The role of education in projecting employment in Europe

Elke Loichinger, International Institute for Applied Systems Analysis (IIASA)

A lot of research has been done on the potential economic consequences of population aging. A recurrent topic is the expected shrinkage (in absolute and relative terms) of the population of working-age. In many countries, there is the fear that there will not be enough people in gainful employment to support those who are not working. Existing projections of labor supply disaggregate populations by age and sex and do not consider any further characteristics. This project builds upon these previous studies, adding educational attainment as a further variable. The reason for this approach is twofold. First, human capital is one factor that influences labor productivity and thus GDP. Second, employment varies significantly by educational attainment: It has been found that people with higher education have higher employment rates than people with less education. As the analysis demonstrates, changes in the expected educational composition of a country’s population, combined with education-specific employment rates, have an aggregate effect on the number of future workers and the skill composition of the labor force.