1000 billion Euros at stake: How boosting employment can address demographic change and public deficits

This Issue Paper by Erik Türk, Josef Wöss and Fabian Zuleeg confirms that improving employment rates is the best strategy with which countries can prepare for population ageing. Against a background of a fast-increasing number of older people and a shrinking number of people of working age, decisive action to ensure the long-term sustainability of social security systems – and especially pensions – cannot be postponed.

But the results presented in this paper go much further: Europe’s budgetary situation would be significantly improved by achieving the employment target of the Europe 2020 strategy. The estimates presented in this paper suggest that a staggering €1000 billion by 2020 is at stake.

Of course, raising employment rates is not an easy process, especially in the current economic climate. Frequently, short-term investment from the public purse is required, with labour-market improvements only happening further down the line. But this paper suggests that the short-term public finance argument should not be over-emphasised. The scale of the positive mid-term impact of higher employment on both public budgets and the ageing challenge implies that finance ministries should look at labour-market policy differently: not as a social outlay, but as an investment in the future which will provide significant returns.