Studies of Economic Change

Labour Force Participation

The increasing share of the 65 to 100 year olds in relation to the population due to the demographic development has to be compensated by an additional potential of workforce to keep the share of the labour force (employed and unemployed) at the same level. This share is of special interest to maintain the social welfare system.

The figures of the labour force participation shown in the analysis for different age groups according to the Labour Force Survey of the European Union for selected countries are transferred to the demographic development of Germany.

At first the actual labour force participation related to the total population is plotted on the time axis for the year 1995:

These are 41% for Italy, 49% for Germany, 56% for Denmark, and 57% for the maximum.

Then the change of the different age groups of the population according to the results of the 2nd variation of the 8th population forecast of the Statistisches Bundesamt is demonstrated until the year 2050. Relevant to this study are the figures at the end of the forecasted period:

These are 33% for Italy, 42% for Germany, 49% for Denmark, and 50% for the maximum.

So the labour force participation is expected to decrease in Germany by 7% from 49% to 42% until the year 2050. Until 2012 the labour force participation remains constant while the substantial decrease takes places between 2012 and 2030. This is the period when measures to increase the number of employed to ensure the retirement pays have to be installed.

It has to be considered that forecasts are less certain the longer the period is. Nevertheless it is likely that the decrease of the labour force participation comes to end in 2030 - if the youth is not hampered to start a family by psychological stress due to a closed labour market.

The conclusion is that the impact of the demographic development on the labour market starts in the next few years.

If nothing happens and the alternative of political passivity is chosen the retirement pays are really in danger. The retirement pays would have to be decreased and the retirement age would have to be increased. That there is an alternative is discussed in the next subchapter. Two alternatives are possible.