Demographic change in Europe and Central Asia: Addressing the issue of a shrinking and ageing labour force

De Gobbi, Maria Sabrina; Kühn, Stefan; Heins, Guido; Malikova, Ziyodakhon Working Paper Demographic change in Europe and Central Asia: Addressing the issue of a shrinking and ageing labour force ILO Working Paper, No. 139 Provided in Cooperation with: International Labour Organization (ILO), Geneva Suggested Citation: De Gobbi, Maria Sabrina; Kühn, Stefan; Heins, Guido; Malikova, Ziyodakhon (2025) : Demographic change in Europe and Central Asia: Addressing the issue of a shrinking and ageing labour force, ILO Working Paper, No. 139, ISBN 978-92-2-042117-8, International Labour Organization (ILO), Geneva, https://doi.org/10.54394/UTFG0314 This Version is available at: https://hdl.handle.net/10419/324229 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ XDemographic change in Europe and Central Asia Addressing the issue of a shrinking and ageing labour force Authors / Maria Sabrina De Gobbi, Stefan Kühn, Guido Heins, Ziyodakhon Malikova April / 2025 ILO Working Paper 139 © International Labour Organization 2025 Attribution 4.0 International (CC BY 4.0) This work is licensed under the Creative Commons Attribution 4.0 International. See: https:// creativecommons.org/licenses/by/4.0/. The user is allowed to reuse, share (copy and redistribute), adapt (remix, transform and build upon the original work) as detailed in the licence. The user must clearly credit the ILO as the source of the material and indicate if changes were made to the original content. 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Authorization for publication: Beate, Andrees, Regional Director, Europe & Central Asia • ROEurope and Central Asia ILO Working Papers can be found at: www.ilo.org/global/publications/working-papers Suggested citation: De Gobbi, M., Kühn, S., Heins, G., Malikova, Z. 2025. Demographic change in Europe and Central Asia: Addressing the issue of a shrinking and ageing labour force, ILO Working Paper 139 (Geneva, ILO). https://doi.org/10.54394/UTFG0314 01 ILO Working Paper 139 Abstract This paper identifies existing labour market challenges associated with ageing in Europe and Central Asia. It presents a general overview and provides ideas to stimulate social dialogue. In 2024, there were 28 persons aged 65 years and above per 100 persons aged 15 to 64 years and this ratio is projected to rise to 43 by 2050. The proportion of older workers (55 years and above) will increase, while the prime-age workforce (25 to 54 years) will decline. This demographic transition is expected to result in a net loss of 10 million workers in the region by 2050. As pension systems increasingly have to rely on a diminishing pool of younger workers, sustaining current living standards will become more challenging. Productivity growth in Europe and Central Asia has been falling since 1991. New sources of productivity have to be unlocked if current standards of living are to be maintained. Increasing the labour force participation of inadequately represented groups, including women, persons with disabilities, the youth, migrants and refugees may only partially improve the situation. However, it would be a step forward in improving the outlook for the challenges that the region is experiencing. About the authors Maria Sabrina De Gobbi is a Senior Economist in the ILO Research Department on secondment at the Regional Office for Europe and Central Asia since November 2024. She has been working at the International Labour Organization since 1998 mainly as an economist. She holds advanced university degrees covering the areas of economics, law and environmental management from institutions including the Trieste University in Italy, Tufts University in the United States and Imperial College and the School of African and Oriental Studies in the United Kingdom. Stefan Kühn is a Senior Economist in the ILO Research Department. Stefan has vast experience in analysing of and reporting on global and regional labour market trends. He is the main author of multiple editions of the ILO’s World Employment and Social Outlook: Trends reports and of the recently published Asia-Pacific Employment and Social Outlook. His primary expertise lies in econometric analysis, econometric modelling and structural macroeconomic modelling. Stefan obtained his PhD in Economics from Maastricht University in the Netherlands. Guido Heins is a Technical Officer at the ILO Regional Office for Europe and Central Asia. He began his career with the International Labour Organization in 2019, primarily concentrating on evaluating and financing social protection systems. More recently, he served in a quantitative researcher role at UNU-MERIT, focusing on social protection, while also contributing to the master’s program as teaching staff. He holds an M.Sc. in public policy and human development from the same institution, a joint degree with Maastricht University. Ziyodakhon Malikova is a Junior Economist with expertise in labour markets, social protection, AI, and sustainable development, with a focus on employment trends, demographic change, and digital transitions. She joined the International Labour Organization as an Employment and Social Policy Intern at the Regional Office for Europe and Central Asia in 2024. She holds an MSc in Economics from the University of Bonn and brings strong capabilities in data analysis, impact assessment, and inclusive policy design. 02 ILO Working Paper 139 Abstract 01 About the authors 01 XIntroduction 04 X1 Population and labour force trends 06 Population trends 06 Labour force trends 07 Economic dependency and productivity 11 Ageing and labour shortages 14 X2 Considerationsofspecificcategoriesofworkers  16 Afocusonolderworkers  16 Women in the labour market 18 Personswithdisabilitiesandtheirlabourmarketchallenges  20 Situationofyoungworkers  21 Migrantworkersandrefugees  23 Benefits and challenges for destination countries 24 Benefits and challenges for origin countries 25 XConclusion 27 Appendix. Methodology underlying the long-term projections of labour force participation rates 30 References 32 Acknowledgements  38 Table of contents 03 ILO Working Paper 139 List of Figures Figure 1. Old-age ratios in Europe and Central Asia, 2024 and 2050 projections 06 Figure2.Scenarioprojectionsforold-agerationsinEurope’sin2050,withandwithoutmigration 07 Figure 3. Composition of the labour force in Europe and Central Asia, by age group, 2000–50, (million) 08 Figure 4. Labour force participation rates and projections in Europe, by sex and age group, 1991, 2024 and 2050 (percentage) 09 Figure 5. Labour force participation rates and projections in Central and Western Asia, by sex and age group, 1991, 2024 and 2050 (percentage) 10 Figure 6. Share of those aged 55 years and above in the labour force in Europe and Central Asia, by subregion, 2000–50 (percentage) 11 Figure7.ImpactofdemographyandemploymentrateonaverageannualGDPgrowth,in Europe and Central Asia, 2024–50 (percentage points) 13 Figure 8. Youth not in employment, education or training in Europe and Central Asia, 2024, by sex (percentage) 19 Figure 9. Youth not in employment, education or training in Europe and Central Asia, 2005– 24 (percentage) 22 Figure 10. Proportion of international migrants in the labour force in Europe and Central Asia, by broad subregion, 2013–22 (percentage) 24 04 ILO Working Paper 139 XIntroduction Europe and Central Asia,1 like the rest of the world, is undergoing a rapid demographic transformation. Particularly in Europe, the prime working-age population (25 to 54 years) is shrinking due to low fertility rates, with some European countries, and mainly in Eastern Europe, also suffering from talent emigration. Although total fertility in Central Asia and Israel remains above the replacement level, lower birth rates and higher longevity have caused significant shifts in the population structure. The ensuing rising economic dependency of the non-employed on workers and shrinking labour force threatens economic wealth – both at the aggregate level due to the risk of hampering economic development, but also at the individual level, by straining the capacity of existing social protection systems to provide adequate old-age pensions. Section 1 of this paper addresses the issue of a shrinking and ageing working population in Europe and Central Asia as well as the challenges that may arise from demographic shifts. It offers a snapshot of the current demographic and labour market trends in the region. Issues stemming from an ageing labour force and rising dependency ratios are described. Societies need to define and strategize how to react to the challenges posed by demographic change and rising dependency ratios. To mitigate the impact of such challenges, the participation in the labour force of specific categories of people who are presently not fully engaged can be expanded, in particular women, older workers and young people, persons with disabilities, and migrant workers and refugees. Section 2 of this paper investigates the labour market characteristics of those groups and highlights some challenges which hinder greater participation by them. The analysis raises several questions critical for securing an adequate share of the economically active population with decent work, supporting the young and elderly, national healthcare systems and social protection schemes. The share of older workers will also keep rising on account of longer and healthier lives. Older workers may have age-specific characteristics in terms of physical and mental fitness, skills and experience acquired, and levels of productivity. How can the potential of older workers be tapped? How can their active status in the labour market be supported in productive and well-paying economic activities? The persistent inequality in the distribution of unpaid care work, disproportionately borne by women, and the inadequacy of childcare, elderly care, long-term care and related care leave policies and infrastructure significantly hinder women’s labour market participation, their ability to balance both unpaid care and paid work, as well as their broader economic security, health and well-being. How can policies foster women’s participation in the labour market and their right to decent work? Persons with disabilities are inactive or unemployed in higher shares than the rest of the working-age population. Recent developments including digitalization, artificial intelligence (AI) and telework can make it easier for persons with disabilities to be employed in productive, decent 1The 51 ILO Member States in the Europe and Central Asia region are: Albania, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malta, Montenegro, Netherlands, North Macedonia, Norway, Poland, Portugal, Republic of Moldova, Romania, Russian Federation, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Türkiye, Turkmenistan, Ukraine, United Kingdom and Uzbekistan. Kosovo is also included as defined in UN Security Council Resolution 1244 of 1999. 05 ILO Working Paper 139 jobs. How can the employment of persons with disabilities be supported and their active participation in the labour market be boosted? The level of youth who are not in employment, education or training (NEET) in Europe and Central Asia stands at rather high levels. How can youth employment be increased jointly with rising levels of participation of older people in the labour force? Talented and skilled youth are leaving some areas in Europe and Central Asia, such as the Western Balkans, to emigrate to other countries in the region which have started programmes to attract foreign, qualified labour force. How can development policies encourage the return of skilled emigrated youth? Certain migration movements are quite constant in some areas, and conflicts in the region have generated flows of refugees that have the potential to support the shrinking labour force of host countries. How can countries ensure the inclusion of migrant workers and refugees in their labour markets to better support shrinking labour forces in the region? Which policies facilitate the integration of refugees in national labour markets? How can decent working conditions be secured for all workers, including migrants, especially in those sectors offering jobs of low quality, where local qualified candidates refuse employment? Productivity is fundamental for economic development and higher wages. It is also a key component for sustained, sustainable and inclusive development. Yet, recent productivity growth has been low, which is extremely problematic given the rising dependency ratio in the region – which is the number of persons below the age of 15 years and 65 years and older compared to those aged 15 to 64 years. Furthermore, with rapid technological shifts and rising pressures brought on by climate change, boosting productivity may not benefit everyone equally. How can productivity gains be fostered and equally distributed among all individuals, including those who are vulnerable, who are socially excluded or who face discrimination? This paper identifies existing labour market challenges associated with ageing. Social dialogue often plays an important role in the identification and implementation of solutions, and such instances are highlighted. It is for social partners and policymakers to choose the most appropriate mechanisms to mitigate the labour market challenges associated with their ageing societies. This paper presents a general overview and provides ideas to stimulate social dialogue with the guiding questions above. 12 ILO Working Paper 139 parts of society.7 Growing GDP per capita makes it more likely to establish redistributive systems where no part of society faces continually declining incomes. Yet, maintaining rising GDP per capita could prove to be very challenging in Europe and Central Asia. Furthermore, rising GDP per capita is no guarantee for improved well-being – achieving inclusive, sustained and sustainable development goes far beyond raising a single number. The combined effect of trends in working-age population growth and employment rates is projected to lower the average annual GDP growth between 2024 and 2050 by 0.1 percentage points in Europe and Central Asia (see figure 7). Growth of labour productivity – when defined as output per worker – would need to be at least as large to stabilize GDP. The impact ranges from negative 0.7 percentage points in Southern Europe to positive 1.0 percentage points in Central Asia. Eastern and Southern Europe are the only two subregions where shrinking populations present a major drag of around 0.3 to 0.4 percentage points on GDP growth, while Northern Europe, Central Asia and Western Asia are expected to see a positive contribution from working-age population growth. The change in the employment rate is projected to lower GDP growth by 0.6 percentage points annually in Central Asia but increase it slightly in Northern Europe. The baseline European labour force projection includes rises in the LFPR of older workers and women by 2050, which cushions the overall impact of demographic change on aggregate LFPR and employment rates. If those rises were not to happen but instead the LFPR of all demographic groups were to remain at their 2024 level, then the ensuing additional fall in the employment rate would lower average annual GDP growth by an additional 0.3 to 0.4 percentage points in Europe.8 In this alternative scenario, Europe would see GDP decline by 0.6 percentage points per year, and Southern Europe even by 1.0 percentage points, unless matched by an equivalent rise in labour productivity.9 7Relevant ILO Conventions are the Social Security (Minimum Standards) Convention, 1952 (No. 102), the Invalidity, Old-Age and Survivors’ Benefits Convention, 1967 (No. 128), and the Social Protection Floors Recommendation, 2012 (No. 202) (see ILO 2021a). 8Under the alternative scenario, the labour force in 2050 would be between 7 and 10 per cent below the baseline scenario in the European subregions. Central and Western Asia is projected to experience broadly declining LFPRs, so that such a scenario is meaningless. 9A scenario of constant LFPR by demographic group is used in Madgavkar et al. (2025), explaining the large productivity implications resulting in that study. 13 ILO Working Paper 139 XFigure7.ImpactofdemographyandemploymentrateonaverageannualGDPgrowth,inEuropeand Central Asia, 2024–50 (percentage points) Note: GDP growth can be decomposed into growth of the working-age population plus the growth of the ratio of employment to the working-age population plus the growth of output per employed (labour productivity). The figure depicts the average annual growth effect of the first two components between 2024 and 2050, where the total effect of demographic change is the sum of these effects. The figure also shows the additional growth effect in addition to the baseline effect of a scenario where LFPRs of demographic groups in Europe were to remain at their 2024 level, which would result in a lower overall LFPR by 2050. The final impact on GDP depends on future labour productivity growth, which is not shown in the figure, as it is unknown. Source: ILO estimates. Ageing societies could face lower productivity growth through several channels. Yet, empirical evidence for most of those is scarce or inconclusive, highlighting the need for further research.10 While experience raises productivity, this effect tends to diminish with the years, suggesting little additional benefit for countries in Europe and Central Asia that already have fairly aged workforces (Gagliardi, Grinza and Rycx 2023; Guest 2013; Guzzo, Nalbantian and Anderson 2022). On the contrary, since younger workers tend to adopt new technologies faster and more readily, firms might move beyond the optimal mix of young versus older workers as the ageing of the labour force continues, thereby lowering productivity growth (Guest 2013). Overall, microeconomic studies are not conclusive on the age–productivity effect in firms, and in addition they often fail to establish causality (Børing and Grøgaard 2023; Guest 2013).11 Older workers tend to work fewer hours, which would lower output per worker even if hourly productivity were to remain the same. Since people usually save most while earning incomes on the labour market, ageing populations tend to experience a dissaving effect, which could reduce available domestic resources for investment. Ageing societies could experience a rising health and other care demand, to the detriment of demand for other goods and services. Yet, care sectors tend to experience lower productivity growth. As their share in total employment will likely increase, productivity growth in high-growth sectors would need to accelerate to potentially unattainable levels in order to maintain a constant aggregate productivity growth (Duernercker and Sanchez-Martinez 2021; Sheiner and Malinovskaya 2016)12. However, market pricing, as is used for measuring GDP, 10 Guest (2013) provides a short discussion of the various channels, as well as the existing evidence regarding their size. 11 Section 2 discusses older workers in the labour market in more detail. 12 Baumol’s effect describes the phenomenon that wages in service sectors with lower productivity growth potential keep up with wages of high productivity growth sectors in order to attract workers to these sectors. Over time, the share of employment in high-growth sectors is falling. 14 ILO Working Paper 139 does not always reflect the true contribution of activities to people’s well-being – a problem particularly relevant to undervalued care activities. Finally, many European countries not only face ageing, but also an actual shrinking of the population, meaning that future internal demand is falling. Productivity growth could fall when firms cut R&D expenditure and investment into new production technology to avoid risks relating to a shrinking market. The current geopolitical environment, where future conditions of access to global markets for firms in Europe and Central Asia grow in uncertainty, only reinforces this threat. Facing downward pressure from employment trends and ageing workforces and societies, maintaining GDP growth in Europe will require a major boost in productivity growth. Yet, productivity growth in Europe fell from 1.8 per cent per year in the period 1991 to 2007 down to only 0.8 per cent per year in the period 2007 to 2024. Such a productivity growth rate barely surpasses the projected drag from demographic change, without even considering the potential additional effects of ageing on productivity growth. If this trend were to continue, it is foreseeable that Europe would soon face shrinking GDP. Central and Western Asia also experienced a major deceleration of annual productivity growth from 4.1 per cent in the period 1991 to 2007 to 2.5 per cent in the period 2007 to 2024. This trend renders the challenge of “getting rich before getting old”13 more difficult. The downward trend in labour productivity growth is a global phenomenon rooted in a range of factors going far beyond demographic change (ILO 2023a). Conversely, the rising dependency ratio due to ageing necessitates increasing productivity growth. Consequently, Europe and Central Asia need to unlock new sources of productivity growth to maintain rising standards of living across the board. Ageing and labour shortages Shifting demand patterns could cause sectoral labour shortages. Labour shortages arise when employers fail to fill job openings because of a lack of suitable candidates. This can occur because of an overall shortage of workers, a mismatch between required skills and candidate profiles, a disconnect between workers’ expectations and the characteristics of available jobs, or a combination of these factors (ILO 2024a). Ageing shifts consumption patterns, as older persons tend to have different preferences and needs. For example, the number of workers required for long-term care alone is projected to increase by 35 per cent, or 6 million, between 2023 and 2050 in Europe and Central Asia, which corresponds to an additional 1.6 per cent of all employed.14 Other forms of care work, but also other services, could also see rising demands. Those additional workers needed would not be available in other sectors of the economy, thereby effectively lowering the labour supply for those other sectors. However, a major current problem seems to be the inability to fill vacancies in care occupations due to a number of factors such as gendered occupational segregation, low pay and poor working conditions (ELA 2024). Market forces alone are unlikely to resolve all sectoral labour shortages due to the large government involvement in key sectors and institutions, such as care and education. Market forces and collective bargaining alleviate sector-specific labour shortages through labour-saving technological innovations and more attractive working conditions. Appropriate training and skill development are unlikely to follow from market forces alone but instead will require external steering. The ILO resolution concerning decent work and the care economy (ILO 2024c) states that the State has 13 The phrase “get old before getting rich” is commonly used in literature and media reports on demographics and refers to the phenomenon that a country will reach a super-aged society with a high old-age economic dependency ratio, and its potential implications for productivity growth, before it can attain high-income status (Lee 2017). 14 The methodology is described in ILO (2024b). 15 ILO Working Paper 139 a primary responsibility for care provision, funding, regulation and ensuring high standards of quality, safety and health for care workers and care recipients. The need for adequate financing to attract enough workers faces budgetary constraints, creating conflicts between different interest groups. All this means that long-term planning and steering, through social dialogue mechanisms, is required to develop appropriate education and training programmes and to allocate sufficient resources. Despite a projected decline in the labour force, it is unclear whether Europe will run out of workers and face aggregate labour shortages. Technological innovation and AI could create large efficiency gains, both in terms of complementing and substituting workers (Gmyrek, Berg and Bescond 2023), even though such gains have failed to boost aggregate productivity growth so far. And history shows that even in the face of massive transformative changes, countries tend not to run out of either workers or jobs. 16 ILO Working Paper 139 X2 Considerations of specific categories of workers A focus on older workers Although there is no internationally agreed definition of “older workers”, they can be considered employees aged over 55 years. The ILO’s Older Workers Recommendation, 1980 (No. 162), provides that, as stated in ILO (2024d): “Older workers are all workers who might encounter employment and occupation-related difficulties due to the advancement of their age; a more precise definition of older workers, including specific age categories may be adopted in countries consistent with national practice and local conditions.” There is now general agreement that age is not the only determinant of health and job performance. Ageing might, nonetheless, involve physical and mental changes that have an impact on the way work is performed. Physical changes include decreased lung capacity, reduced muscular strength and endurance, poorer hearing and vision, longer time to recover from work, backache and sleeping difficulties, as well as other chronic health issues, such as cardiovascular problems. Furthermore, over the age of 45, workers have a lower heat tolerance than younger employees (Shephard 2000), which makes them more vulnerable to the consequences of rising temperatures caused by climate change. This makes them experience more occupational accidents than their younger colleagues and with more severe injuries (ILO 2024e). Concerning cognitive functioning, as the age of 70 approaches, the ability to solve complicated issues and process complex information (“fluid intelligence”) weakens, although these limitations are normally compensated by experience. Besides age, other factors, such as lifestyle and working conditions, determine the health of older workers. This is why it is preferable to talk about “functional age” rather than “chronological age” to describe someone’s ability to work.15 The relation between individual productivity and age is not straightforward. It is closely linked to the technology used and to the work content. Factors other than age, such as education, have a much stronger impact on productivity than ageing (Prskawetz and Lindh 2006). Aged and skilled labour is likely to have had a positive effect on productivity in the European Union in the last decade (EC 2024). Extensive experience and knowledge compensate for changes in health conditions and cognitive capabilities. Older workers outperform their younger colleagues in experience, trust and independence (Eiffe, Muller and Weber 2024). Declines in cognitive skills may be alleviated through training. Nonetheless, older workers take part in lifelong learning less often than other age cohorts (OECD 2022a). On one hand, companies tend to offer fewer training opportunities to older workers compared to their younger colleagues, and on the other, older workers themselves are less inclined to welcome training activities (ILO 2024b). The learning processes of older employees are different from those of younger 15 See https://oshwiki.osha.europa.eu/en/themes/older-workers#:~:text=Older%20women%20(aged%2055%2D64,of%20the%20EU%20 Member%20States.. 17 ILO Working Paper 139 colleagues. Multiple instructional methods, including lecturing, active participation and modelling, are more conducive methods for older workers’ learning. Self-pacing, on-the-job and applied training are other effective training modalities for this age group (Picchio 2021). Content wise, older employees seem to be in particular need of digital skills and skills for the green transition. In some countries, such as Latvia, specific training programmes to teach skills for the green transition to older adults have been organized. AI can help older workers perform cognitive, non-routine tasks. It can also enhance productivity. Older workers tend to have poor digital skills, and, at present, specific, targeted skills policies are absent (OECD 2024). Older workers are often employed in jobs of low quality, with higher rates of working poverty, low pay and less social protection coverage and representation than other cohorts. When they lose their job, it is difficult for them to find another one of similar quality and pay. Former employees who become entrepreneurs improve their life quality, but they receive a lower income (ILO 2024b). As table 1 shows, for all the indicators considered, older workers have a higher incidence, and for some of them by a large margin. Some of the figures are clearly connected. For example, older workers (65+) have a much higher incidence of rural employment, part-time employment, not high-skill employment and agriculture employment, which suggests that older people in rural agricultural areas tend to work longer than their urban counterparts, as self-employed and informal workers. The shares of women in informal and part-time jobs as well as in low-skill occupations are higher, indicating the life-cycle gender inequalities. XTable1.Differenceinincidenceofemploymentcharacteristicsofolderworkerscomparedtoprime-age workersinEuropeandCentralAsia(percentagepoints) Indicator Workers aged 55–64 compared to 25–54 Workers aged 65+ compared to 25–54 Total Women Men Total Women Men Part-time employment 4.4 5.6 4.0 31.8 30.2 35.9 Rural employment 4.1 3.7 4.3 7.1 6.7 7.1 Informality 5.8 7.3 5.5 21.9 24.1 22.7 Own-account and contributing family work 6.1 6.9 6.0 31.1 32.8 32.0 Medium and low-skill occupation 5.6 7.4 4.1 7.0 10.8 2.6 Agriculture employment 10.9 11.9 10.3 36.8 38.3 35.3 Note: The table shows the unweighted mean across countries with available data of the difference in the incidence of a certain type of employment between older and prime-age workers. Source: ILO calculations based on ILOSTAT. Stereotypes and prejudice against older workers are still widespread. The ILO’s Discrimination (Employment and Occupation) Convention, 1958 (No. 111), does not mention age as a ground for discrimination. However, Member States are allowed to introduce other grounds. The ILO’s Employment Promotion and Protection against Unemployment Convention, 1988 (No. 168), provides that Member States are expected to ensure equal treatment on the basis of age, among other grounds (ILO 2024d). Furthermore, Recommendation No. 162 urges states to “take measures for the prevention of discrimination in employment and occupation with regard to older workers.” Some countries in Europe and Central Asia such as Austria, Azerbaijan, Lithuania and the Netherlands have adopted measures to improve the positive image of ageing and to oppose ageism against older persons. Such actions include information campaigns through the media 18 ILO Working Paper 139 and intergenerational dialogue, among others. National legal provisions against discrimination in employment by reason of age exist in some countries in the region, for example Belarus, Finland and Türkiye (UNECE 2023). Despite the challenges that older workers face in the labour market, the shrinking and ageing population that Europe and Central Asia are confronted with calls for measures aimed at retaining those who wish to work and employing those who are unemployed or inactive (UNECE 2025). Older workers may leave the labour market prematurely, even when they are employed on jobs that are not manual and strenuous. In some European countries in recent years, the statutory retirement age has been increased. In a few European countries, including the most ageing ones, such as Italy and Greece, retirement age is presently 67 years. In Denmark, it has been raised to 69 years following an agreement between the social partners and the Government (Eiffe, Muller and Weber 2024). Ageing societies are also present in other regions of the world, including Asia and Pacific, where Japan has recently introduced special rules to encourage the retention of older workers beyond normal retirement age. As of April 2025, Japanese companies may deviate from mandatory retirement age, which is fixed at 65 years, and introduce a continuous employment system based on re-employment or extended employment whereby older workers can work until they are over 70 years of age (Asada 2024). Women in the labour market The LFPRs for women are lower than those for men, even though in some European countries the gap is small. Furthermore, women earn less than their male counterparts, with a ratio of women’s to men’s labour income in Europe and Central Asia at 61.9 per cent in 2024 (ILO 2024f). The need to increase the share of the economically active population in the region has urged governments to stimulate higher levels of female participation in labour markets. Factors which hinder decent employment for women include balancing paid work and unpaid care and domestic work, gendered sectoral and occupation segregation, as well as social and discriminatory norms, violence and harassment at work, and “soft” or “indirect” discrimination of gender-biased skills in career advancement (ILO 2010, 2025a). Women are still considered as the main “caregiver”. Those who are prime age with young children, low education levels and living in rural areas are less likely to be in the labour force and subject to more disproportionate responsibility for unpaid care. Young women aged 15 to 24 years are more often NEET compared to male counterparts of the same age. The NEET gender gap in Europe and Central Asia in 2024 was 3.5 percentage points compared to a global gap of 14 percentage points (ILO 2024f; see figure 8). 19 ILO Working Paper 139 XFigure 8. Youth not in employment, education or training in Europe and Central Asia, 2024, by sex (percentage) Source: ILOSTAT, ILO modelled estimates, November 2024; ILO estimates. Care work includes “childcare, elder care, care for those with physical and mental illnesses and disabilities, access to treatment for persons living with HIV, education, healthcare, and personal social and domestic services, as well as daily domestic work such as cooking, cleaning, washing and mending” (ILO 2024g). Women provide 76.2 per cent of unpaid care work globally, which hinders their participation, retention and progression in the labour market. Population ageing and the impact of climate change are further increasing care responsibilities and the need for social protection and care services. In 2023 in Europe and Central Asia, 21 per cent of inactive women justified their status with care responsibilities. On account of social policies and workplace practices in the past supporting women’s employment, Eastern Europe recorded the lowest rate at 11 per cent (ILO 2024h). Investing in care services, especially childcare services, and parental and childcare leave is fundamental to enhancing women’s participation in the labour market. Belarus, Bulgaria, Latvia and Sweden are examples of countries where less than 10 per cent of women are outside the labour force because of caregiving (not necessarily childcare), thanks to investments in early childhood care and education (ECCE) of about 1 per cent of GDP. Kyrgyzstan and the Republic of Moldova also invest between 1 and 1.5 per cent of GDP in ECCE. Other European countries, such as Poland and Slovakia, are increasing investments in ECCE and parental leave (ILO 2024h). The ILO Global Care Policy Investment Simulator estimates that in Azerbaijan, investing in universal childcare and long-term care services could generate more than 390,000 jobs by 2030, corresponding to 128,000 direct jobs in childcare, 232,000 direct jobs in long-term care and more than 30,000 indirect jobs in non-care sector.16 Every dollar invested in closing the childcare policy gap could result in an average increase of US$4.19 of GDP in 2030 from mothers regaining their pre-birth earnings over their lifetime. A similar exercise on Uzbekistan anticipates the creation of over one million jobs by 2030, with every US dollar invested in closing the childcare policy gap resulting in an average increase of US$6.23 of GDP growth by 2030. 16 See https://webapps.ilo.org/globalcare. 20 ILO Working Paper 139 If young and adult women leave the labour market, they are very likely to experience difficulties later in life. Older women often end up living in poverty due to the frequent sequence of unpaid, part-time, low-paid, interrupted or informal employment, which results in very poor pension benefits. This is why they may decide to return to work after raising children. They need to be trained and reskilled more than older male counterparts (ILO 2009). Besides the challenge of obsolete skills, older women face age discrimination more than men in returning to the labour market (UNECE 2019). Older women leave the labour market prematurely more often than men due to family obligations, poor health caused by caring commitments and menopausal symptoms at work (Eiffe, Muller and Weber 2024). Persons with disabilities and their labour market challenges The inclusion of persons with disabilities in the labour market could be significantly increased. Seven out of ten persons with disabilities are inactive worldwide. Furthermore, young persons aged 15 to 29 years with disabilities are five times more likely to be NEET than their peers without disabilities (Stoevska 2022). In 2023 in Europe and Central Asia, the share of persons with long-standing limitations varied from 12 per cent in Serbia to 37 per cent in Latvia, and that of people experiencing severe constraints was at least 3 per cent (World Bank 2023a).17 The estimated weighted average unemployment rate for people with disabilities in Europe and Central Asia in 2022 was around 25.4 per cent, well above the regional average for the working-age population of 4.7 per cent.18 The education level of persons with disabilities is lower than that of the rest of the working-age population. Women with disabilities earn less (6 per cent on average) than male counterparts (ILO 2025a), indicating that the wage gap between men and women is also present among persons with disabilities. When they work, persons with disabilities are employed in part-time jobs more than their peers without disabilities and their income is therefore lower. It is estimated to be as much as 12 per cent lower than that of workers without disabilities. Persons with disabilities are often self-employed, as this type of work allows for greater flexibility (Ananian and Dellaferrera 2024). Self-employment can also be the result of discrimination in regular employment. Several barriers to their recruitment exist, including discrimination, employers’ misperceptions about the cost of work-station accommodation and a lack of knowledge of solutions available to enterprises. Convention No. 111 does not include disability as a ground for discrimination. Like age, disability can be considered as an additional ground for discrimination as envisaged by the Convention. The UN Convention on the Rights of Persons with Disabilities, adopted in 2006, includes the principle of non-discrimination. In addition, Article 27 recognizes that persons with disabilities have the right to work on an equal basis with others. The ILO’s Vocational Rehabilitation and Employment (Disabled Persons) Convention (No. 159) and Recommendation (No. 168), 1983, are other reference international legal instruments for the employment rights of persons with disabilities. Digitalization, AI and telework arrangements have the potential to facilitate the employment of persons with disabilities and allow them to perform a broader range of tasks at increased 17 Several reasons may explain the variability across countries, such as differences in the perception of disabilities, culture and awareness, in addition to possible measurement differences across surveys (see OECD 2022b). 18 Calculation based on survey data. The weighted average unemployment rate in 2022 based on 44 countries. This measure might considerably differ from official unemployment rates for people with disabilities due to variations in methodology, including differences in definitions of disability. 21 ILO Working Paper 139 productivity levels. Training in digital skills becomes essential for the inclusion of workers with disabilities in the world of work, as they are normally confronted with a digital gap and have three times less access to digital technology compared to persons without disabilities (ILO 2022). Digital training should be made accessible to and inclusive of persons with disabilities. Publicly funded associations grouping persons with disabilities with the same disability can also be extremely helpful at providing disability-specific AI and digital training. Online forums and discussions can provide valuable information on the latest technological advancements for specific disabilities and strategies to overcome work-related challenges. In other words, peer-exchanges of information on AI applications to overcome limitations of a group of workers and potential employees with the same disability can play a very important role in the activation of persons with disabilities. The provision of equipment and training to modify the telework environment for workers with physical disabilities should be planned in consultation with the employees and their representatives (WHO and ILO 2021). Despite the opportunities that telework offers to persons with disabilities, it is important to highlight that remote (online) work cannot always be considered as the best solution, and that it may involve poor working conditions with isolation, long working hours and low and irregular pay (Fundación ONCE and ILO 2021). Situation of young workers Young workers are those people aged 15 to 24 years. Their number is shrinking in the region overall. Central Asian countries record the largest share of youth, with fertility rates at or above replacement level (UNECE and UNFPA 2023). Long-term social and economic development requires a well-educated youth, especially in an era of rapid technological progress. Even after completing their studies, young people often experience a lack of decent work opportunities. The level of NEET youth in 2024 in Europe and Central Asia was 13 per cent (see figure 9). Despite its decline since 2015, this rate remains above the target of 9 per cent set by the European Pillar of the Social Rights Action Plan (European Commission 2021; ILO 2024f). Nonetheless, Eastern, Northern, Southern and Western Europe have all reduced NEET levels since 2015 (ILO 2025b). 28 ILO Working Paper 139 of older workers. This is why it is preferable to talk about “functional age” rather than “chronological age” to describe someone’s ability to work. Older workers are more often employed in jobs of low quality than younger peers, with higher rates of working poverty, low pay and less social protection coverage and representation than other cohorts. Stereotypes and prejudice against older workers are still widespread. Older workers tend to have poor digital skills, and, at present, specific, targeted skills policies are absent. Despite the challenges that older workers face in the labour market, the shrinking and ageing population that Europe and Central Asia are confronted with calls for measures aimed at retaining those who wish to work and employing those who are unemployed or inactive. Women: Women participate in the labour market less than men, and they earn less than male counterparts. They continue to bear the primary responsibility for caregiving, often engaging in unpaid care work, which limits their employment opportunities. Investing in care services, especially childcare services, parental and childcare leave, and closing the wage gap between men and women are fundamental to enhance women’s participation in the labour market. Older women are especially vulnerable to poverty due to a history of informal, low-paid or unpaid work. Furthermore, discrimination and outdated skills remain significant barriers to the employment of women, particularly those who are older. Persons with disabilities: Persons with disabilities tend to have lower education levels than the general working-age population and have three times less access to digital technology. Training in digital skills becomes essential for the inclusion of workers with disabilities in the world of work. Persons with disabilities are employed in part-time jobs more than their peers without disabilities, and their income is therefore lower. Key barriers to their employment include discrimination, employer misperceptions about the costs of workplace accommodations and a lack of awareness of available support solutions for enterprises. Addressing these challenges through inclusive policies and workplace adjustments is crucial to improving employment opportunities for persons with disabilities. Youth: Central Asian countries have the largest share of young people, with fertility rates at or above replacement level. Despite efforts to reduce youth NEET rates across Europe and Central Asia, progress remains insufficient, and youth unemployment remains high. Young workers are adaptable, eager to acquire new skills and bring fresh ideas to the workforce. However, they are also more vulnerable to work-related injuries. Their strong digital skills give them a competitive edge over older workers. Promoting intergenerational solidarity through joint activities and mentorship programmes can help to bridge skill gaps, with older workers transferring experience while benefiting from younger workers’ technological expertise. Migrants and refugees: Europe and Central Asia have experienced significant refugee inflows, particularly from Afghanistan, the Syrian Arab Republic and Ukraine. Barriers to their labour market integration include skill mismatches, the lack of recognition of prior learning, limited access to work permits and informal employment. Migration patterns vary across the region: Northern, Southern and Western Europe have the highest shares of migrant workers, while Eastern Europe faces significant outflows, especially from the Western Balkans and Ukraine to EU Member States. Skilled migration can drive innovation and economic dynamism in receiving countries but may also lead to brain drain in countries of origin. Migrants play a vital role in sectors such as agriculture, care and construction – particularly in ageing societies faced with labour shortages. Migration also contributes to remittances, skills development and lower youth unemployment in countries of origin while facilitating skills transfer when migrants return with valuable experience and are provided with an enabling environment to do so. Bilateral labour migration agreements are an important cooperation tool to address skills’ needs actively used in the region. 29 ILO Working Paper 139 Ensuring economic resilience in the face of demographic change requires a multifaceted policy response. The 2013 International Labour Conference resolution concerning employment and social protection in the new demographic context (ILO 2013) offers valuable guidance for policy formulation. In particular, it prescribes “a comprehensive multidimensional and integrated policy mix that recognizes the interdependency between demographic shifts, employment, labour migration, social protection and economic development.” Key policy areas outlined in the resolution – many of which have been discussed in this paper: education, training and lifelong learning; combating discrimination; promoting the inclusion of vulnerable and under-represented groups in the labour market; and well-managed migration policies. Policies to increase productivity are equally described, including frameworks for work practices conducive to improvements in productivity and policies that support innovation. These key policy areas and the summary in these conclusions can guide and foster a fruitful and constructive social dialogue on the issues raised in this paper. As remarked in the resolution (ILO 2013), when managed effectively, “demographic transitions not only become manageable and sustainable but can be turned into opportunities”. 30 ILO Working Paper 139 Appendix. Methodology underlying the long-term projections of labour force participation rates Labour force participation rates (LFPRs) have strongly persistent trends, meaning that a certain change over a certain period is likely followed by a similar change over the next period. This characteristic gives a reasonable statistical basis to longer-term LFPR projections. In addition, external factors can play an important role; the decision to participate in the labour force is based on considerations such as macroeconomic conditions, social security systems and cultural determinants. Cultural determinants, for example, is a very important factor in driving trends in gender gaps. While long-term projections of macroeconomic factors, such as GDP per capita and the composition of GDP, are available, existing social security systems are too diverse and complex to quantify them consistently for use in an econometric set up for all countries in Europe and Central Asia. The baseline labour force data are the ILO modelled estimates (November 2024) of LFPRs by sex and age (see ILO 2025c). The historical estimates are available as of 1991. The LFPR is estimated for men and women for four age groups: youth (15 to 24 years), prime age (25 to 54 years), older (55 to 64 years) and 65 years and above. The 2024 revision of the World Population Prospects by the United Nations Department of Economic and Social Affairs Population Division serves as the benchmark population data and projections. The database provides estimates and projections of population until 2100 by sex and five-year age group, which are aggregated to match the age groups of the labour force estimates. The historical data of GDP per capita comes from the World Bank World Development Indicators, and the share of government consumption in GDP from the UN estimates of national accounts. The October 2024 projections of GDP growth from the International Monetary Fund are used to construct projections of GDP (and relatedly GDP per capita) up to 2029. The Economist Intelligence Unit provides long-term projections (until 2050) of GDP growth and the share of government consumption for a sizeable number of countries. For other countries, projections of GDP per capita are made using historical growth rates and an estimated convergence mechanism. The government spending share is projected using an econometric approach to estimate long-term changes. The baseline approach to conducting long-term projections is by trend extrapolation, taking macroeconomic projections into account. This means that the future impact of all unobserved and unquantified determinants on LFPR trends is assumed to be the same as it has been in the recent past. For example, the projection does not make any assumptions about changes in retirement age. As such, the long-term projection presents only one of a multitude (in fact infinite) possible scenarios that could materialize and is thereby subject to substantial uncertainty. The general regression approach is to regress the six-year change in the transformed target variable on some explanatory variables using a panel model. Using the six-year change reduces the variance of the dependent variable by focusing on drivers of medium-term changes, which is also in line with the objectives of long-term projections.22 The explanatory variables – whose coefficients have been estimated in a panel – should explain changes in the trend. Multiple specifications are feasible and estimated. Those encompass using country-fixed effects or not, using a lagged dependent variable, estimating a global or income grouping panel, and different 22 While a longer lag horizon could be used, this would reduce the sample size for regression analysis, as data are only available as of 1991. 31 ILO Working Paper 139 macroeconomic explanatory variables. Model averaging across different specifications has been shown to reduce the variance of the final prediction. This paper follows the approach of cross-validation and so-called Jackknife model averaging as described in Gomis et al. (2022). It minimizes the sum of squared errors of the leave-one-out prediction errors across the various specifications through appropriate weighting. This extrapolation is made within certain boundaries. 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