ECB’s Makhlouf: Aging Populations Threaten Euro Area Job Growth, Migration Only Partial Solution

22 September 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gabriel Makhlouf on Monday warned that Europe’s shrinking and aging workforce would slow employment and economic growth, saying migration could only partly offset the drag.

In a speech at the OECD in Paris, Makhlouf, who heads the Central Bank of Ireland, called the euro area labor market a “quiet champion” for its resilience through the pandemic, Russia’s attack on Ukraine and other shocks.

Employment has continued to grow despite those disruptions, he said, with the euro area jobless rate at a record low of 6.2% in late 2024. Job-retention schemes, strong post-pandemic demand and inward migration all supported the recovery, he noted.

However, Eurostat projects the euro area working-age population to shrink by 0.7% between 2024 and 2027, and the old-age dependency ratio to rise sharply to 51.2 by 2050, he said. “Migration can mitigate some of the effects of the coming demographic changes, but it cannot push back the tide,” he said.

Makhlouf said the demographic shifts would have “varying, and sometimes contradictory, effects on inflation”, complicating the task of central banks. Older populations could damp aggregate demand and limit price growth, he said, but fewer working-age people risked tightening labor markets and pushing up wages, particularly in services.

He warned that the likely result could be segmented inflation dynamics, with labour-intensive non-tradable sectors facing higher structural inflation even as headline price pressures stay weak, making price stabilization “increasingly” difficult for monetary authorities.

Makhlouf urged reforms to boost labour-force participation, including extending working lives and adjusting tax and benefit systems to encourage employment. Flexible labor markets and reskilling will be critical to harness artificial intelligence and lift productivity, he said.

“Our choices are likely to involve improvements in our productivity, an increase in labor market participation and inward migration,” he said. “A combination of these offers us the most effective route to building the best opportunities for our grandchildren.”