But as health care and pension expenditures rise, the average savings rates of the aging population will fall. This will affect capital formation, change the nature of the real estate market, and shift retail preferences for commodities ranging from food to cars. Despite the tightening labor market, many younger people may find their choice of jobs limited as some companies prefer to relocate their principal operations to areas with plentiful and cheap labor. Most new companies are started by individuals 25–44 years of age, and the shrinking share of this cohort will also mean less entrepreneurship and reduced innovation.
In addition to these consequences, which aging Europe will share with low fertility societies in other parts of the world, the continent faces a specific problem whose resolution may crucially determine its economic and political future. As Demeny (2003) has noted, the process of moving toward a smaller and older population could be contemplated with equanimity only if Europe were an island, but instead “it has neighbors that follow their own peculiar demographic logic” (4).
This neighborhood—Demeny calls it the European Union’s southern hinterland— includes 29 states (counting Palestine and Western Sahara as separate entities) between India’s western border and the Atlantic Ocean, all exclusively or predominantly Muslim.
By 2050, EU-25 is projected to have 449 million people (after losing some 10 million from the present level and an assumed net immigration of more than 35 million, 2005–2050), half of them older than 50 years. The population of its southern hinterland is projected to reach about 1.25 billion by 2050. Immigration to the continent from this hinterland is already the greatest in more than 1,000 years.
During the previous period of mass incursions, intruders such as Goths, Huns, Vikings, Bulgars, and Magyars destroyed the antique order and reshaped Europe’s population. So far, the modern migration has been notable not for its absolute magnitude but for five special characteristics.
First, as is true for immigrants in general, the Muslim migrants are much younger than the recipient populations. Second, the migrants’ birth rate is appreciably (approximately three times) higher than the continent’s mean. Third, the immigrants are disproportionately concentrated in segregated neighborhoods in large cities: Rotterdam is nearly 50% Muslim; London’s Muslim population has surpassed 1 million, and Berlin has nearly 250,000 Muslims. Fourth, significant shares of these immigrants show little or no sign of second-generation assimilation into their host societies. A tragically emblematic illustration of this reality is that three of the four suicide bombers responsible for the July 7, 2005, attacks in London’s underground were British-born Pakistani Muslims. Fifth, whereas Christianity has become irrelevant to most Europeans, Islam is very relevant to millions of these immigrants.
Europe’s traditional ostracism has undoubtedly contributed to the lack of assimilation, but more important has been the active resistance by many of the Muslim immigrants—whose demands for transferring their norms to host countries range from segregated schooling and veiling of women to the recognition of sharıa law.
What would happen if this influx of largely Muslim immigrants were to increase to a level that would prevent declines in Europe’s working-age population? In many European countries, including Germany and Italy, these new Muslim immigrants and their descendants would then make up more than one-third of the total population by 2050 (United Nations 2000).
