Who will pay the pensions of an ageing continent in the future?

Europe, which for centuries was considered the engine of global development, is today the continent with the highest median age in the world. In almost all European countries the fertility rate is well below the level of about 2.1 children per woman that demographers consider necessary in order to keep the population stable without immigration. At the same time, thanks to advances in medicine and better living conditions, life expectancy in most of Western Europe is now over 80 years. The result is a population pyramid that increasingly resembles an urn: the number of pensioners is growing steadily, while the cohorts of working age are becoming ever narrower.

This upheaval particularly affects the pension systems, which in most of Europe are based on the principle of intergenerational solidarity. If current trends continue, the ratio between people of working age and those over 65, which today in the European Union is about three to one, could fall to less than two to one by the end of the century. Governments therefore face an uncomfortable choice: to raise contributions and taxes, to cut pensions or to raise the retirement age. Germany, for example, decided as early as 2007 to gradually raise the age limit from 65 to 67. Yet pensions are only one side of the coin, because an older population inevitably also needs more medicines, hospital treatment and long-term care.

The labour shortage, about which economists have been warning for years, has long been no abstract forecast, but everyday reality in many sectors. In hospitals and care homes there is a shortage of nurses and carers, and in rural areas many companies do not manage to fill vacancies. The situation is likely to worsen even further when in the coming years the large generations born in the 1960s go into retirement, because significantly fewer young people will take their place on the labour market.

Germany, whose economy depends particularly heavily on industry and skilled labour, is therefore turning ever more systematically abroad. Particularly significant for the region is the so-called Western Balkans regulation, which since 2016 has allowed citizens of six countries, including North Macedonia, to work in Germany without a formally recognised qualification, provided they have a concrete job offer. The annual quota, which was previously 25,000 people, was doubled to 50,000 in 2024.

What looks like a pragmatic solution from a German perspective often represents a serious loss from the point of view of the countries of origin. The census of 2021 showed that fewer than 1.9 million inhabitants live in North Macedonia, significantly fewer than at the previous census of 2002, with a large part of the difference being due to emigration. Thus a vicious circle emerges: the more young people leave, the faster the remaining population ages, which also reduces the number of those who would have to finance future pensions.

Advocates of labour migration stress that remittances from abroad help many families and that workers who return bring with them new knowledge and experience. Critics, however, warn that in the long term above all the richer countries benefit from such an exchange, while the poorer ones lose precisely those people without whom their development would hardly be possible. That is why partnership models are being discussed increasingly, in which the countries receiving workers would contribute to the costs of education in the countries of origin, so that their already limited human resources are not depleted. The question remains open whether Europe will manage to cushion its own ageing without deepening the demographic crisis of its neighbours.