By Milla Pollak
European populations are undeniably ageing. More than 30% of the European Union’s population is expected to be 65 or older by 2100. This demographic shift is predominantly caused by low fertility rates, increasing life expectancy, and migration flows. Policymakers and economists fear that without the implementation of decisive and appropriate policies, the Eurozone might be facing lower growth projections, reduced public finances and greater strain on public infrastructures. Simultaneously, the widespread introduction of artificial intelligence (AI) across Europe is becoming less of a choice and more of a necessity to remain competitive in the rapidly digitalised economic landscape. Policymakers are hopeful that AI will boost productivity and, in doing so, counter one of Europe’s most pressing challenges. This article will debate the merits and challenges of increasing usage of AI for the elderly, as well as present policy recommendations which may help ensure the successful implementation of artificial intelligence tools. Could AI be the solution to the economic challenges Europe faces? Or could it leave the elderly behind and worsen the problem?
The economic challenges of Europe’s ageing population
The economic impact of Europe’s ageing population will likely include a reduced labour supply, as well as lower productivity and growth. Indeed, the population growth rate in the Eurozone is expected to become negative from 2035, thus reducing the aggregate supply of working age individuals. According to a report by Mario Draghi, former prime minister of Italy and former president of the European Central Bank, on EU competitiveness, Europe might face a labour shortage of 2 million workers by 2040. This trend is amplified by the increase in the median age of the total population, as well as the rising old age dependency ratio, which has escalated from 24% in 2000 to 32.7% in 2020. These trajectories will place a significant burden on pension systems, in addition to adversely affecting tax bases. They could therefore alter the structures of public finances, thus limiting the availability and effectiveness of fiscal policy measures. An ageing population puts pressure on healthcare systems, since more resources need to be allocated towards medical care, long-term care, and support systems for the elderly. This further increases governmental spending, without an equalizer in the form of income taxes and economic activity. Other economic consequences might include reduced innovation and investment, since the elderly tend to be more financially risk averse and favour saving. These fiscal constraints might be aided by limited use of monetary policy, as nominal interest rates might be more frequently constrained at the effective lower bound due to this depression of investment. In sum, productivity and investment could be expected to decrease, leaving fewer taxpayers to fund more public expenditures. This could consequently depress GDP growth and in a digital age characterized by rapid developments, these problems – if not addressed rapidly – might reduce Europe’s competitiveness on the global stage. This brief analysis presents a bleak picture of the future; however, this article argues that this need not be the case if European policymakers implement appropriate and equitable measures across the European Union, namely by utilizing artificial intelligence to its fullest potential.
How can AI help: from improving healthcare to increasing productivity?
The widespread adoption of artificial intelligence might well alleviate the economic pressures caused by an ageing population by improving competitiveness and ensuring continued innovation. AI might be used to augment the abilities of the ageing population, thereby allowing elderly citizens to remain economically active for longer periods of time or improve the efficiency of the existing workforce to account for the deficit. Firstly, AI could plug the labour shortage by automating tasks, especially in the manufacturing and agricultural sectors, as well as enable the elderly to work remotely. It can also achieve this by matching skills to jobs, analysing labour market trends, identifying gaps, offering insights into future needs, upskill workers, provide training opportunities, and more. Artificial intelligence might also significantly assist in providing care for the elderly, alleviating the strain on human resources. AI technology in the form of robotics and diagnostic tools might improve the quality of care and render it more efficient. For example, the project ‘Development of Smart Furniture with Artificial Intelligence and Medical Devices’ by NOVOTA ART in Norway seeks to do exactly that: utilize AI and automation to aid the elderly in their homes, by making smart furniture and implementing medical devices. These infrastructures reduce the need of assistance from other people, for instance, carers and doctors on visits. This technology may not only replace some human labour, but indeed has the potential to improve the quality of care, by ‘collecting measurement data, automatically evaluating trends in your health progress or alarming you when there are indicators of health problems incoming’. Investment in AI-driven technological advancements could therefore play an essential role in maintaining Europe’s economic growth and ability to remain competitive relative to countries such as the United States. When implemented successfully, AI could improve productivity across all age groups, mitigating the economic consequences of Europe’s ageing population.
The challenges of unequal AI implementation
However, the widespread adoption of AI might present certain difficulties, particularly when implemented inequitably. It could have varying impacts on different social groups, both within a nation and across the European Union, with the danger of benefitting certain segments of the population disproportionately, whilst others are left behind. These effects could depend on factors such as economic status, education, gender, access to technology, cultural contexts, and more. Age is arguably amongst the most important factors determining who gains from increased automation and who loses. Economic growth driven by AI advancements might leave those segments of the population no longer active in the labour market behind. Barriers to the digital inclusion of the elderly in AI might include: A lack of inclusion of older people in the development, design, and evaluation of AI; limited digital literacy and understanding of algorithms; biased or incomplete data on older adults; failure to effectively implement adaptive monitoring. In fact, the European Commission’s recent report: ‘2030 Digital Decade’ highlights that 46% of EU citizens, especially amongst older people, lack basic digital competencies, preventing an effective use of digital tools, let alone AI, for daily tasks. This digital divide can lead to lower productivity, reduced rates of innovation, and slower economic growth. Moreover, this problem could be understood as self-perpetuating, since a digital skills gap could prevent those individuals from accessing employment opportunities and essential services, thereby limiting their ability to interact with programs that might teach them how to effectively utilize technology. One can also identify different approaches across EU member states, caused by disparities in resources, political priorities, and technical infrastructure. Countries such as Denmark, the Netherlands, Sweden and Finland might be able to adopt AI more effectively among the elderly compared to states with less well-developed digital infrastructure and fewer financial resources. This may lead to competitive disadvantages, particularly if AI infrastructure becomes too expensive for states with less-developed technological infrastructure to emulate. The widespread adoption of artificial intelligence technologies might thus end up defeating the purpose of boosting productivity and economic growth if only the privileged few in society reap the benefits.
Policy recommendations for long-term equitable growth
The above analysis reveals the need for targeted policies that encourage the responsible integration of AI in industries affected by an ageing population. Governments must evidently take great care to create regulations that do not exacerbate inequality but rather help to level the playing field between the elderly and the typically more digitally literate youth. For example, governments should invest in education and reskilling programs for the older workforce, to provide them with the necessary skills to remain competitive in the current digital world. Close collaboration between governmental bodies, business and tech companies could be required to create AI solutions that specifically address the needs of an ageing population, as well as improve overall efficiency. Specifically, policymakers could provide financial incentives to startups, to counter the downturn of innovation and investment accompanying an older population. The EU could also reduce the stringency of AI regulatory frameworks to prevent a brain drain of talented individuals towards countries like the United States to ultimately ensure that Europe does not fail to maintain a competitive position. More generally, the EU must tackle ageism and dismantle harmful stereotypes that prevent older people from receiving the same opportunities for technological development as younger people. This process necessitates the collection and release of more data on the link between AI and an ageing population, especially with respect to how various societal groups are impacted. In sum, tailored and personalized approaches are needed to integrate all segments of the population into the digital transformation driven by AI. Specialized courses, mentoring programs, personalized training sessions and similar initiatives would be instrumental in ensuring that widespread AI usage benefits all and results in increased economic growth and productivity improvements.
In conclusion, whilst Europe’s ageing population presents significant economic challenges, AI offers innovative growth opportunities that could help to mitigate the negative effects of this demographic shift. It is essential that policymakers and governments take the necessary precautions to ensure an inclusive implementation of these new technologies across all social groups, to maximise the potential of artificial intelligence. AI technology could lead Europe towards a path of sustained economic growth, even in the face of an ageing population, provided it is applied in this strategic and equitable manner.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.
Image: via Unsplash
https://unsplash.com/photos/a-hand-reaching-out-towards-a-robot-hand-f_u6pLLjGuo