Portugal's Ageing Population Problem

More and more Western countries have an ageing problem. Increasing ratio of retired to working people. Which translates into rising pension and healthcare bills (to be paid by the state). Addressing it isn’t easy. Attempts to persuade people to have more babies haven’t worked. Increasing taxes to pay those pension/ healthcare bills only causes younger people to leave the country.

 

Vasco Queiros talks of how Portugal, the second oldest country in Europe, is faring. Half the population is dependent on the state in one or the other way:

“35% are retirees, 10% government workers, and another 5% receive either unemployment benefits or integration benefits.”

 

Policies are further skewed by the fact that senior citizens are reliable voters, while young people aren’t. And seniors vote to ensure pension and healthcare needs are taken care of. Put amusingly, seniors go to the ballot box while young people vote with their feet, i.e., leave the country.

 

To summarize, an ageing population translates to higher taxes, which then leads to youth drain and with it, brain drain.

 

How has Portugal tried to address this problem?

 

Tourism, thanks to good weather, is one of the few bright spots in Portugal. The country also tried to attract young immigrants via its “golden visa” policy. If you buy property or create jobs in Portugal, they give you a residency permit which also allows you to go anywhere in the EU/Schengen region. It didn’t work out the way they hoped. Of the 10,000 golden visas, only 2 were issued for job creation – the rest went to folks who bought property in Portugal. Half of them went to Chinese citizens, who buy property, then go to other parts of the EU and just rent out their property. This property buying spree increased real estate prices so much that Lisbon real estate is even more expensive today then Berlin!

 

Another measure was to give tax exemptions and reduced taxation for high-skill expats if they returned to Portugal. The hope was that such highly skilled people would attract companies to Portugal and set off an economic boom. Sadly, 90% of the expats who availed this scheme were retired folks, not still-working folks.

 

To ease immigration, a job contract was deemed enough to get a permit to live in Portugal. It has led to a “blooming business of fake contracts”. The fact that different agencies deal with different aspects – contract verification, immigration, issuing permits – has created chaos and illegals have slipped through the cracks.

 

Adding too many outsiders too quickly creates other problems. Even before these measures, 10% of the population were immigrants, mostly from Brazil and other former colonies. With young people moving out, a lot of illegal immigrants come to work on the farms – they don’t get officially counted. The number of immigrants has exploded too quickly, and now the old (Brazilian) immigrants complain about the new immigrants!

 

This led me to wonder whether ageing countries with no track record of being immigrant friendly can solve the problem at all. Portugal was never hostile to foreigners, just indifferent, and yet, look at how it has fared. What chance do hostile to foreigners or “superior” culture mindset countries like Germany or Japan stand? Would people be reluctant to immigrate to those countries, and would the backlash from within turn violent? Does that then leave only the UK and US as rich countries with a chance of addressing ageing via immigrants, because they have a long track record of accepting immigrants?