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Population decline and decreasing numbers in the workforce are issues that impact many countries globally, both within Europe and outside of its borders. Europe is notoriously known for having an ageing population and this has resulted in them not having enough capable people to maintain the levels of output currently required.
Europe has established itself clearly as a welfare state and this generally means that the majority of money ends up going towards social causes. The push towards welfare has allowed Europe to maintain a high level of satisfaction amongst many of their citizens, often above those living in the US. However, this also means that much of the available financial resources in Europe are channelled towards pensions, limiting the funds available for fostering innovation and entrepreneurship. This means that the EU is closing the door on the futures of young people, failing to invest time and ideas into their growth. The lack of funding and opportunities in Europe drives young people to countries with better prospects, such as the US which is known for its thriving entrepreneurial ecosystem. As a consequence, these countries benefit from these inspired young people but this further worsens the problem in Europe.
Many Europeans aspire to establish businesses that can compete with others on a global scale, particularly in the realm of technological innovation. However, certain aspects of the EU as a regulator have made this impossible. Markus Beyrer emphasises that “more investment happens outside of Europe than inside Europe”, attributing this to a “regulatory tsunami” and excessive bureaucracy that has burdened businesses over the past decade. High taxation, over-regulation, and the overall lower income per capita further hamper the ability to attract investments.
Despite the efforts made by the EU to improve investments — notably by initiating programs to support motivated individuals with funding and resources to develop their business ideas — the financial backing available is often far more restricted than what is accessible in the US. Furthermore, there is a lack of investors available within the EU. Those who are available to invest are often older and tend to favour more traditional, less innovative ideas over ground-breaking projects, further compelling innovators to pursue their ventures elsewhere.
Following this, the importance of education continues to increase, resulting in many young people becoming over-qualified for the jobs available within the EU. Even for highly qualified jobs, young people still seek higher and fairer pay—something that Europe struggles to offer compared to other regions, especially given ongoing challenges like the war in Ukraine.
Increasing pension requirements and welfare for the elderly, as mentioned previously, inhibit the ability of many countries within the EU to provide higher pay. Moreover, several major European economies (including France, Germany, and Italy) are grappling with significant debt. Europe’s gross national income per capita lags significantly behind that of the US, making it harder for the EU to meet the diverse needs of its member states compared to the US, which can pursue a more unified economic agenda. Even some of Europe’s established largest corporations, such as Volkswagen, Nokia, and UBS, are currently suffering from severe economic pressures, necessitating significant layoffs.
As highlighted by recent analyses, while Europe flounders, the US economy is thriving in almost every measure: historic lows in unemployment, record business formation, and rapidly rising wages. This stark contrast is precisely what inspires young people in Europe and encourages them to leave.
In summary, Europe’s declining workforce is significantly influenced by a lack of innovation stemming from regulatory burdens, limited funding for new ventures, and a preference for traditional business models. Without addressing these systemic issues, the continent risks further economic stagnation and a continued exodus of its most talented and ambitious individuals, leaving only the elderly population behind.
Edited by Erin Morgan
Image: Innovation PNG Picture, By PNG All // CC BY-NC 4.0
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