2013: A crucial juncture

Notwithstanding the fact that immigration alone would not solve the problem of the European population ageing, there are several reasons why failing to accept it would be a pernicious mistake.

According to Eurostat's population projections, the EU's working age population (15-64 years of age) will start its decline as from 2013. By 2020, it will decrease by 1.4 million persons compared to the present levels. The same source states that Malta's own workforce population will start shrinking even earlier and by 2020 it will be down by 9,000.

However, demographic bottlenecks are not necessarily straight forward losses. The "second demographic dividend" is a case in point whereby younger, leaner generations stand to benefit from the higher savings and inter-generational transfer of wealth created by more numerous generations of parents and their siblings. Nevertheless, the age structure of the labour force is an important prerequisite for productivity growth and the creation of economic wealth.

The expected sclerotic demographic backdrop leads to a decline in demand for a range of goods and services, loss in productivity and innovation, decline in investments, economic under-performance and, ultimately, a deterioration of living standards. The EU Commission's micro-productivity study conducted in 2005 shows a significant decline in the individual's productivity after the age of 50. When compared to the average ability of the 25-34-year-olds, the 55-65 age group's decline in productivity-related abilities stands at -1.42 standard deviations for the criterion "finger dexterity", -0.94 for "manual dexterity", -0.85 for "numeral ability" and -0.80 for "clerical perception". It is noteworthy that the variable "experience" remains age-positive and, therefore, could be utilised in maintaining productivity levels.

Although demographic trends were always an inseparable component of the welfare economics, never before has this juncture been explored in a more peculiar way. As the ratio between economically active and older (65+) population increases from 4:1, as it is today, to 2:1 in 2060, the major concern is undoubtedly focused on the future losses in tax revenues (in the absence of overall increase in productivity) and on the rising social security bill. This more than justifies the need for the recent pension reforms across the EU while health-care system reforms are still in the pipeline.

Despite the reinforced imperative of fertility revival in the EU and notwithstanding the immigration positives, the EU's population decline is inevitable. Migration in the EU, both from other European countries (third countries) as well as from other continents, helps to slow down the decline in the EU's working-age population and, with it, a decline in its main economic parameters.

Discrimination against immigrants in the EU remains, therefore, a top challenge equally for the national policy makers as well as for the EU citizens themselves.

The integration of both intra-EU and non-EU migrant populations requires assiduously constructed social cohesion frameworks. This task becomes even more exacerbated in the case of low-skilled migrants and migrant women. While four out of 10 European citizens support the statement that "immigrants contribute a lot to their respective countries", the Eurobarometer equally reports that the majority of Europeans (52 per cent) tend to disagree with this account. There is, therefore, a need for awakening on both sides: immigrants to take up the advantages of education, training and cultural adaptation, certain strata of the host populations to abandon their racial prejudice and both groups to forsake their religious chauvinisms.

Although presently very intensive, the future immigration flows to the EU will not remain a permanent feature on the decrepit European demographic platform. Due to a notable decline in fertility in developing countries, as already recorded in the Mediterranean partner countries, labour shortages will be felt even in these fast ageing societies. The fertility decline in developing countries is not cyclical but rather structural and, therefore, long term. Consequently, the tempo of demographic transition in developing countries is expected to be much faster than what it was in developed countries in the last century or so, ultimately resulting in drying up of the emigration flows as we know them today.

However, from the micro perspective, these are all distant trends. The immigrants from the non-EU countries are here and now. History shows that, given the right conditions, people in general tend to behave in a rational manner. The future racial, cultural and religious stress looks inevitable, however, its further aggravation could be avoidable. Despite the xenophobic fears, the immigration window of opportunity will close on Europe in approximately three to four decades, according to the long-term world population projections. After that, the future generations might have to learn to live with lower performance levels altogether. By how much lower depends on how long it will take us today to eschew the ugliness of the current divide.

Dr Miljanic Binkworth lectures on demography at the University of Malta