Portugal faces ‘perfect demographic storm’

A clothing maker in central Portugal has started paying its workers a bonus for having babies. The “maternity incentive” of €505, equal to the monthly minimum wage that most of the company’s 330 employees earn, is a modest local response to what Pedro Passos Coelho, the prime minister, describes as the country’s biggest problem: its rapidly declining population.

“No one is going to have a baby for the sake of this perk,” says Ângela Castanheira, a director of the Goucam garment group based near the central town of Viseu. “But it’s an encouraging gesture that we hope will spur other companies and the government to get to grips with an issue that is threatening all our futures.”

Portugal is the EU country hit hardest by a Europe-wide demographic problem as falling fertility rates and ageing populations threaten economic growth and the provision of pension, public health and elderly care services.

The looming crisis, described in one newspaper editorial as “a perfect demographic storm”, results from a combination of Portugal’s plummeting birth rate, a deep recession and a wave of emigration that is fast turning the country into a society of one-child families.

“Young people are delaying starting a family because it takes so much longer these days to find a steady job — if you can find one at all — so that you can move out of your parents’ home and settle down,” said José Loff, a 37-year-old statistics consultant with a two-year-old son.

“People stay on at university to get an MA or a PhD to better their chances and may go through several precarious jobs before they find something stable,” he said. “Suddenly they find they’ll be in their forties by the time they have a second or third child.”

Portugal’s fertility rate — the average number of children in the population for every woman of child-bearing age — has been falling, from three in 1970 to 1.21 in 2013. This is the lowest level in Europe, with only South Korea having a lower rate among the 34 mostly wealthy nations in the OECD.

Over the past five years, a recession exacerbated by a painful economic adjustment programme , applied by Lisbon in return for a €78bn bailout from the EU and the International Monetary Fund, has aggravated the demographic crisis. With a third of under-25s out of work, hundreds of thousands of mostly young people have emigrated in search of jobs.

The high rate of youth employment and a precarious job market are critical factors in deterring young couples from having children

Maria Filomena Mendes, Portuguese Demographic Association

“The high rate of youth employment and a precarious job market are critical factors in deterring young couples from having children,” says Maria Filomena Mendes, a sociology professor and president of the Portuguese Demographic Association. “At the same time, many young people are emigrating at an age when they might otherwise have been starting families in Portugal.”

Between 2010 and 2014, Portugal lost 198,000 inhabitants, close to 2 per cent of its population, as the number of deaths exceeded births, emigration rose to levels unseen since the 1960s and immigration slowed to a trickle. As the OECD put it in a recent report , “a further fertility dip is evident in Portugal since the onset of the financial crisis”.

If nothing changes, the worst-case projection by the National Statistics Institute (INE) sees the population of Portugal dropping from 10.5m to 6.3m by 2060, while the number of over-65s for every 100 under-15s — the so-called ageing index — would soar from 131 to 464, the highest in Europe.

Even in INE’s more optimistic central forecast, Portugal is expected to lose 2m inhabitants over the next 45 years with the ageing index rising to 307. In little more than a generation, estimates the EU’s Eurostat agency, Portugal will be the EU country with the smallest proportion of children, with the percentage of under-15s falling from 14.6 per cent of the population in 2014 to 11.5 per cent in 2050.

The impact of a shrinking yet rapidly ageing population is already visible in hundreds of small villages inhabited by diminishing numbers of elderly residents. Village schools have been closed as state services are cut back and centralised. Working-age adults have emigrated or left for the big towns on the Atlantic coast. Like the Goucam clothing group, some depleted municipalities have taken to offering cash inducements of up to €1,000 for babies born to local mothers.

“Without a new influx of people, the interior of Portugal will be practically empty in 25 years,” according to a recent study of rural desertification.

Mr Coelho sees the falling birth rate as the most serious challenge facing Portugal and has called on the European Commission to make the issue an EU-wide priority for the next five years. He wants to “remove the barriers” that deter couples from having children.

Efforts to reach a political consensus on measures to address the crisis ahead of Portugal’s general election in October have failed.

One measure proposed by the ruling centre-right coalition, but rejected by the opposition Socialists, is to allow public sector employees to work four-hour days for 60 per cent of a full-time wage. The idea is to encourage couples who would like to be parents by assuring them of more time off to look after young children.

The stakes, according to a recent report commissioned by the prime minister, could hardly be higher.

It concluded that having fewer children threatens Portugal with “definitive impoverishment” and would leave the country “unsustainable in terms of economic growth, social security and the welfare state”.