3.6 million women, 2.9 million secondary-educated people and 2.2 million people aged between 55 and 64 years old would enter the EU labour market .
This chapter explores ways to improve the labour market outcomes of older people in the EU.
Section 3.2 describes the main patterns of their labour force participation and employment. It also discusses their economic and policy drivers and outlines remaining gaps and challenges. Section 3.3 discusses the training, education, and digital skills of people aged between 55 and 64 years old, as well as skills mismatches and the dynamism of their workplaces. Section 3.4 presents a projection of the labour market potential of older individuals. Section 3.5 reviews how pension and labour market policies can support the employment of older workers. It also describes recent policy examples and trends across Member States and draws conclusions for future policies in the EU.