Demographic Transition and Human Capital Outflow

Future cohesion policy should focus on retaining human capital, strengthening local innovation capabilities, and restoring territorial equity rather than on building physical infrastructure, notes Csaba Zalai, a professor at the National University of Public Service (NKE), in a study published by the central bank.

Csaba Zalai analyzes the macroeconomic and regional consequences of demographic change and the outflow of human capital – one of the most critical structural challenges facing the EU. The free movement of labor – though a fundamental freedom of the single market – has triggered asymmetric processes that widen the development gap between regions and jeopardize the EU’s long-term competitiveness. In his view, cohesion policy must be reformed within the 2028–2034 multiannual financial framework to take into account the demographic situation of member states and mitigate the brain drain.

He noted that natural population decline and aging have accelerated in the EU over the past two decades, leading to a drastic reduction in the working-age population.

Internal labor market migration exacerbates regional disparities, as mobility is uneven: capital and highly skilled labor flow toward more developed centers. According to the study, the EU’s sustained population decline could diminish its global economic and political influence in the long term.

It emphasized that the greatest economic risk stems from the sustained decline in the working-age population (ages 20-64). The size of this age group could fall from 263 million to 223 million between 2022 and 2070. This will fundamentally reshape traditional sources of growth: although a rise in the employment rate may partially mitigate the effects of the labor force decline, the trend points to persistent labor shortages and rising costs, while changes in the age composition of the workforce may dampen productivity growth.

Among the policy recommendations, he emphasized that the EU should establish a targeted compensation mechanism to support regions affected by population decline, emigration, and the loss of human capital. In addition, he called for the creation of targeted financial funds to support local employment opportunities for young people, the development of startup ecosystems, and the decentralization of R&D capacities. In the allocation of EU funds, greater weight should be given to demographic indicators (local out-migration rates, aging populations) rather than a purely GDP-based approach.