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In the Market - December 2008
Dec 15, 2008
The Youth Effect: Population Demographics and Global Economies
What role do age demographics play in the global economy? Can a baby boom spark a revolution in productivity in one decade only to create a drain on government resources when those boomers reach retirement age?
To gain some perspective on the relationship between macro population trends and global economic output, we look at world population numbers from 2000 and projections for 2025 across 20 of the world's largest economies. The analysis sheds light on which countries stand to gain a bigger slice of the world economic pie and which may see their slices diminish, based on their ratios of active workers to dependents.
Among the world's largest economies, 12% of the total population is currently over the age of 60. In 2025 that number is projected to be 19%. During that same time period, the active workforce (ages 30-60) will only grow from 37% to 40% of the total population.
In the chart below we can see which countries are trending away from a favorable balance of active workers to dependents, and which countries look to be on the upswing. Europe and Japan look to be the countries that have the most significantly dwindling workforces with an aging population. The total population of Japan, Russia, Italy, and Spain is projected to decline while the population of those over the age of 60 is projected to increase by 2025, placing a much larger burden on a shrinking workforce.
India, Brazil, Mexico, and Argentina, by comparison, are expected to show a large increase in the number of people in the active workforce between now and 2025. Likewise, the life expectancy in those countries is also growing at a higher rate than others, resulting in a greater number of dependents in the future. In India, the difference between the gain in the workforce and the gain of people over 60 is staggering, tilting the scales strongly in favor of India's long-term global expansion. This trend is reversed in the U.S. and China, where the population is aging very quickly. The new "mini baby boom" predicted for the United States will likely play a role in balancing this gap.