Population ageing is shaping the future of labour markets.

On 16 September, the European Commission published its Report 2025 on employment and social developments in Europe (ESDE). The report shows that the composition of the working population in the European Union (EU) has changed significantly over the last ten years. The labour force participation of women, older people and people born outside the EU has increased, and the employment rate has risen to 75.8 per cent. While these are important first achievements, they are still not sufficient to effectively counter the future labour shortages resulting from Europe’s demographic ageing. The ESDE report therefore analyses the situation of the 51 million EU citizens of working age between 20 and 64 who are currently not in employment and identifies the barriers to their integration into the labour market.

Positive labour market developments

In 2024, the European economy recovered thanks to strong private consumption, which was supported by a robust labour market, lower inflation and, to a certain extent, wage growth. The employment rate rose by 0.5 percentage points to 75.8 per cent (in Germany by 0.3 percentage points to 81.3 per cent). This puts the EU on track to achieve its employment policy target of 78 per cent by 2030.

Demographic ageing slows Europe's growth potential

Without further policy measures or behavioural changes, population ageing will significantly hamper economic growth and the ability of EU countries to further improve their standard of living. Mobilising untapped labour reserves, on the other hand, could help to stimulate economic growth and mitigate or even offset the effects of demographic ageing.

One fifth of the labour force is not in employment

Women, people aged 55 to 64, migrants and people with disabilities in particular remain underrepresented in the labour market. There are many reasons for this. The reasons are diverse. Women are primarily out of employment due to family responsibilities, lack of childcare options and limited tax incentives. The report emphasises that expanding childcare in some countries could increase the employment rate of women by up to 30 per cent and boost gross domestic product by 1.7 per cent.

The labour market participation of migrants is mainly hampered by language barriers and the difficult recognition of qualifications. For people with disabilities, prejudices and a lack of tailored job-matching services stand in the way of better inclusion.

Harnessing the economic potential of older people

The report emphasises that nearly 20 million older people are not in employment – often due to pension system rules as well as health issues. In order to meet different individual needs and enable older workers to remain in employment for longer, the report recommends a broad range of measures. These include flexible retirement arrangements and investment in the skills and health of older workers.

OECD acknowledges need to catch up on continuing education

The Employment Outlook 2025 of the Organisation for Economic Co-operation and Development (OECD) also addresses the challenges for the labour market and economic growth associated with demographic ageing. The OECD stresses the need for lifelong investment in skills and health. However, the data show that participation in training falls sharply from the age of 55. In 2023, just over one third of people aged 55 to 65 took part in training, compared with more than half of those aged 25 to 44. This decline in participation particularly affects highly and more highly qualified older workers. The ESDE report should therefore also be understood as a wake-up call: in discussions about Europe’s competitiveness, investment in people must not be forgotten.