Thomas White Global Investing
Italy
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May 15, 2009
A Postcard from Europe
Italy: The Gray Areas of an Aging Economy and Immigration

Italy has the world's second oldest population

24 out of the 25 countries in the world with the eldest populations are in Europe, according to a joint report by the European Commission and AARP, a U.S. lobby for the elderly. Italy tops the list with 26% of its population older than 60 as of 2005, which is just 1% less than Japan.

Television advertisements generally show the power of the young to buy the latest luxury car or gadget. But in many places in Europe, the ‘silver economy’, a term referring to services and products targeted at older consumers, is changing consumption patterns. This is more true than anywhere else in Italy, which has the oldest population in the European Union and the second oldest in the world next to Japan. In 1950, Italy had five adult children for every elderly parent, but today that number has considerably shrunk to 1.5.

According to Nandan Nilekani co-chairman of Infosys, the Indian outsourcing company, Europe needs to either embrace immigration or consider outsourcing in order to mitigate the challenges of aging. With one in five Italians being over the age of 65, many are outsourcing home care for the elderly to immigrants. More Italians are now depending on immigrants for this purpose, with family networks shrinking and more women opting for careers, which is also affecting birthrate.

Low birthrate coupled with longer life expectancies has put Italy into a senescent quagmire. The northwestern region of Liguria is considered to have the highest ratio of elderly to youth in the world while Genoa, its capital, has had the quickest population decline rate among all European cities. Gone are the days of the stereotypical large Italian family, and today Italy has one of the lowest birthrates in the world as women forego having children altogether or have one child, citing economic reasons. In 2006, the average Italian woman had 1.35 children, according to Istat, the Italian statistics bureau.

The aging phenomenon is not limited to Italy. Known as the ‘graying of Europe,’ it is widespread and has affected Germany and Russia among other European countries. Europe is facing an aging crunch, which the European Commission forecasts will hit hardest between 2015 and 2035. While Britain is expected to fare relatively well, Germany’s working population is foreseen to shrivel by 29% to just 39 million.

This is where migrants come into the picture. Once an impoverished country that sent its young abroad to find work, Italy now has to import workers to stabilize its economy. Today, Italy has an estimated four to five million immigrants, which is about 7% of the population and they account for 9.2% of the Italian GDP. Most of Italy’s immigrants come from Romania, Albania, Egypt, Morocco and even Bangladesh. Last year alone, around 36,000 African immigrants touched the shores of Italy by boat. Not all of them are caregivers to the elderly. Nearly 5% of the legal immigrants own businesses and according to one study an estimated 20,000 new immigrant-owned businesses are created every year. Immigrant-owned firms provide employment for about 500,000 people, which is significant at a time when Italy’s unemployment rate is expected to touch 8.2% this year up from 6.7% in 2008. Between 2003 and 2008, Romanian-owned businesses increased by 61.2%; followed by firms owned by Albanians, which went up by 48.5%.

In recessionary times like ours, immigrants can often provide the necessary resurgence that an economy needs. Immigrants have certainly changed the face of Europe, not to mention other areas across the globe, and Italy stands as one of the stronger testaments. Moreover, with Italy having a rapidly increasing geriatric population, immigrants might plug some of it’s economic potholes. But issues with their integration, both political and economic, have escalated recently, and it remains to be seen if these migrants are a part of the solution or the beginning of a larger growing problem.

 

Image Credit: minicooper 93402 under a Creative Commons License

 

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