French pensioners have it pretty good. The minimum age at which a French worker can obtain their state pension is 62, with many retiring as early as 60. French retirees receive some of the most generous pension payments in all of Europe, now averaging around 1,500 euros a month (about $1,750). The result is that French seniors have higher average incomes than working-age people.

There’s just one problem: This is completely unsustainable. The combination of generous pensions and an aging population means France is sitting on a budgetary time bomb, and the public has repeatedly rejected any attempt to defuse it.

In 2023, President Emmanuel Macron pushed ahead with plans to increase the state pension age by a mere two years, to 64. This would still be enormously generous by international standards. Yet mass protests and strikes followed. Protesters in Paris set fire to bins and tires, hurling rocks at police, who responded with tear gas and water cannons. After rioters briefly blocked the train tracks at Gare de Lyon station, Clément Saild, a passenger, told NPR, “Everybody is getting madder.”

Macron’s proposal resulted not only in mass protests but in multiple no-confidence votes in Parliament. Former French Prime Minister Michel Barnier’s austerity proposals, including a six-month delay to pension increases, resulted in the collapse of his government in 2024, the first of two governments to fall within a year. In 2025, proposals to cut budgets resulted in the resignation of Macron’s sixth prime minister, François Bayrou. Later that year, the government suspended the age increase until after the 2027 presidential election.

Political turmoil has dashed hopes of making even a small dent in reducing the country’s large and persistent budget deficit, which in 2024 hit 5.8 percent of gross domestic product (GDP). That’s the country’s largest deficit since World War II (apart from 2020) and it’s well above the eurozone’s 3 percent limit. Weary of this risk, investors have increased French borrowing costs to some of the highest levels in the entire eurozone, adding costs to the system.

The core problem is the unfunded pension system. Today’s French pensioners came of age in an era when there were fewer old people, and life expectancies were shorter. The country’s seniors have paid far less into the system than they now receive, creating a massive budget gap. “The deficit of the pension system is really worrying,” says Pierre Garello, professor of economics at Aix-Marseille University. “It’s probably worse than is stated now.”

The rest of Europe may not be violently rioting, but this same pattern is occurring across the continent. A combination of aging populations, collapsing birth rates, and shrinking labor markets has produced an economic crisis so serious that it threatens the viability of the economic system.

With fertility falling, there’s only one way to meet the economy’s demographic needs: immigration. Yet the European public is increasingly hostile to young workers from abroad, and politicians are acceding to their demands. This, in turn, is making the underlying problem worse.

“Reducing immigration while you face an old-age demographic challenge is like pouring salt into a wound,” says Alex Nowrasteh, senior vice president for policy at the Cato Institute. With fewer and fewer workers paying more and more in taxes to fund increasingly expensive public benefits, Europe is in a fiscal doom loop—and it’s not clear how it will find a way out.

Europe’s fiscal problems are rooted in the interaction between fertility rates and welfare spending. Fundamentally, it’s about how many people there are, how much they contribute to the economy, and how much they draw from the state.

All across Europe, fertility rates have fallen well below what’s called the replacement rate—the number needed to maintain the population—of around 2.1 children per woman. Roughly half as many children were born in the E.U. in 2024 as six decades ago, according to data from the European Union: 6.8 million in 1964, down to 3.55 million in 2024. The E.U.’s total fertility rate is now about 1.34 children per woman.

At the same time, life expectancy has increased from 77.6 years in 2002 to 81.4 years in 2023. Since the 1960s, life expectancy has, on average, risen by more than two years per decade, shifting the balance of old and young. In 2004, there were just under four working-age adults for every one person over 65. Twenty years later, there were fewer than three working-age adults per elderly person.

This is a continent-wide problem. In Spain, deaths have outstripped births every year in the last decade. In the U.K., the number of people over the age of 65 will exceed the number of people under the age of 18 for the first time in the country’s history. By 2072, there are projected to be just 1.9 potential workers for each pensioner in Britain, down from 4.5 in 1972. Italy registered 281,000 more deaths than births in 2024, and the population shrank by 37,000. Since 2014, the Italian population has fallen by almost 1.9 million, more than the entire population of its second-largest city, Milan.

This means that a shrinking base of workers must prop up a growing population of retirees.

In the U.K., the state pension as a share of the economy is now 35 percent higher than it was 50 years ago, according to the Office for Budget Responsibility’s Fiscal Risks and Sustainability report, and is set to be 50 percent higher than it is today by the 2070s. “This projected rise in spending on the state pension is the second-largest increase in noninterest spending after health,” said the report. “If current policy settings were to be maintained over the long run, debt would be on an unsustainable path.”

“Fertility rates impact everything,” says Clara Piano, an economics professor at the University of Mississippi. “People assumed that fertility would just naturally be high.”

These demographic shifts give the elderly more power—and make pension reform politically challenging.

Electoral incentives are skewed in their favor, partly because there are more of them, and partly because they are more politically engaged. In the 2024 U.K. general election, the majority of voters in the majority of constituencies were over the age of 55 for the first time in Britain. In the 2022 French elections, 76 percent of people aged 50–59 voted, 16 percentage points higher than those aged 18–24.

“We have a really unequal distribution of voters,” says Piano. “And politicians know this, and so they’re going to be catering to the preferences of older populations more than they will to those who are under 18.”

Across the euro area, age-related spending already amounts to roughly a quarter of GDP, with pensions alone accounting for around 11 percent. In France, where pension spending exceeds 13 percent of GDP, rising deficits have pushed public debt above 110 percent of GDP. “When you think about it that way,” says Piano, “it’s not surprising that you end up with a state that redistributes a lot of wealth from young, working-age people to the elderly.”

The result is a dangerous feedback loop. Higher debt leads to higher interest payments, which in turn require more borrowing. In the U.K., the government spends 8.2 percent of total expenditures on debt interest alone—more than spending on defense (2.9 percent) or education (6.9 percent). If policies don’t change, Britain’s aging society will push borrowing to above 20 percent and debt above 270 percent of GDP by the early 2070s, according to the U.K. Office for Budget Responsibility.

In a speech at the House of the Euro in Brussels, Alfred Kammer, the director of the International Monetary Fund’s European Department, laid out the consequences. “Our simulations show that under current policies, public debt would be on a steeply increasing path over the next 15 years, with average debt ratios across European countries reaching 130 percent by 2040.”

Without radical reform, European governments will continue to be trapped in a cycle of shrinking labor markets, rising welfare costs, and mounting public debt. As Kammer said, “Doing nothing is not an option!”

Europe desperately needs more working-age people. If they aren’t having more European babies who grow into taxpaying workers, there’s only one other place to get them: immigration. 

Across Europe, there’s significant support for immigration restrictions. According to a YouGov survey conducted in France, Germany, Italy, Spain, Denmark, Poland, and the U.K., support for reducing immigration and removing large numbers of migrants is high.

Approximately half of respondents in each country surveyed (45 percent to 53 percent) support a scenario where no new migrants are permitted, and large numbers of recent migrants are required to leave. From Italian Prime Minister Giorgia Meloni to longtime Hungarian leader Viktor Orbán, political leaders who promise to deliver on immigration restrictionism are usually popular. Nigel Farage’s Reform U.K. party is consistently top of the polls in Britain, as is Marine Le Pen’s National Rally in France.

It’s not hard to understand the resistance to immigration. Unlike in the United States—where immigrants, both legal and illegal, have paid more in taxes than they received in benefits from federal, state, and local governments every year since data on this begins in 1994—Europe has designed its welfare state to make immigration costly to the public.

Europe’s overregulated labor markets, generous welfare states, and high taxes create unfavorable conditions for immigrants, leaving many reliant on government welfare. In the United Kingdom, more than 1 million foreign nationals claim Universal Credit, a monthly welfare payment for low-income households. Once an immigrant obtains Indefinite Leave to Remain—effectively a form of legal permanent resident status—they are entitled to welfare, social housing, and free health care. Every year, thousands of migrants leave France to cross the English Channel; the annual cost to taxpayers to keep asylum seekers in hotels and look after them is estimated to be around 4.7 billion pounds (about $6.33 billion).

Yet the fiscal case for immigration is far stronger than its critics suggest. On average, migrants contributed approximately 1,500 euros (about $1,750) more per capita each year than natives, according to a paper reviewing data from 2014–2018 published in International Tax and Public Finance. The primary factor determining whether a person is a net contributor is their age. Migrants tend to be younger, and therefore expand the tax base and delay the fiscal impact of demographic decline. With demographic changes mounting pressure on public finances, and little political incentive to reform these systems, restricting immigration is a terrible idea.

“We absolutely need reforms to welfare benefits and tax policy in Europe,” says Nowrasteh. “However, expanding legal immigration can help reduce the severity of those cuts and changes while also providing additional inducement to economic growth.”

In practice, because European countries have signed binding international frameworks, such as the European Convention on Human Rights (ECHR) and the 1951 Refugee Convention, restricting asylum seekers is far harder, and limiting legal migration is far easier. European governments cannot easily turn away asylum claims without breaching international commitments, but they can cut visas and legal work routes at will. 

Europe has many problems. The continent faces some of the highest energy costs in the world, an enormous regulatory burden, high taxes, and consequently, sluggish growth. There are fewer workers, more pensioners, and a political system increasingly shaped by those who benefit the most from the status quo. European governments have responded to the impending fiscal crisis by passing on the burden to future generations of taxpayers.

But reality cannot be deferred forever. You cannot sustain a growing welfare state when there are ever fewer people left to pay for it. You cannot grow an economy while shrinking its workforce. And you cannot solve a demographic crisis by turning away the very people who can help alleviate it.

Serious reform of benefits systems will be necessary to resolve long-term fiscal problems. But Europe desperately needs more working-age people. In a continent where about three-quarters of immigrants are of working age, they represent an immediate way to expand the tax base and slow the pace of fiscal doom.

France’s destructive protests are a warning. The prospect of a vibrant and prosperous European future is colliding with the realities of an older, shrinking, and poorer one. Shutting the door to immigrants, and kicking out those who already reside in Europe, will only exacerbate the continent’s fiscal crisis.

The post Europe Has Too Few Workers and Too Many Retirees. Cutting Immigration Will Make the Math Worse. appeared first on Reason.com.