Europe’s governments must act decisively to prevent deeper inequality and wider labour-market mismatches as climate change and digitalisation upend markets and welfare systems over the next two decades, threatening social cohesion and long-term competitiveness, a new foresight study by Project WeLaR shows.
The study, “Foresight on the long-term impacts of megatrends on labour markets and welfare states,” outlines four scenarios for Europe’s future, each shaped by different mixes of globalisation, climate ambition and technological change. In each case, the green and digital transitions stand out as drivers that are reshaping economies, societies and the distribution of opportunities.
“Climate action and digitalisation are structural drivers that will not disappear,” said Laurène Thil, researcher at the Research Institute for Work and Society (HIVA) at Belgian university KU Leuven, and a co-author of the study. “The question is whether Europe will manage these transitions to create opportunity for all, or allow inequalities to deepen.”
Four plausible futures
WeLaR researchers developed the four contrasting futures through an inclusive foresight process that combined two participatory workshops and two Delphi surveys. Policy-makers, representatives of trade unions and NGOs, government officials and academics worked together to create the scenarios, bringing their diverse perspectives on how Europe’s labour markets and welfare systems could evolve – with outcomes ranging from a highly connected, climate-focused and innovation-driven continent to a more fragmented, slower-growing one with limited technological progress.
In the most dynamic scenario, large numbers of jobs could be created in renewable energy, advanced manufacturing and digital services. However, structural unemployment and skills mismatches are likely unless governments implement effective reskilling and labour mobility policies.
In slower innovation scenarios, the challenge shifts: low-quality, insecure work persists, with fewer opportunities for workers to move up the skills ladder. Regional disparities widen as dynamic urban hubs attract investment, while rural and post-industrial regions are left behind.
Cohesion under strain
The report shows that without targeted intervention, inequality between regions, skills groups and generations is likely to intensify under most scenarios. This could undermine social cohesion and fuel political resistance to climate and digital policies.
Europe’s welfare systems, designed for an era of stable, full-time work, are ill-equipped for future labour markets, the report finds. Education and training systems face similar challenges. The study identifies skills mismatches as one of the most pressing risks across all scenarios. Whether technological change is fast or slow, education systems need long-term curriculum reform, closer links with industry and strong lifelong learning opportunities to ensure that large groups of workers are not left behind.
The study highlights structural governance barriers that cut across every scenario. With responsibilities split between EU, national and regional authorities, coordination too often remains weak. Political and budgetary cycles reward short-term fixes, even as decarbonisation and technological change require decades-long commitments. Capacity gaps between administrations persist, and policy silos make it difficult to align labour, welfare, climate and industrial strategies within a single coherent agenda.
Policy priorities
Despite the differences between the scenarios, the study identifies five policy priorities that are relevant in all futures: boosting labour market adaptability through reskilling and mobility; reforming welfare systems to provide more inclusive protection; overhauling education and skills systems; strengthening governance coordination across different levels; and aligning climate, economic and social goals to maximise synergies.
“Even under very different futures, some priorities never change: skills reform, inclusive welfare provision and stronger coordination are always needed,” Sebastiano Sabato, researcher at the European Social Observatory (OSE) and co-author of the study.
The authors argue that acting on these “no-regrets” strategies will help Europe navigate uncertainty, maintain competitiveness and strengthen social cohesion.
Read the report here.
Foresight report on the long-term impacts of megatrends on labour markets and welfare states. Laurène Thil, Karolien Lenaerts, Mikkel Barslund, Allison Dunne, Ursula Holtgrewe, Michaela Bruckmayer, Ramón Peña-Casas, Sebastiano Sabato, Dalila Ghailani, Slavina Spasova (2025). Deliverable D7.5. Leuven: WeLaR project 101061388 – HORIZON.
