Where the Population Shrinks, Opportunities Also Arise

Many developed countries are already in this situation. In the Netherlands, the birth rate is just below 1.5, slightly above the average of the European Union and the United States. Some countries are much lower: China has a fertility rate of 1.2, South Korea 0.75. Each new generation is more than half smaller than the previous one. What are the consequences of this development? And how should the Netherlands respond?

A direct consequence of a shrinking population is lower economic growth. After all, fewer people become available for the labor market. The most recent estimates from the Central Planning Bureau for the Netherlands show that the growth of the labor force decreases from 1.5% per year over the period 2022-2025 to 0.8% per year in the next four years. From 2030, it drops sharply: the number of workers hardly increases anymore. This translates directly into lower economic growth: it decreases from 1.4% annually in the coming four years to 1.0% in the period 2030-2033. 

Not new

Can we increase productivity per worker? It is an attractive thought, but the question is: how? This question is currently high on the agenda, both in Europe (see the Draghi report) and in the Netherlands (the Wennink report). And the answers are unanimous: invest more, in infrastructure, innovation, education and training. And ensure that these investments can yield returns: complete the internal market, and limit unnecessary rules and bureaucracy. Wise advice, but not new. The Lisbon agenda of the EU from 2009 contained the same directions, but since then not much has happened. It turns out to be not that simple.

There is perhaps hope that the geopolitical urgency now forces Europe to act. Maybe – but it is good to note that many proposed investments (in defense, in more strategic autonomy) may be necessary, but do not necessarily lead to higher productivity. For defense spending, the opposite applies, as recent studies from the CPB and Dutch Central Bank show. And producing things ourselves that are currently very cheaply produced abroad – from American cloud services to Chinese batteries – is economically inefficient in the short term. That is a price we may have to pay, but it does not make us more productive.

Moreover, it is unclear how an aging society relates to productivity growth. On the one hand, tightness in the labor market can lead to investments in labor-saving technology, such as robots and AI. On the other hand, it is uncertain whether an aging workforce is able to innovate sufficiently and become more productive through retraining and/or job changes.

Optimism 

Nevertheless, there is reason for some optimism. Over the past 20 years, more and more elderly people have continued working and the effective retirement age in the Netherlands has risen from 61 to 66. More than 20% of those aged 65+ now have paid work. By 2033, this is expected to be 30%. Many people therefore work longer, without raising the state pension age. Sometimes out of necessity, but more often because of job satisfaction. 

Another solution for demographic shrinkage lies abroad. A recent study by the Scientific Council for Government Policy points out that labor migration from Central and Eastern Europe will decline in the coming years because those countries also face demographic shrinkage. 

Therefore, the report advises intensifying cooperation with regions that will still enjoy a demographic dividend in the coming years: South America, Africa, the Middle East, South and Central Asia. Migration is often thought of – the fact that these countries are not EU members makes it possible to steer more specifically there. But trade and investment agreements, such as those recently concluded with Mercosur and India, may be even more important.  After all, we do not have to produce everything here. Also considering geopolitical uncertainty, it is wise to move with global demography.

This essay by Pieter Hasekamp was also published on Friday, February 20, 2026 on the opinion page of Het Financieele Dagblad.