‘Demographic Dividend?’

The world’s demographics have already been transformed. Europe is shrinking. China is shrinking, with India, overtaking it this year as the world’s most populous nation.

By 2050, people age 65 and older will make up nearly 40 percent of the population in some parts of East Asia and Europe. In all of recorded history, no country has ever been as old as these nations are expected to get.

As a result, experts predict, things many wealthier countries take for granted–like pensions, retirement ages and strict immigration policies–will need overhauls to be sustainable. And today’s wealthier countries will almost inevitably make up a smaller share of global GDP.

This is a sea change for Europe, the United States, China and other top economies, which have had some of the most working-age people in the world, adjusted for their populations. Their large work forces have helped to drive their economic growth.

Those countries are already aging off the list. Soon, the best-balanced work forces will mostly be in South and Southeast Asia, Africa and the Middle East, according to U N projections. The shift could reshape economic growth and geopolitical power balances.

No doubt people are living longer, healthier lives and having fewer children as they get richer.

When birth rates fall, countries can reap a “demographic dividend”, when a growing share of workers and few dependents fuel economic growth. Adults with smaller families have more free time for education and investing in their children. More women tend to enter the work force, compounding the economic boost.

Demography isn’t destiny, and the dividend isn’t automatic. Without jobs, having a lot of working-age people can drive instability rather than growth. And even as they age, rich countries will continue to enjoy economic advantages and a high standard of living for a long time.

Countries with a very high proportion of children today will have fewer child dependents and more workers in 2050. Many are in Africa, Asia or Oceania. If enough jobs are not available they will have to face a catastrophic situation.

More than a million people have taken to the streets in France to protest raising the retirement age to 64 from 62, highlighting the difficult politics of adjusting. Immigration fears have fuelled support for right-wing candidates across aging countries in the West and East Asia.

The changes will be amplified in Asian countries, which are aging faster than other world regions, according to the World Bank. A change in age structure that took France more than 100 years and the United States more than 60 took many East and Southeast Asian countries just 20 years.

Not only are Asian countries aging much faster, but some are also becoming old before they become rich.

Pension systems in lower-income countries are less equipped to handle aging populations than those in richer countries.

In most lower-income countries, workers are not protected by a robust pension system. They rarely contribute a portion of their wages toward retirement plans, as in many wealthy countries.

Countries are categorised as having large working-age populations if people between the ages of 15 and 64, an age group commonly used by demographers, make up at least 65 percent of the total population.


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Vol 56, No. 7, Aug 13 - 19, 2023