POLITICS & INSTITUTIONS - ECONOMY

Luxembourg population explosion



Is it sustainable for Luxembourg's resident population to rise 50% by 2035? Pexels

Is it sustainable for Luxembourg's resident population to rise 50% by 2035? Pexels

We could be about to see a 23% increase in the resident population in the next ten years, and a near 50% rise by 2035. Outlandish, unbelievable figures? Maybe, but then the last major demographic prediction was broadly derided as being alarmist, and it underestimated the subsequent population boom.

A round 14,500 more people were resident at the start of this year than on 1 January 2016; this is nearly double the average annual increase seen during the first decade of this millennium. The vast majority of this rise was due to immigration, rather than births outnumbering deaths.

This translates into an impressive longer term trend highlighted in a recent official report from Statec, the national statistics office. Even if we take the bureau’s most conservative estimate, the number of our fellow residents will increase by about 133,000 (+23%) in the ten years to 2025, and a quarter of a million (+44%) by 2035.

In 2005, many people were sceptical of Statec’s claim that Luxembourg’s population would reach 725,000 by 2055. We’re now set to hit that mark in less than ten years’ time. That is the conservative prediction. In the high growth scenario, the population is on course to nearly double by 2060. This is based on projecting current trends, so much could change. But it would be unwise to dismiss this estimate out of hand.

So far, the influx has been manageable, and the result is a more economically and socially vibrant country that continues to welcome new arrivals. However, is this sustainable?

For housing prices to remain stable, around 5,000 new homes are needed each year. Only around half that number are being built, and increasing numbers of modest houses are starting to cost €1m. Then there are the schools, hospitals, transport links, shops, offices, bars, football pitches and so on that need to be built.

Hard to change course

Most voters appear content that Luxembourg is so attractive. But could the government try to reign in economic growth and thus reduce the rate of immigration? Maybe, but new arrivals are needed to keep the generous pension and health systems sustainable.

Currently, 14% of the population are over 65, and under Statec’s projection, this is set to rise to about 18% by 2030 and 25% by 2060. If immigration of young people fell, the share of old people in the population would rise and current levels of social welfare spending would no longer be affordable.

When he was still prime minister, Jean-Claude Juncker raised the issue of high population growth, as he undertook mild reform of the pension system in the late 1990s. His party was heavily punished at the subsequent election. Little wonder that politicians have shied away from anything more than mild tinkering with the system since then.

“In Luxembourg, demographics are largely governed by salaries,” noted Tom Haas, part of the economic modelling and forecasting team at Statec. “Businesses create the jobs and people follow, attracted by the relatively high net salaries on offer in Luxembourg,” he noted. Here too, it’s unlikely that political parties could advocate reducing salaries to control immigration that the vast majority of voters welcome.

Daytime population

The report also looked at cross-border commuters. Currently around 181,000 people cross the French, Belgian and German borders to come to work here, and in just 13 years’ time, this figure could increase by half to 270,000.

These “frontaliers” would make up the lion’s share of the increase in the national workforce, which is due to rise by over one-third to 570,000 by 2030.