Increased labor migration can mitigate the demographic and economic challenges caused by an aging population. Personnel shortages, partly caused by aging populations, can be reduced in certain sectors by selective labor migration. This is especially true in the period 2030-2040, when aging reaches its peak. Indeed, the rise in the “gray pressure” (the ratio of retirees to those in work) puts pressure on the affordability of the welfare state.
- ‘Gray pressure’ rises to 2040 and is a threat to welfare state;
- To reduce pressure, 3 million additional labor migrants are needed or state pension increase to 69;
- Labor migration can reduce labor shortages, but selectivity is essential;
- Most important for prosperity: migrants with specific knowledge and skills.
According to the study “Labor migration: solution for economy and demography?” by the Dutch Advisory Council on Migration, more labor migration can temper this, but certainly not solve it. The projected increase in the state pension age to 69 around 2050 would have a similar effect on gray pressure as the annual arrival of 50,000 additional labor migrants.
In this exploration, the Advisory Council on Migration examines labor migration’s role in an aging society. The exploration offers insight into the impact of labor migration on three demographic challenges: “gray pressure,” workforce shortages, and maintaining prosperity through the year 2070. The study is based on scientific literature and calculations based on the middle variant of the CBS population forecast.
Gray pressure: affordability of facilities
The “gray pressure,” defined as the ratio of retirees to working people, will increase significantly through 2040. This has implications for the affordability of the welfare state. Maintaining the ‘gray pressure’ at current levels would require three million additional migrant workers through 2040 (on top of the CBS projection). Other choices to moderate the increase in gray pressure are also possible, such as allowing everyone to work more hours and raising the state pension age. The arrival of 50,000 additional immigrant workers per year will have the same effect on the increase in gray pressure as the planned increase in the state pension age to 69 around 2050.
Staff shortages
The arrival of additional labor migrants (on top of the CBS projection) will allow the potential labor force to continue to grow up to 2040, thereby reducing personnel shortages in certain sectors. But labor shortages are also caused by poor terms and conditions of employment. Labor migration can reduce the incentive to improve work. Selective labor migration, focused on specific knowledge and skills, may well address labor shortages for certain positions in key sectors.
Preserving Prosperity
Although migrant workers increase economic growth, their contribution to average per capita prosperity is limited due to population growth. Only when migrant workers are more productive than the average Dutchman does the gross domestic product (GDP) per capita grow. Their contribution to prosperity is greatest if they have knowledge and skills that are in short supply in the Netherlands.
Migrant workers’ contribution to prosperity is greatest when they have knowledge and skills that are in short supply in the Netherlands.
Migration Advisory Board report
The study is intended to provide insight into the effects of labor migration on the labor force, the sustainability of the welfare state and prosperity. The study does not offer policy recommendations, but can help policymakers develop well-considered and substantiated policies regarding labor migration.
In the spring of 2024, the Advisory Council on Migration will issue an advisory report in which labor migration will be highlighted from a broader welfare perspective and in which more concrete handles for future labor migration policy will be offered.
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