SPEECH/10/385 László Andor EU Commissioner Employment, Social Affairs and Inclusion "Opportunities and Challenges of Demographic Change in Europe" Economic Council Brussels Brussels, 13 July 2010
Ladies and gentlemen, Tackling demographic change will be one of the main challenges of my term as Commissioner. Like the authorities, businesses need to respond to demographic challenges and can play a big role in tackling them. That is why it gives me great pleasure to meet with Wirtschaftsrat Brüssel. We are currently living through the aftermath of the worst financial and economic crisis since the 1930s. It has left us with a legacy of huge public finance deficits. Meanwhile, the baby-boom cohorts are starting to retire. The combination of these factors demands a fresh look at what Europe can and should do to cope with our ageing population. EU strategy for tackling demographic change The Commission s strategy for tackling the demographic challenges facing Europe was set out in its 2006 Communication The demographic future of Europe from challenge to opportunity. That strategy relies on our ability to invest in a number of areas such as better support for working parents, a more productive labour force achieved through better education and training, research and development and modern capital stock, and more effective social and labour-market integration of migrants. Today we need to consider how the recession is affecting the Member States ability to respond to the demographic challenges ahead. For me that means answering the following five questions: First, is it possible to step up support for families and allow both mothers and fathers to reconcile their caring responsibilities and work? We know this is vital if we are to do something about our very low birth rates, which could be exacerbated by the recession and the economic uncertainty it creates for would-be parents. Second, how can we make sure that employment rates go up, that young people get jobs and that older workers in particular stay on the labour market longer? There are encouraging signs that older workers have not been ejected massively from the labour market during this recession. But the crisis has brought a massive increase in unemployment among young people, whose access to the labour market has been blocked as employers stop recruiting new staff. Third, how can we increase the productivity of our workforce? The number of working-age people will decline in the coming decades, but there is a lot of scope for improving their productivity. Far too many young people are leaving school too early and without qualifications that offer them a reasonable chance of finding a quality job. We cannot rely for future growth on a rise in the number of people at work. So we need to go about doing things in a much smarter way or invent new products. But we spend too little on research, compared to the USA and Japan, and China is catching up fast. Fourth, how can we integrate our immigrants and their children more successfully? The recession has reduced the need for immigrant workers in the short term, but integrating the millions of immigrants who arrived in Europe in past decades and their children born here remains an urgent task. 2
Lastly, how can we continue to offer adequate social protection to our elderly and consolidate public finances at the same time? In recent years we had been making good progress towards that goal, but the recession has thrown us back two decades. The big question now is how to make our public finances sustainable again. Several areas where we can respond to demographic change better support for families, education and research, better integration of migrants call for big investments. There is a temptation to cut spending in these areas too, but we should carefully consider the longer-term returns on investments in these areas. Higher employment rates and a more productive labour force could contribute to sound public finances, but this will take time. Green Paper on Pensions Last Wednesday the Commission published a Green Paper on pensions. We hope it will stimulate a wide-ranging debate that gives people the chance to learn about the challenges and options before us, reflect on the facts and possibly adjust their positions accordingly. The three issues we raise are: - First, how can the EU support the Member States in balancing the periods people spend working and in retirement? There is a link here with the employment target in the Europe 2020 strategy. - Second, how can the EU help to overcome the obstacles to mobility for people and pensions? and - And third, how can we make our pensions safer? The Commission has no position on pension system design and does not believe there is a one-size-fits-all pension system. All systems both funded and pay-asyou-go must be judged on their merit in terms of their key basic performance in other words, their ability to deliver adequate, sustainable pensions in the future as well as now. Obviously, we could not foresee the background against which this debate would take place. As the financial crisis evolved into an economic crisis and now into a budget crisis, the issue of sustainable pensions has aroused unprecedented controversy. There had been significant progress in pension reform over the last 15 years. But as the heat of the debate going on in some Member States demonstrates, there are still major issues to resolve. Europe 2020 Many of these issues are tackled by the new strategy put forward by the Commission and endorsed by the European Council. The Europe 2020 strategy for jobs and smart, sustainable and inclusive growth sets out a policy framework for our work over the next 10 years. It lays down an ambitious agenda at a critical juncture. The recent economic crisis is the worst in generations. It has brought tremendous hardship for those who have lost their jobs and for their families too. 3
Vulnerable groups and young people have been hit particularly hard. 23 million people are unemployed, 80 million people are at risk of poverty, 19 million of whom are children. The magnitude of this crisis and its social impact are undermining social peace and the very stability of our societies. We have to ensure the EU economy is capable of delivering high rates of employment, productivity and social cohesion. Europe 2020 is based on the conviction that economic development and social progress must go hand in hand. Clearly, the strategy for tackling demographic change worked out in 2006 is in line with the overall thrust of Europe 2020. Active ageing But its success will largely depend on one particular age group those born during the baby-boom following the Second World War, who are now reaching retirement age. The number of people aged 60 and over is growing by two million every year about twice as fast as up to 2007. By contrast, those aged 20 to 60 the age group most likely to be in employment will start declining in two or three years. At the same time, we need to tackle the sharp rise in unemployment among young people, so they are not left by the wayside. The retirement of the baby-boom generation may seem good news for the labour market chances of young people. But paying for the baby-boomers pensions and greater healthcare needs could place an increasingly heavy burden on the younger generation. The ageing of our population could jeopardise public investment in the younger generation and damage our longer-term growth potential. Now we should bear in mind that Europeans in their 50s and 60s can contribute a great deal to society, their families, the community and the economy. Active ageing could turn the baby-boomers into part of the solution to the demographic challenge instead of being a problem. That is also why Europe 2020 stresses the need to ensure that the elderly remain healthy and active for as long as possible. Against that background the Commission is working on a proposal to designate 2012 European Year for Active Ageing. During the year-long campaign, we will seek to encourage policy-makers and stakeholders, including companies, to engage in projects to promote active, healthy, autonomous ageing. Active ageing in employment In order to cope with our ageing population, we need to promote employment in Europe, focusing on more jobs and longer, better-quality working life. With an ageing workforce this means in particular: Raising the employment rate of older workers to take advantage of their experience and skills; 4
Increasing the employability of young people, and not just that of older people; Working for a healthier elderly population that is able to work for longer. The European Union supports the Member States in their efforts to devise integrated, coherent strategies that combine better working conditions, better access to training and fiscal measures that promote active ageing. Better working conditions will, of course, apply to all workers, though they are especially relevant to older workers. This may involve meeting various health and safety needs and applying flexible working arrangements that take account of older workers particular circumstances. More and more European companies are developing age-management strategies and are promoting active ageing through various measures. For example, the chemical company BASF launched a specific demography action plan called Generations@Work in 2006. It combines various measures and activities, such as providing health advice, sports facilities, lifelong learning, flexible working hours, meeting ergonomic and age-appropriate personal needs, reconciling work and family life, and systematic transfer of knowledge. Training is an area that needs improving. To date, older workers participation in training is still very low. Fewer than 5% of workers from 55 to 64 years old took part in training in 2008. We know that low-skill levels play an important role in early retirement, which makes training crucial to extending the individual s active working life. New skills for new jobs Europe s major asset is its human capital and people s skills will be hugely important to our efforts to make the economy smart, sustainable, inclusive and capable of delivering high rates of employment, productivity and social cohesion. That is why we absolutely have improve skill levels, especially in the aftermath of the crisis. The latest forecasts show that jobs will be increasingly knowledge and skillsintensive in the future. Net employment change over the next decade is expected to bring over 7 million new jobs, mostly in knowledge- and skill-intensive occupations. By 2020, demand for highly qualified workers is projected to rise by 16 million, while demand for low-skilled workers is expected to decline by around 12 million. So workers with higher qualifications will clearly be best placed to take advantage of these developments, although Europe s economy will continue to need a broad basis of intermediate skills, especially those acquired through vocational education and training. We know that most people who will fill the jobs in the next 10 years are already in work now. That makes targeted skills-upgrading all the more important. This is where the employers role is vital. If they are to increase the competitiveness and long-term development of their companies they must invest in their workforce s skills. This will be particularly important in the services sector, and in particular in the health and business services sector, where most net job creation should occur. 5
New jobs will also emerge in the green sector in renewable energies and ecoconstruction, for example. So what do we need to do to make the best use of our workforce s skills and develop the right skills for the future? I see three issues that need looking at. First, we need to anticipate skill needs more accurately and match them more closely to future demand on the labour market. With that in mind, the Commission produces skills forecasts every second year that predict demand and supply at EU level. We also produce sector-level studies on future skill needs in the EU s main economic sectors. And together with stakeholders, we have helped to set up sectoral councils on skills and employment at EU level. Employers are best placed to identify and inform current and future employees of skill needs and can therefore play a key role in helping to anticipate skill and labourmarket needs. Second, the results of accurate skills forecasting must feed into our education and training systems so our young people have the skills and competencies which the market actually needs. Here too employers can play a key role by contributing actively to shaping the future of our education and training systems. At EU level, the Commission has established a European University Business Forum, which brings together key players in the academic and business worlds, to foster closer cooperation between universities and business. Third, we must encourage all employers in both the private and public sectors to make better use of the skills of our increasingly more heterogeneous workforce. This calls for a change in mindset to adapt to a changing workforce. In ten years time, there will be a higher percentage of older workers in our workforce. We need to make sure we have the structures in place to allow them to update their skills constantly. The workforce will also include more female workers, who will often be better qualified than men. Comprehensive lifelong-learning strategies and competence-based approaches to human resource management will be needed to turn these challenges into opportunities. * * * * Let me conclude by calling on you to contribute to the European Year for Active Ageing in 2012. We intend to encourage the regional and local authorities, the social partners and other stakeholders to commit themselves as from 2011 to objectives relating to active ageing. Such commitments should be documented on the European Year s website. This will help make 2012 a year of achievement, during which the results of the specific initiatives would be presented. For instance, companies could commit themselves to conducting a strategic analysis that identifies the areas where most action will be needed in the years to come. Or they could lay down an active ageing action plan. 6
The success of the European Year for Active Ageing will depend on the involvement and commitment of the other European institutions, the Member States and the stakeholders at all levels. And among them, as I have tried to show, employers will play a very big role. 7