“The demographic reversal underway is not yet recognized for what it truly is: one of the major revolutions of our time,” warned economist Maxime Sbaihi during the inaugural edition of the Chamber of Commerce’s autumn economic forum, titled “It’s the economy, stupid!”, held on September 161. And he is right. Like climate change or the digital revolution, population ageing is an irreversible global megatrend. Yet it is often overlooked or underestimated because it behaves like a rising tide: its progression is visible but not alarming—until we realize we are already knee-deep in water.
Today, as Europe and Japan are already submerged, we seem genuinely surprised to discover that human capital is not an inexhaustible resource. The demographic shift has occurred faster than anticipated. The global population has doubled in just fifty years, from 4 billion in 1975 to 8 billion today. This explosive growth once led some radical environmentalists to advocate for fewer births to reduce humanity’s ecological footprint. In reality, the decline in birth rates had already begun long before such calls were made.
This trend is driven by two main factors: economic development in the Global South, which has empowered women and reduced fertility rates (in Sub-Saharan Africa, the fertility rate fell from 6.8 children per woman in 1975 to 4.3 in 20232), and multifaceted societal changes in industrialized nations (housing constraints, career choices, cost of living, etc.). According to various demographic projections, the global population will peak at around 10.3 billion by 20853 before entering a phase of gradual decline. Some scenarios even suggest this peak may occur earlier.
Following the peak oil era, our economies must now prepare for the peak of humanity. This shift is marked by two key features: its intensity varies significantly across continents, and it is universally preceded by rapid ageing.
Japan: On the Brink of Demographic Collapse
Japan exemplifies the extreme case. With a fertility rate of just 1.3 children per woman4 and a median age exceeding 49, the country is ageing at an accelerated pace. Its population, which peaked at 128 million in 2010, has declined to 123 million in 2024 and could fall below 100 million by 20605. Despite imaginative—and sometimes eccentric—pro-natalist campaigns, including Tokyo’s proposal to reduce the workweek to four days to encourage family growth, the demographic pyramid continues to invert. Robots now populate care homes, and Japan lives in a future the rest of the world fears: there are 50 people over 65 for every 100 aged 15 to 64.
Europe: The Shrinking Old Continent
Europe is experiencing a slow demographic hemorrhage. In the 1970s, it envisioned prosperity fueled by the baby boom. In 2025, it finds itself in the midst of a “baby bust,” as Maxime Sbaihi aptly puts it. Retirement homes are overflowing while maternity wards are emptying. Italy is at the forefront: with a fertility rate of around 1.2 children per woman, its population could plummet from 60 million today to 35 million by 21006. Germany, despite efforts to attract immigrants, has dropped below 83 million inhabitants and could lose 13 million by century’s end. France, once praised for its demographic vitality, has now fallen in line: fertility declined to 1.62 children per woman in 2024, far below the 2.1 needed for generational renewal.
The consequences are already tangible. In 2024, the European Union had 9 million fewer working-age individuals7 than in 2010. According to UN median projections, Europe could lose 150 million workers by 2100. Without immigration, the loss could reach 241 million. Imagine the economic upheaval that lies ahead. The ageing process is already accelerating at a remarkable pace. Since 2010, the number of people over 60 has already surpassed those under 20. That being said, an ageing continent means less innovation, less investment, and diminished economic dynamism.
The Luxembourg Paradox
Amid this bleak outlook, Luxembourg appears to be an exception. Raw figures are reassuring: a growing population, a median age of 39.7—among the lowest in Europe—and a positive migration balance. The country has 682,000 inhabitants, with projections exceeding 870,000 by 20508. Yet this is where the “Luxembourg paradox” emerges: despite a relatively favorable demographic trajectory, Luxembourg is expected to bear the highest cost of ageing in the EU. According to the 2024 Ageing Report9, absent reform, pension expenditures could rise from 9.2% of GDP in 2022 to 17.5% in 2070—the highest ratio in the EU, ahead of Spain (expected at 16.7% of GDP in 2070). When factoring in healthcare, dependency costs, and subtracting savings from declining education expenditures, demographic transition could increase Luxembourg’s social spending by 10.7 GDP points, compared to an EU average of 1.2 points. This is largely due to a generous pension system and early retirement practices.
This burden could grow further if Luxembourg’s demographic momentum slows—a trend already underway. The natural population growth is minimal, with a fertility rate of just 1.25 children per woman, far below the replacement threshold. The truth is that without immigration, the country would already be stagnating. Each year, 15,000 to 25,000 new residents arrive, offsetting around 15,000 departures, resulting in a net migration of 7,600 to 14,200 annually over the past decade10. Additionally, 220,000 cross-border workers commute daily from neighboring regions. In short, Luxembourg does not renew itself—it thrives on its ability to attract.
Historically, Luxembourg’s success was built on a delicate balance. Cross-border employment was enabled by abundant labor in neighboring regions weakened by industrial decline. Italian and Portuguese migration waves found their place in a society where integration often meant mutual respect rather than assimilation. This model worked as long as everyone benefited from growth-driven redistribution. Today, however, the foundations are shaking. Economic growth has stalled, housing costs deter foreign talent, the housing shortage threatens social cohesion, and transport infrastructure is saturated despite significant investments. Tomorrow, even healthcare workers from the Greater Region—already essential for an ageing population—may become scarce, as their home countries face similar shortages.
Time for Strategic Choices
Demographic transition confronts Luxembourg with a stark truth: there is no miracle cure. Three theoretical paths exist: boosting birth rates, relying on immigration, or investing in automation. The first seems unrealistic. Luxembourg already allocates 3.2% of its GDP11 to family benefits, compared to an OECD average of 2.3%. While this support has helped families balance work and life, it has not reversed the underlying trend of declining births. The second path—immigration—is necessary but fragile. It requires ambitious integration policies and societal acceptance, both of which are waning across Europe. The third—automation and digitalization—is essential for productivity but cannot meet deeply human needs, such as elderly care.
Luxembourg’s response must involve a nuanced combination of these three levers. Priority must be given to enhancing attractiveness and improving productivity. This entails massive investment in housing and transport infrastructure, simplifying administrative frameworks that hinder private initiatives, and activating new mechanisms to stimulate private investment. Regardless of the outcomes of these policies, Luxembourg must adapt to its new demographic reality by reforming intergenerational solidarity mechanisms—pensions, healthcare, and dependency systems. These were simply not designed for an economy where the number of contributors stagnates while beneficiaries surge. There will be no second chance: either we reform in time, or we watch our solidarities dissolve like a sandcastle swept away by the demographic tide.
[1] His speech is available on video here : https://www.youtube.com/watch?v=ER0p1mvPP2I
[2] Source : World Bank
[3] Source : 2024 Revision of World Population Prospects, UN.
[4] Source : World Bank
[5] Source : 2024 Revision of World Population Prospects, UN.
[6] Source : 2024 Revision of World Population Prospects, UN.
[7] 15-64 years old
[8] Europop2023 projection
[10] Source : STATEC
[11] Source : OECD, 2021