Economic impact should guide Europe’s immigration policy amid ageing

(EUROPE) Europe’s aging trend is now driving a major rethink of immigration policies across the bloc, with economists, central banks, and EU officials in 2025 pressing governments to put jobs, skills, and fiscal impact at the core of their entry rules. The immediate issue is simple and stark: the working-age population is shrinking while pension costs rise, leaving fewer workers to support more retirees.

New assessments say that only immigration on a scale that matches real labour market needs — and that focuses on employability and skills — can steady growth, safeguard public finances, and keep welfare systems running in ageing Europe. The European Central Bank has underlined the urgency, noting that foreign workers made up about half of the euro area’s labour force growth over the past three years — equal to 3.1 million additional workers — helping firms fill jobs and keeping services moving when native-born employment growth slowed.

Demographics and the economic squeeze

The demographic squeeze shows up in every sector that relies on steady numbers of working-age people. The 15–64 cohort is falling in most EU countries. Without higher inflows of workers, Eurostat expects further drops by 2035, with steep declines forecast in countries like Italy.

The upshot:
– A smaller tax base and a larger group of pensioners
– Slower growth and pressure on healthcare and long-term care
– Tougher budget choices for governments

Recent policy debates, data briefings, and central bank notes in 2025 converge on one conclusion: a broader, better-planned stream of labour migration — especially among people in their prime working years — will do the most to keep the economy steady.

Evidence from labour markets

The evidence goes beyond demographics. In several major EU economies, migrants have accounted for virtually all net employment growth since 2005. Many migrants filled roles that were hard to staff: care work, agriculture, cleaning, logistics, and hospitality. These roles are often not high-paid but are essential for daily life and for firms needing steady staffing.

Economists argue that without these workers:
– Labour shortages would be worse
– Wage inflation might be higher in tight pockets
– Service disruptions would be more frequent

This pattern shapes an emerging view among officials: to keep hospitals staffed, crops harvested, and eldercare operating, Europe needs a reliable, rules-based pipeline for labour migration.

Macroeconomic and fiscal impacts

Macroeconomic studies in 2025 show immigration has a positive and significant effect on GDP growth when arrivals are mostly of working age. Key findings:
– Stronger effects when migrants are aged 15–64
– Larger growth effects observed when more women enter the labour market
– The ECB links part of the euro area’s post-pandemic employment gains to foreign workers who helped firms meet demand without sacrificing output

Fiscal dimension:
– High-skilled migrants generally contribute more in taxes than they receive in benefits over time.
– Low-skilled entrants can be fiscally neutral or slightly negative, depending on work hours, wages, and how quickly they find stable jobs.

Currently, across the EU, only about a quarter of residence permits are issued for employment or education, leaving a majority of inflows driven by other channels (family, humanitarian), which do not always align with labour market gaps or fiscal sustainability.

Policy recommendations emerging in 2025

Policy voices are converging around a common set of recommendations:

1. Selection based on economic criteria
   • Prioritise skills, age, and proven job offers tied to real shortages
   • Maintain worker protections and fair conditions
2. Integration as an economic tool
   • Invest in language training, recognition of foreign qualifications, and early labour-market support
3. Better EU–national coordination
   • Align inflows with regional needs
   • Avoid fragmenting the single market or enabling unfair treatment

Analysis groups argue for medium-term planning of migration pathways rather than ad hoc measures each time shortages spike.

“A broader, better planned stream of labour migration — especially among people in their prime working years — will do the most to keep the economy steady.”

Country-level pressures and uneven progress

The call for action is loudest where demographic decline is sharpest. Italy, for example, faces severe population ageing and a declining workforce, yet policy changes remain limited and largely temporary. Employers in Italy report repeated shortages in care, construction, and seasonal agriculture, while pathways for steady, employment-focused migration remain narrow and bureaucratic.

Similar issues appear across southern and eastern member states:
– Young workers often migrate away
– Sectors like care, transport, and food processing struggle to hire

Officials warn that filling only a fraction of labour gaps with employment-based entrants will slow growth and strain public finances.

Balancing high- and low-skilled inflows

A debate continues over the right balance of skills:

• Many 2025 studies favour a stronger focus on skills, but stress that low-skilled roles remain vital, especially in eldercare and everyday services.
• The recommended approach is a portfolio:
  • Ensure predictable entry for essential low-skilled roles tied to vacancies
  • Create fast tracks for high-demand skills (engineering, healthcare, digital services, green industries)

This balances immediate staffing needs with long-term productivity and tax-revenue gains.

EU coordination and practical steps

The European Commission urges member states to plan ahead, using data to align entry rules with shortages and to track outcomes for workers and employers. Recommendations include:
– Better monitoring of job matching
– Clearer rules on recognition of qualifications
– Stable channels that facilitate participation by women and younger workers
– Updated shortage lists and faster permit processing for verified employers who meet labour standards

The ECB supports forward-looking plans that protect growth while supporting price stability, arguing that well-targeted labour migration can reduce bottlenecks and smooth cycles.

Can native-born workers fill the gap?

Critics ask whether local workers could fill these roles. Economists respond that:
– Many persistent gaps are in jobs with low pay, irregular hours, or remote locations.
– With ageing populations, the pool of potential local hires is shrinking.
– Training and activation help, but cannot fully replace the lost supply.

Practical consequence:
– For hospitals, nursing homes, and farms, empty roles can mean closed beds, longer waits, or spoiled crops.

Integration and social considerations

Integration has social and practical challenges when housing and public services are under pressure. Reformers push for early, practical measures that make work and community life easier for newcomers and long-term residents:
– Local language classes tied to workplace contexts
– Employer mentorship programs
– Support for spouses to find work

Evidence shows early integration leads to higher participation rates and better earnings, strengthening fiscal outcomes. Integration is presented as the bridge that turns arrivals into long-term contributors.

Employer, union, and government roles

Employers, unions, and governments are adapting:
– Employers partner with training institutions abroad for roles in care and construction
– Unions call for wage protection and enforcement to prevent unfair hiring
– Governments piloting structured programs report fair systems help prevent abuse and keep hiring pipelines open

Well-run channels reduce irregular work by providing clear legal paths, which improves tax collection and levels the field for compliant employers.

Data gaps and monitoring

Policymakers need better, faster data on:
– Real-time vacancies
– Wage trends
– Outcomes for new arrivals (job entry speed, retention, earnings)

Experts recommend expanding linked administrative datasets to track these metrics and allow timely policy adjustments. Clear communication of results can lower public tension and build trust.

Economic stakes and public finances

The fiscal math depends on who arrives and how quickly they work:
– High-skilled entrants generally yield positive net fiscal contributions
– Low-skilled entrants can break even or improve fiscal outcomes if they work steadily and climb the wage ladder
– Speed of integration matters: each month of inactivity reduces earnings growth and weakens fiscal returns

Regional differences matter too. Coordinated flows to areas with demand help local planning (schools, transport, clinics) and encourage investment.

Risks of inaction:
– If the status quo persists — with only about one in four residence permits tied to employment or education — many countries face weaker growth and heavier pension costs.
– By contrast, entry systems focused on skills, age, and real job offers, combined with early integration support, can keep growth on track and protect the social model.

Tools and pilots available to governments

Governments can:
– Update shortage occupation lists more frequently
– Create fast lanes for verified employers with labour standards
– Require fair wages and conditions
– Expand language and sector-specific training
– Improve data links between employment, education, and migration authorities

Many of these steps are in pilot form in parts of the EU; scaling them up is the next challenge.

For official policy details, see the European Commission’s page on legal migration: European Commission – Legal migration policy.

Politics, gender, youth, and sectoral needs

Politics around migration can be tense, but the economic case is central. Key social and policy points:

• Gender: Growth effects are stronger when more women enter the labour force. Policies that support childcare, family reunion, and two-earner households improve economic returns.
• Youth: Younger entrants have more working years ahead, compounding fiscal benefits.
• Health and social care: Europe needs more nurses, aides, and home care workers; structured migration plus fair wages and standards can fill gaps quickly.
• Manufacturing and green transition: Engineers, technicians, and skilled trades are crucial for projects like electric vehicle plants and wind farms. Clear routes for high-demand skills keep projects on schedule and maintain competitiveness.

Fairness, transparency, and worker protections

Officials emphasise fairness:
– Safeguards against abuse and equal treatment on the job are essential
– Legal status tied to employment encourages reporting of violations and reduces informal work
– Transparency on who is coming, for what jobs, and how long builds public trust

Conclusion: why act now

Europe faces a slow but significant squeeze as working-age populations decline and pension costs rise. The consensus among economists, central banks, and migration experts in 2025: a balanced, employment-focused migration system — one that welcomes skills, supports families, and invests in integration — offers the best way to protect growth and keep public finances sound.

For member states confronting tight labour markets and rising costs, the time to act is now.