Demography

Demographic crisis and denatality: the 3 ways to prevent labour shortages

The decrease in the number of children per woman is causing a demographic crisis affecting labour supply. Possible solutions include delaying the retirement age, immigration and artificial intelligence.

by Leonardo Becchetti

18 April 2025

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La crisi demografica e la denatalità: l’impatto sul mercato del lavoro

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Key points

November figures
The Eurozone crisis
The three ways to solve the problem

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Istat data on demography tells us that we have reached an all-time low in the number of children per woman at 1.18. The trend is ongoing throughout the western world. Increasing spending on family policies has failed to reverse it, proving that there are deeper cultural causes at the root.

Historians teach that the terrible bubonic plague epidemic of 1300 had the effect of halving the European population within a century.

The demographic crisis is producing something similar on population and labour supply in our country.

If we look at the age structure of the population we find that there are almost 9 million Italians between the ages of 55 and 64 as opposed to 4 million Italians between the ages of 18 and 24. This means that in the next 5-10 years we have to expect that less than half of the Italians leaving the labour market due to retirement age will be replaced by young new recruits.

This long-term factor is crucial for interpreting the data made public by Istat on a monthly basis. Where one has to look not so much and not only at the monthly variations but at the entire historical series made available by the statistical office.

November 2024 figures

The just-released data for November of last year show yet another drop in unemployment to an all-time low of 5.7 per cent, but this was accompanied by an increase of more than one percentage point in youth unemployment (15 to 24 year olds), which rose to 19.2 per cent from 17.8 per cent in the previous month.

In fact, looking at the historical series over the last twenty years, we realise that monthly variations in youth unemployment not infrequently show upward or downward fluctuations of more than one percentage point.

The most important thing therefore, while waiting to see whether monthly deviations can indicate changes in trend lines over time, is to assess the dynamics with a broader scope.

When we do so, we realise that total unemployment peaked in our country at 13.2% in November 2014, falling progressively month by month to 5.7% after 10 years with the newly released figure of November 2024.

The dynamics of youth unemployment show very similar characteristics with a peak of 43.6 per cent in July 2014 and a steady downward trend despite the increase over the past month just released.

The changes in the percentage of inactive persons are much less pronounced, but they too show a five percentage point decline over 15 years (the peak here is in 2009).

The eurozone crisis

This evidence documents that, on the unemployment front, the most difficult time for our country came as a result of the eurozone crisis which in turn followed the global financial crisis and the public budget adjustment made necessary to cope with that difficult time.

The descent begins with the whatever it takes, the quantitative easing and the timely and effective response of the European Union and our country to the dramatic shock of the pandemic.

However, all this must now be framed in the light of the prolonged effects of the demographic crisis in the coming years, which foreshadows the transition from an era of a shortage of jobs to one of a shortage of workers.

Such a marked reduction in the labour force, which in turn risks producing significant negative consequences on hours worked and thus on growth, cannot be countered in the short term by the necessary policies aimed at stimulating births.

The three ways to solve the problem

In the short term, hoping that those policies will be successful, the only ways forward are three:
1) delaying the retirement age (which is partly envisaged in connection with the increase in life expectancy)
2) encourage the entry of foreign labour and shope in the contribution of artificial intelligence which will certainly be able to increase labour productivity;
3)reduce the labour required to achieve a certain level of economic value creation in produced goods and services.

In all three cases, these are directions that do not find unanimous support in public opinion.

But we would do well to help them understand their role and their importance for the stability of the system.