Economic sustainability in ageing and shrinking societies

One of the challenges faced by ageing societies is maintaining a workforce large enough to supply the goods and services needed by a country's entire population. In the coming decades, industrialized countries will experience a steep increase in the share of elderly persons in the population and a fall in the share of the working-age population.

In some countries, the number of people aged 60-64 (many of whom are about to retire) already exceeds the number of people aged 15-19 (who will soon be labour market entrants). There will, however, be mitigating factors that will tend to decrease the effects of declines in the working-age share of the population: (a) the burden of caring for a high number of elderly people will be offset by there being fewer children to support, and (b) the proportion of adult women who work will rise when there are fewer children to take care of. Still, if there is no change in work and retirement patterns, the ratio of older inactive persons per worker will almost double from around 38% in the OECD area in 2000 to just over 70% in 2050 (OECD, «Live Longer, Work Longer», 2006). In Europe, this ratio could rise to almost one older inactive person for every worker over the same period.

Ageing on the anticipated scale will place substantial pressure on public finances and economic growth. According to the OECD, on the basis of unchanged participation patterns and productivity growth, the growth of GDP per capita in the OECD area would decline to around 1.7 % per year over the next three decades, as compared with about a 2.4% growth per year between 1970 and 2000. These consequences of ageing could be possibly offset by greater immigration, higher fertility, or faster productivity growth (although the positive economic effects of higher fertility would only come several decades after an uptick in fertility rates). While these developments would all help offset the negative effects, they need to go hand-in-hand with attempts to mobilize and maintain available labour in order to sustain economic growth. One of the most significant sources of additional labour supply is older people who are currently inactive.

Indeed, as labour markets tighten, employers will soon have little choice but to be more welcoming of older employees. Prompt action to harness – and enhance – the contributions of older workers could become a key competitive advantage.

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