• For the first time this century, the expected average duration of working life for Europeans has dropped.
  • The pandemic is partly to blame, according to the European Commission.
  • People are living longer and age-related costs are rising accordingly.
  • It’s a global problem which could affect developed and developing economies alike.

In Europe, people are living longer but spending fewer years working.

For the first time this century, the expected average duration of working life for Europeans has dropped. Data from 2020 shows that an average 15-year-old living in one of the 27 European Union member states (EU-27) is likely to spend 35.7 years working. That’s 0.2 years less than the average for the year before.

Meanwhile, the median age in the EU is on track to have increased by 4.5 years between 2019 and 2050, when it is forecast to reach 48.2 years. By then, there will likely be half a million people aged 100 and above in the EU-27.

a graph showing that working life duration is decreasing in Europe
Working life duration is dipping in Europe.
Image: Eurostat

Reasons and implications

One of the reasons cited by the European Commission (EC) for the drop in expected working life duration is the pandemic, which it says has disrupted employment opportunities and may even have led some people to withdraw from the labour force altogether.

“[Some] people who would have been available to work and would have sought employment, may have given up their search due to low return expectations,” according to the EC’s Eurostat report.

The combination of people living longer but working less raises the prospect of countries struggling with declining future tax revenues at a time when the cost of maintaining an ageing population (increased pension payouts; rising healthcare needs) is heading in the opposite direction.

So-called “old-age expenditure” is forecast to rise by 80%, between now and 2050, across the 38 countries that comprise the Organization for Economic Co-operation and Development (OECD). A similar picture is developing across many advanced countries.

a chart showing the rising OECD ‘old-age expenditure’ forecasts by 2050
Rising OECD ‘old-age expenditure’ forecasts by 2050.
Image: OECD

In December 2020, the Irish Fiscal Advisory Council warned that the country’s ageing population could cost the government an extra $1 billion per year from this year onward, the Irish Times reported.

Japan has one of the world’s oldest populations, due to increased life expectancy and a birth rate that’s been falling for decades. According to the Japan Times, there are 36.17 million people in Japan aged 65 and above. That’s 28.7% of the country’s population.

“Older men totalled 15.73 million, accounting for 25.7% of the total male population. The number of older women stood at 20.44 million, or 31.6% of the female population across Japan,” the Japan Times reported.

China, too, is set to experience similar demographic changes. According to Reuters: “The median age of China’s population had risen to around 38 years in 2020, up from 25 years in 1990 and 21 years in 1960.”

By 2050, that is likely to have risen to 48 years. Although that would be lower than the projections for Germany (49), Italy (54) and Japan (54), it will be higher than Canada (46), France (46), the UK (45) and the US (43).

Despite that, in the US 16.5% of the population is already at least 65 years of age. That’s approximately 54 million people and the number is set to grow to 74 million by 2030. Speaking to Reuters, the US Commerce Secretary, Gina Raimondo, described the ageing population there as likely to hit the economy “like a ton of bricks”.