Advanced economies will struggle to maintain growth and keep inflation under control in the coming decades without a greater influx of foreign workers, central bankers have warned, according to reporting by the Financial Times.
Speaking at the U.S. Federal Reserve’s annual Jackson Hole symposium in Wyoming, leaders of the Bank of Japan, European Central Bank, and Bank of England highlighted how ageing populations and declining birth rates are already constraining labour markets.
Kazuo Ueda, governor of the Bank of Japan, said his country’s labour shortages had become one of its “most pressing” economic issues. Foreign workers currently make up just 3% of Japan’s workforce, yet they have accounted for half of recent labour force growth. “Further increases will surely require a broader discussion,” Ueda told delegates.
ECB president Christine Lagarde stressed that immigration would play a “crucial role” in offsetting Europe’s demographic decline. Without an influx of foreign labour, she said, the eurozone would lose 3.4 million working-age people by 2040. She noted that foreign workers accounted for only 9% of the euro area’s workforce in 2022, but were responsible for half of its growth over the past three years. “Without this contribution, labour market conditions could be tighter and output lower,” Lagarde said.
Andrew Bailey, governor of the Bank of England, echoed these concerns, warning that the demographic shift posed an “acute” challenge for the UK. By 2040, 40% of the population will be above the traditional working age of 16–64, he said. The UK also faces declining participation rates, driven by rising long-term illness and fewer young people entering the workforce. Mental health issues were the most common reason for inactivity, which Bailey described as “a very concerning development.”
Economists fear that shrinking workforces in wealthy nations will not only lower potential output but also fuel inflationary pressures, as widespread labour shortages give workers more leverage to demand higher wages.
While immigration has become politically contentious across much of the developed world, central bankers underscored that foreign workers are already crucial in sustaining labour supply. “The challenge,” Bailey noted, “is not just about unemployment, but about inactivity itself.”
As the Financial Times reported, the warning from Jackson Hole reflects a growing consensus among policymakers: without a steady inflow of foreign labour, the economic weight of ageing societies will become increasingly difficult to bear.
