Europe faces an aging population and a shrinking workforce. AI can fill the gap

Good morning.

There are all sorts of AI races underway, but Svenja Gudell, chief economist at jobs site Indeed is focused on a less flashy one: Whether AI can catch up to aging populations.

It’s a fresh way to look at AI and one that’s especially applicable to Europe. The median age in Europe is set to increase to 48 by 2050, almost five years older than today and a signal that the region will have more elderly and fewer working age people than ever.

To see what the future might hold, European countries need only look to Japan, the country with the oldest population (bar the microstate of Monaco); a full 30% of people there now are age 65 or older. Two European countries, Italy and Finland, have the second and third oldest populations. Germany is not far behind, with its share of 65+ population expected to reach Japan's levels by 2050.

But unlike its European peers, Japan has been an early adopter of AI. There, [the] use of AI is seen as unequivocally good, Deko Idekoba, the CEO of Recruit Holdings (the Japanese parent company of Indeed and Glassdoor), told me. “In Japan, 100% of people agree we need more AI,” he said. “There’s no argument. We just need it.”

The nation is running out of workers to fill vacancies in its industrial, service, and care economies. “The real problem is having enough people fill in jobs,” Gudell said. “Without immigrants, almost no developed country is going to fill their demand for jobs.” Japanese restaurants are already routinely deploying server robots, for example, and AI-powered robots are increasingly common in elder care.

Germany’s government plans to robotize and digitize its workforce to address an aging population. Italy, by contrast, has emphasized policies that counter the threat of AI stealing jobs rather than embracing technology as an opportunity to address declining demographics. At one point, it even banned ChatGPT.  

For Europe to adopt Japan's outlook in earnest, European governments and companies may need to change tack. So far, most AI attention has gone to companies trying to create a leading generative AI model that can compete with OpenAI’s ChatGPT, Alphabet’s Bard, or other American Big Tech models. The emphasis on these companies became clear in the last-minute lobbying on the EU AI Act, which EU governments adopted late last week.

“France and Germany argued hard to protect their own AI champions, specifically Paris-based startup Mistral AI (founded by former Meta and Google scientists) and Aleph Alpha in Germany,” my colleague Vivienne Walt wrote in a feature for Fortune’s February/March issue. Mistral, barely one year old, was valued at almost €2 billion last December based on the promise of replicating OpenAI’s success.

But with U.S. companies already far ahead in building large language models, and no European company having gotten anywhere near the Silicon Valley giants in the past few decades, the more viable AI option for European companies may be hiding in plain sight: develop applications to augment the abilities of an aging population or master the skills currently carried out by a shrinking workforce.

More news below.

Peter Vanham
peter.vanham@fortune.com
@petervanham

This story was originally featured on Fortune.com