The aim of this study is to answer the question of whether improvements in the health of the elderly in European countries could compensate for population ageing on the supply side of the labour market. We propose a state-of-health-specific (additive) decomposition of the old-age dependency ratio into an old-age healthy dependency ratio and an old-age unhealthy dependency ratio in order to participate in a discussion of the significance of changes in population health to compensate for the ageing of the labour force. Applying the proposed indicators to the Eurostat's population projection for the years 2010-2050, and assuming there will be equal improvements in life expectancy and healthy life expectancy at birth, we discuss various scenarios concerning future of the European labour force. While improvements in population health are anticipated during the years 2010-2050, the growth in the number of elderly people in Europe may be expected to lead to a rise in both healthy and unhealthy dependency ratios. The healthy dependency ratio is, however, projected to make up the greater part of the old-age dependency ratio. In the European countries in 2006, the value of the old-age dependency ratio was 25. But in the year 2050, with a positive migration balance over the years 2010-2050, there would be 18 elderly people in poor health plus 34 in good health per 100 people in the current working age range of 15-64. In the scenarios developed in this study, we demonstrate that improvements in health and progress in preventing disability will not, by themselves, compensate for the ageing of the workforce. However, coupled with a positive migration balance, at the level and with the age structure assumed in the Eurostat's population projections, these developments could ease the effect of population ageing on the supply side of the European labour market.