Will demography mean the United Kingdom soon overtakes Germany?

Shannon Roberts
9 October 2013
Reproduced with Permission
Demography is Destiny

Changing demography is affecting economies around the world, and we could see a shift in the power of the world's major players over the next few years. Broadly speaking, the winners will be those who have enough people in their work forces. That means fertility rates above replacement level and immigration which is higher than emigration.

In particular, there are concerns that the ease of movement within the European Union will adversely affect many of its economies for years to come because of a 'brain drain' of the best and brightest. The European Union allows skilled graduates within its borders to easily move to where they perceive good jobs to be.

Portugal is just one country experiencing a deep recession and high youth unemployment rate, as this interesting video from the Financial Times discusses. A common European story, the unemployment rate among under-34 year olds is 37%. That means many youth are leaving the country, and among them are the highly qualified - meaning the threat to the economy may well be long term if they don't come back.

Between 1998 and 2008 about 700,000 Portuguese nationals left their home country according to research carried out by the former Economy and Employment Minister Álvaro Santos Pereira. As a result, both the overall population and the working age population of the country are declining - another common story.

Portuguese youth complain that Portugal offers no job prospects that match their qualifications, and in many cases the United Kingdom has become the destination of choice for the most qualified graduates. There, there is a demand for professionals such as nurses and IT and banking consultants.

Part of Portugal's problem is that older people are holding onto their good jobs, and young people are unable to enter the workforce. Sustained economic growth is needed to provide enough jobs for everyone, but do such countries need to make a conscious effort to give jobs to the young for the sake of their future?

Low fertility, immigration and recession are not only affecting the smaller economies within the European Union, but the major players as well. In fact, The Spectator surmises that the British economy will soon overtake that of Germany - the current leader - as it too is weighted down by low fertility, low immigration and its European Union neighbours' weak economies. The article argues that England and France are the only two countries in Europe with healthy demographics and growing populations, commenting:

Germany? That really is a serious economy - Europe's largest both before the First World War and since its recovery after the second, partly because Germans are very good at making stuff, but also because there are a lot of them - 82 million, compared with 62 million Britons. But even Germany is getting sucked into the eurozone's depression. It was growing at just 0.1 per cent at the start of the year, and has recovered only slightly since then. Germany is the only eurozone economy still in respectable shape - but with even the Dutch next door in recession, that can't last. The reality is that Germany is fated to a decade or more of faltering output just like its neighbours. If the UK starts to grow consistently faster than Germany, the gap will close.

There is another, more important factor. From 2015, Germany will have a sharply declining population. By 2020, it will have 80 million people, according to the Federal Statistical Office. By 2060, that will be down to 64 million. By contrast, the UK by 2050 will be home to 80 million, according to a report last year by the Population Reference Bureau. It would require miracles of productivity in terms of output per worker for Germany not to lose ground.

As the European Union continues to be weighed down by recession, will Great Britain emerge more powerful on the world stage simply because the others have dropped out of the race? Let's hope not for the sake of the European Union's young people.