Predicting population trends is a challenging task, especially in countries undergoing shocks and transformations as these might experience rapid demographic shifts. The general problem with such predictions becomes not least visible when looking at the UN’s Population Predictions models, where one can detect a clear decrease of prediction accuracy the further away one goes in the future. For instance, the 2100 population prediction model for the EU ranges from 401 million inhabitants in the most pessimistic scenario and 830 million inhabitants in the most optimistic scenario (United Nations Department of Economic and Social Affairs, Population Division, 2022). Various external and internal fac- tors that are hard to foresee make it difficult to estimate a clear trajectory for population development.
One striking example of this is the most populous country in the world, the People’s Republic of China. There, the birth rates have declined much quicker than previously anticipated, leading to major concerns in Beijing and significant policy changes, such as the departure from the One Child Policy and incentives to couples to get more children (Mao, 2024). China is still a country in transition and has far-reaching ambitions as far as its catching-up process is concerned, such as outlined in its 2049 Plan, until which it ‘aims to ‘build a modern socialist country that is prosperous, strong, democratic, culturally advanced and harmonious’ (ODI, 2021). However, experts claim that due to a potential demographic collapse, ‘China is growing old before it becomes rich’, effectively undermining the ‘prosperous’ element of the 2049 plan (Mei et al. 2023).
In a similar fashion, Poland, itself a country in the process of quickly catching up with its Western European peers, experienced a rapid decrease of birth rates, raising the question of whether it might become locked in a middle-income trap. In just six years, between 2018 and 2023, Poland experienced a decrease of new-born children in a year from 388.000 to 272.000, which represents a decrease of over 30 percent (Pezda, 2024). Even in the most optimistic scenario in the UN Population Prediction models, Poland’s population will stand at 34 million by 2100; in the most pessimistic one, less than 15 million (United Nations Department of Economic and Social Affairs, Population Division, 2022a). Regardless of the model applied, the trend is therefore clear and shows that the economic transition process is accompanied by an accele- rating ‘grey transition process’, whereas the labour force shrinks, and the old-age dependency ratio rises, describing pro- found changes of the population structure of a society.
The grey transition’s impact on economic growth
The impact of such a change can be clearly established using economic concepts. Bloom et al. (2010: 591) explain in this context that ‘increased life expectancy has historically been strongly associated with increased per-capita income’. This is visible when assessing Solow’s Growth Model, where the net national product Y is a function of capital K and labour L. In textbooks, Labour is defined as ‘the time people spend working’ (Mankiw, 2021: 393). As a result, a shrinking labour force will decrease the national product if a) the amount of individual work is not increased and b) capital, defined as ‘the set of tools that workers use’ does not increase. Whilst the former might be politically difficult to enforce, the latter, which can be equated with an increase in productivity, might be difficult to implement in an ageing society as it would require large-scale investments and political resistance. As such, research has shown that ‘a 10% increase in the fraction of the population ages 60+ decreases the growth rate of GDP per capita by 5.5%’ (Maestas et al. 2023: 1).
However, the challenge stemming from an ageing population does not only impact economic output itself, but also poses questions on the sustainability of the social security infrastructure and welfare states in general. Social security sys- tems are a cornerstone of almost all modern European nation states. However, their roots date back to the 19th century, when ‘Germany became the first nation in the world to adopt an old-age social insurance program in 1889, designed by Germany’s Chancellor, Otto von Bismarck’. (SSA, no date). It is worth noting that the initial pension age was 70 at that time and only lowered to 65 in 1916 (SSA, no date). Whilst these systems expanded over time, their key assumption, that is the existence of a pyramidic population structure, in which a large group of people in pre-productive and productive age faces a significantly smaller group of post-productive age, remained the same.
Yet, significant demographic changes that have occurred over the course of the past decades, have started to put an increasing strain on social-security systems as the reality starts to further depart from one of the key assumptions of their functioning. The old-age dependency ratio, which puts the number of elderly people relative to that of productive age, is a good symbol for this trend. Figure 1 below illustrates the trend relatively clearly, demonstrating the massive increase of the ratio between old to young people in the EU, the CEE, as well as Poland. Visibly, in Poland and the CEE region the curve is steeper in the EU since 2010, symbolising the increasing speed of the ‘grey transition’ in these cases. It is worth noting that, according to Eurostat predictions, ‘at EU level, the ratio is projected to reach 56.7% by 1 January 2050, when there will be fewer than two working-age adults for each elderly person’ (Eurostat, 2021).
Already in 2006, the question was posed in a World Bank publication whether ‘Europe (can) afford to grow old?’ (Carone & Costello 2006). The conclusion back then was that ‘it is a slow-moving, largely predictable process that is therefore manageable, provided policymakers act in an efficient and timely manner’. Bloom et al. (2010: 583) have, for instance, shown that
‘behavioural responses (including greater female labour-force participation) and policy reforms (including an increase in the legal age of retirement) can mitigate the economic consequences of an older population’. This, however, puts forward the importance of understanding this monumental, and from the perspective of history, unique task from a regional and sin- gle-country perspective in order to find specific and forward-looking solutions to these changes in each country.
The low priority of the grey transition in the public realm
As mentioned earlier, the questions on how to find policy solutions to these changes is a particularly imminent issue in Poland, and the CEE region at large, due to their status as (still) catching-up economies. The World Bank points out in the European case that ‘with current policies, public spending on pensions and health care would have to increase substantially, by several percentage points of GDP in most countries, which would require considerable
fiscal adjustments’ (Schwarz et al. 2014: 19). As a result, the necessary large-scale investment in a catching-up economy is put under question when a shrinking labour force requires significant investments to keep existing levels of production, but the social security systems are putting a strain on financial reserves in the first place. As a result, a double negative effect emerges for these countries.
Despite these negative effects, the grey transition is often overshadowed in the public discourse and policy agen- das by two other major transformations that are happening simultaneously: firstly, the Green Transition, which puts an emphasis on sustainability and the move away from fossil fuels. And, secondly, the (digital) Blue Transition, which describes the tremendous changes to our lives due to the adaptation of increasingly sophisticated technological solutions. The Green and the Blue Transition are both designated as the top two priorities of the six-point priority plan of the EU Commission for 2019-2024 (European Commission, 2019).
In contrast, Grey Transition does not come up, despite 85% of EU citizens calling for better cooperation between various governance levels from local to EU level in managing and addressing this challenge. However, despite such calls and 81% of EU citizens claiming that the management of demographic changes should remain a political priority European Commission (2023), in the Eurobarometer the pension system, which in itself is directly related to the grey transition, is ranging on the bottom of top policy priorities of Europeans, way below issues such as the environment and others European Commission (2023a). As Börsch-Supan (2013: 4) notes in this respect, ‘while population aging is a well-known phenomenon, its economic and social implications are often underestimated or misunderstood by the general public and policymakers alike’, which helps to explain such findings.
However, this lack of salience of the issue at stake, and subsequently also its long-term consequences, can be a signifi- cant obstacle on the way to developing and implementing effective and necessary policies that aim at mitigating the consequences of population aging. One such issue is the increase of the statutory pension age in Poland, which was enacted in 2011 and seen by most observers as a necessity, but then instrumentalised as campaign fuel by the back-then opposition party, PiS, which used the reversal of this policy as a political ‘flagship project’ (Chłoń-Domińczak, 2018).
It is therefore of utmost importance to create a symbiosis between policymakers and experts to raise public awareness and inform the public about the grey transition and its consequences for our societies from societal, economic, as well as political perspectives. In this respect, the EU Commission itself argues that ‘ageing will require adapting the welfare state, but also, more broadly, the way our societies function, the way people work, consume and interact. This requires a forward-looking and comprehensive strategy’ (European Commission, 2018: 9). Therefore, bringing the grey transition to the forefront of public debate and policy discussions now ensures that Poland and Europe as a whole can better prepare themselves for the demographic challenges that lie ahead.
