Who is supplying new workers to the European working age population?

In spite of relatively low population shares of migrants in Europe, the increase in the European labor supply from 2006 to 2018 was driven by migrants and by foreign-born persons in particular.

In the EU as a whole, the total labor force increased by 4.2 percent between 2006 and 2018 (i.e, an average annual increase of 0.33%). Given that natives’ contribution to this variation was almost zero, the entire increase in the total labor force is attributable to migrants. At the same time, the aggregate labor force participation rate rose by 5.2 percent in comparison to the 2006 level as a result of native-born persons’ limited contribution (by 0.9 percent) and foreign-born persons’ large contribution (4.3 percent). In other words, the growth in EU labor supply from 2006 to 2018, in terms of either the total labor force or the aggregate labor force participation rates, was driven by migrants.

The shifting contribution of foreign-born labor was influenced by a number of factors, including a demographic shift towards an older overall population, changes in work participation by older native born workers, the size of the foreign-born population, and the work participation rate of the foreign born. Generally, the increase in older person participation did not make up for a decline in total younger workers.

Among native born workers, there occurred an increase in the numbers of persons on the relatively old side of the working age population (in their 50s and 60s) and a higher work participation rate for them. Thus the meager growth of the native population in the workforce was disproportionately driven by older workers.

Norway, Italy and Germany were the most affected by a decline in the labor participation rate of natives – a 10% reduction in Norway,

In Sweden, non-migrants contributed 0.7 percent to the increase in the total labor force, whereas migrants’ contribution was 11.4 percent, for a total increase of 12.1% (that is, an average annual increase of about 1% a year). In Italy, the shrinkage in the native-born labor force would have resulted in a decrease in the total labor force by −1.8 percent, but through migrants’ positive effect (7.2 percent), the total workforce increased by 5.4 percent.  Only in the Netherlands was the native born increase in the workforce greater than the foreign-born; in France, the contributions were equal.

From International Migration Review, Christos Bagavos, How Much Does Migration Affect Labor Supply in Europe? 2023


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