At the Federal Reserve's annual gathering in Jackson Hole, central bankers from Japan, Europe, and the UK presented their alarming forecasts regarding the economic futures of their countries.
The Aging Population Problem in Japan
Bank of Japan Governor Kazuo Ueda noted that the labor shortage in the country has become one of the most serious economic threats. With over 28% of Japan's population already aged 65 and older, the country faces the risk of productivity decline. He pointed out that foreign workers make up only 3% of the labor force, yet they are responsible for half of the recent growth in labor force.
Immigration as a Recovery Factor for Europe's Labor Market
European Central Bank President Christine Lagarde highlighted that by 2040, the eurozone could lose 3.4 million working-age residents if current demographic trends continue. Immigration has helped stabilize the labor market post-pandemic, making up 9% of the labor force, while it accounted for 50% of labor force growth over the past three years.
Workforce Crisis in the UK
Bank of England Governor Andrew Bailey stated that by 2040, 40% of the UK's population will be older than the standard working age (16 to 64). He pointed to a significant drop in the number of young people working and a marked increase in those classified as 'long-term sick,' suggesting a connection between these trends. Bailey also added that mental health issues were the most common reason behind this new wave of workforce dropouts.
All three central banks agree that without a significant increase in immigration, their countries will face shrinking labor pools, rising wages, and higher inflation. Structural labor market issues require new solutions.
