Central bankers at this year’s Jackson Hole Economic Symposium warned that ageing populations and shrinking workforces will limit future growth unless countries welcome more foreign workers. Leaders from Europe, Japan and the UK said migrant labour has already played a central role in stabilising their economies and will be critical for the decades ahead.
Europe’s reliance on migrant labour
European Central Bank President Christine Lagarde said that a rise in foreign-born workers after the pandemic allowed the euro area to keep growth steady while bringing inflation down. “Although they represented only around 9 per cent of the total labour force in 2022, foreign workers have accounted for half of its growth over the past three years,” she told the audience.
She pointed to Germany, where GDP would be about six per cent lower without foreign workers, and Spain, where the rebound “owes much” to foreign labour. Lagarde said that the influx of migrant labour helped companies expand output to meet a surge in demand that followed pandemic stimulus, easing price pressures.
She also noted that other factors contributed to resilience: a fall in inflation-adjusted wages, companies retaining staff instead of shedding jobs, and more elderly workers entering the labour force. Without older people joining in greater numbers, she said the euro area’s unemployment rate would be 6.6 per cent instead of the current 6.3 per cent.
Historically, she added, higher borrowing costs have often caused recessions in Europe. But during 2022 and 2023, as the ECB raised rates, foreign labour and other changes in participation helped prevent such a downturn. At the same time, she warned, “Migration could, in principle, play a crucial role in easing labour shortages as native populations age. But political economy pressures may increasingly limit inflows.”
Japan faces sharp demographic pressures
Bank of Japan Governor Kazuo Ueda, who shared the Jackson Hole panel with Lagarde, said Japan faces a similar trend. While foreign-born workers account for only about three per cent of Japan’s workforce, they have made up half of the country’s recent workforce growth since the pandemic.
He stressed that participation among women and older people has risen but the scope for further gains is limited. “Further increases will surely require a broader discussion,” Ueda remarked, signalling that Japan must consider immigration more seriously to offset its shrinking population.
UK warns of future labour shortages
Bank of England Governor Andrew Bailey added that the United Kingdom is also heading toward demographic strain. By 2040, about 40 per cent of the UK population is expected to be above working age, he said, making it increasingly difficult to sustain growth without migrant labour. He underlined that foreign workers will be essential to keeping the economy productive and stable.
By the Numbers: Foreign Workers and Growth
The symposium, hosted by the Federal Reserve Bank of Kansas City, centred on “Labour Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.” Policymakers agreed that ageing populations and falling birth rates are structural headwinds that cannot be solved by monetary policy alone.
The issue of immigration is politically sensitive across many countries, but central bankers at Jackson Hole highlighted the economic stakes. With projections showing that Europe could lose millions of working-age people by 2040 and that nearly 40 per cent of the UK’s population will be above working age by the same year, the pressure on labour markets is intensifying.
By bringing the debate to Jackson Hole, monetary policymakers signaled that migration is no longer just a political or social question — it is becoming a central element of economic and monetary strategy.
Europe’s reliance on migrant labour
European Central Bank President Christine Lagarde said that a rise in foreign-born workers after the pandemic allowed the euro area to keep growth steady while bringing inflation down. “Although they represented only around 9 per cent of the total labour force in 2022, foreign workers have accounted for half of its growth over the past three years,” she told the audience.
She pointed to Germany, where GDP would be about six per cent lower without foreign workers, and Spain, where the rebound “owes much” to foreign labour. Lagarde said that the influx of migrant labour helped companies expand output to meet a surge in demand that followed pandemic stimulus, easing price pressures.
She also noted that other factors contributed to resilience: a fall in inflation-adjusted wages, companies retaining staff instead of shedding jobs, and more elderly workers entering the labour force. Without older people joining in greater numbers, she said the euro area’s unemployment rate would be 6.6 per cent instead of the current 6.3 per cent.
Historically, she added, higher borrowing costs have often caused recessions in Europe. But during 2022 and 2023, as the ECB raised rates, foreign labour and other changes in participation helped prevent such a downturn. At the same time, she warned, “Migration could, in principle, play a crucial role in easing labour shortages as native populations age. But political economy pressures may increasingly limit inflows.”
Japan faces sharp demographic pressures
Bank of Japan Governor Kazuo Ueda, who shared the Jackson Hole panel with Lagarde, said Japan faces a similar trend. While foreign-born workers account for only about three per cent of Japan’s workforce, they have made up half of the country’s recent workforce growth since the pandemic.
He stressed that participation among women and older people has risen but the scope for further gains is limited. “Further increases will surely require a broader discussion,” Ueda remarked, signalling that Japan must consider immigration more seriously to offset its shrinking population.
UK warns of future labour shortages
Bank of England Governor Andrew Bailey added that the United Kingdom is also heading toward demographic strain. By 2040, about 40 per cent of the UK population is expected to be above working age, he said, making it increasingly difficult to sustain growth without migrant labour. He underlined that foreign workers will be essential to keeping the economy productive and stable.
By the Numbers: Foreign Workers and Growth
- Europe (ECB): Foreign-born workers = 9% of workforce in 2022, but contributed to 50% of labour force growth over three years.
- Germany: GDP would be 6% lower without foreign workers.
- Spain: Post-pandemic recovery “owes much” to foreign labour.
- Japan (BoJ): Foreign workers = 3% of workforce, yet accounted for half of recent labour force growth.
- United Kingdom (BoE): By 2040, around 40% of population will be above working age.
The symposium, hosted by the Federal Reserve Bank of Kansas City, centred on “Labour Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.” Policymakers agreed that ageing populations and falling birth rates are structural headwinds that cannot be solved by monetary policy alone.
The issue of immigration is politically sensitive across many countries, but central bankers at Jackson Hole highlighted the economic stakes. With projections showing that Europe could lose millions of working-age people by 2040 and that nearly 40 per cent of the UK’s population will be above working age by the same year, the pressure on labour markets is intensifying.
By bringing the debate to Jackson Hole, monetary policymakers signaled that migration is no longer just a political or social question — it is becoming a central element of economic and monetary strategy.
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