Future dims for Europeans

Future dims for Europeans

By Joe Baker, Senior Editor

A common factor—demographics—is affecting Europe and the United States, but in quite different ways.

In Europe, the population is aging and having fewer children, a condition that has generated political uncertainty and crowds of angry demonstrators.

The New York Times reports a number of European countries, whose governments have noted the shift from youth to age, are taking steps to cut back on social services, including the pensions that millions have banked on for their retirement years.

That’s what has prompted the angry demonstrations. “We’ve only seen the beginning of that,” said Wolfgang Lutz, a demographer at the Austrian Academy of Sciences. He forecasts a sharp climb in the average age of Europeans in the years just ahead.

A study by William Frey, a demographer who works for the Brookings Institution in Washington, predicts the median age in the United States will be 35.4 years in 2050, only a slight jump from the present. In Europe, however, it is expected to leap from 37.7 years to 52.3 years.

Pension reform is a hot political issue in Germany, France, Austria and other countries at the moment.

In the U.S., there has been talk of privatizing some aspects of pension programs, and there is a law—Employee Retirement Income Security Act or ERISA—passed a few years ago, which is likely to have a severe impact on American retirees because it shifts pension planning from employers to employees.

Age is the key item in all of this. Experts think the demographic shift to come will not only affect the welfare of retirees, but will mean a downturn for European societies as a whole.

What it means is that America’s power and influence will continue to grow while Europe’s will decline against the U.S., China, India and Latin America.

“There is a fear,” said Herr Lutz, “that just as the world is entering its most competitive stage ever, Europe will be less competitive vis-à-vis the United States and the Asian economies, which are much younger and are benefiting from what you might call a demographic window of opportunity.”

Europe, with its population both aging and shrinking, faces two great possibilities: it must either increase immigration to gain population, or it will have to concede to being older, smaller and less influential.

The British weekly The Economist foresees the UK as “shuffling slowly toward history’s off ramp.”

“The European countries are aging in a world that is becoming younger,” said Frey. “And in a global economy, they’re not going to share in the energy and vitality that comes with a younger population.”

Initial results of all this are efforts by European governments to trim their pay-as-you-go pension system. Under that plan, the taxes paid by those now working finance the pensions of current retirees. In that sense, it is much like our Social Security program where workers provide the funds for retirees.

These cutbacks have produced the first general strikes in Austria since the end of World War II. Austria has a very generous social welfare system. In France, there has been a series of one-day national work stoppages because the government has proposed workers would need to spend several more years on the job to become eligible for smaller pensions.

Some experts say such measures will prove to be inadequate. Erich Streissler, an Austrian economist, wrote: “In reality, a legal retirement age of 80 is what we should aim at.”

Across Europe, only 39 percent of men aged 55 to 65 still work. That statistic comes from the Organization for Economic Cooperation and Development.

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