Demographic Time Bomb Threatens Greek Labor Market, Insurance, and Growth

A ticking time bomb lies at the foundation of Greece’s economy, with comparative demographic data released yesterday (20.05.2025) by the Commission painting a grim picture. Greece ranks among the ‘oldest’ countries in the EU, and no government effort has managed to reverse the downward trend in demographic figures since the debt crisis. Naturally, following the labor market, which is gradually losing its dynamism, are the insurance system and other sectors of our economy. During the decade of economic crisis (2011–2021), Greece’s population decreased by approximately 3%, mainly due to negative natural balance (more deaths than births) and mass migration, especially among young and skilled workers—the so-called brain drain. Despite the end of the debt crisis, this trend continues, with Greece recording one of the highest population declines in the EU in 2023 at 0.46% and again in 2024 with a drop of 0.13%. Among EU countries, Greece is near the top of the list for the highest average age as of January 1, 2024. Italy leads with 48.7 years, followed by Bulgaria and Portugal (both at 47.1 years), and Greece at 46.9 years. The future looks even bleaker as fewer children are being born in Greek society, either because of the economic burden of raising them or because parents are migrating abroad. In 2004, the percentage of children under 15 in Greece was about 15.3% of the population. By 2010, this figure had gradually declined to around 14.6%. From 2010 to 2018, it remained relatively stable between 14.6% and 14.4%. However, from 2019 and especially after 2020, there was a dramatic decline: in 2021, it fell below 14%; in 2022, below 13.8%; and by 2024, it reached nearly 13.1%, the lowest rate in two decades. The impact on Greece’s economy is incalculable. Studies by Eurostat and IOBE predict a 50% reduction in Greece’s workforce by 2100, affecting productivity and economic growth. The decrease in individuals aged 20-64 impacts labor supply and economic dynamism, particularly in sectors reliant on human capital (e.g., healthcare, education, agriculture). Simultaneously, population aging increases spending on pensions and healthcare, straining the national budget. For the insurance system, the worker-to-pensioner ratio has steadily declined from 1.9:1 in 2009 to around 1.3:1 today, jeopardizing sustainability. Pension expenditure in Greece is among the highest in the EU, exceeding 16% of GDP and rising due to aging. The reduction in the active working population also decreases tax revenues, limiting state investment and social benefits. The age group 20-40, key savers and investors, sees their decline limiting domestic demand for housing loans, business establishment, private consumption, and risk-taking essential for investments. Overall, demographics pose a hurdle to Greek GDP growth, impacting the three critical factors: labor, capital, and productivity. According to the IMF, Greece is among countries expecting negative or zero potential growth rates after 2040 due to demographic trends. The Greek government has announced a National Demographic Action Plan with a €20 billion budget through 2035, including tax incentives and family support measures. However, these appear insufficient to attract talent back. Salaries in Greece, especially in the private sector, lag significantly compared to those abroad for equivalent expertise. For instance, a Greek scientist or engineer earning €60,000–80,000 annually abroad is called back to Athens with a salary of €1,200–1,800 monthly. The Greek market lacks sufficient positions for highly skilled professionals, as 99% of businesses are SMEs with limited technological advancement or export orientation. Additionally, despite efforts to reduce bureaucratic procedures and create favorable tax frameworks for ‘tax residents abroad,’ the overall tax and insurance burden remains prohibitive, as wages do not correspond to tax breaks and social benefits comparable to Western Europe.