The impact of an aging population on the global economy and the changing outlook
An avid reader of global economic development could easily relate a growth pattern to a number of recognized parameters, life expectancy is one of them. As economies have grown healthier and healthier, their life expectancy being a measure of success for these growth seekers. However, what if we told you that this parameter of economic growth now poses a serious integrated global economic question? Well, shocking as it sounds, it’s true and it’s not far off. Let’s analyze it step by step to understand it.
To get started, let’s talk about the main purpose of the sections to follow. The current concern is the growing proportion of the elderly population and how it affects the economic development of the country. The concern stems from the fact that the ratio between the working class and retirees, which five decades ago was around 6 people of working age for a retiree, it is now 3 of these for each of the former. The probability that this number will soon overtake the fifty percent position is what worries economists.
Before discussing the outlook and impact of the proposed position, let’s first see why this is a cause for concern.
The ratios mentioned above, while showing a greater incidence of the increase in the elderly population, also signal the slower growth rate of the younger population. The importance of the young population lies in the very essence of its nature, as they are points of contact of innovation, development and ubiquitous nature. The association of the younger population with income generation, an increase in the tax base and a better quality of life has been a sought-after and accepted premise. The tilt of these aforementioned factors towards economic growth is what worries experts, because if the first one decreases, the second will follow.
Is it a global thing? Are all countries confronted with this phenomenon?
Well the answer, surprisingly, is yes. Surprisingly because the world is faced with what we call the knock-on effects of the aging of the population, including the developed world and the developing world, despite extremely variable population growth figures. This is because the concern here is not just the slow growth of the younger population, but the increasing weight of the older population, resulting in a higher percentage of replacement rates.
The replacement rate is the percentage the annual employment income of an individual which is replaced by retirement income when he retires. As for the rates countries are facing today, India and Bangladesh stand at 2.1, followed by Indonesia at 2 and the United States at 1.6. An outlier in this rate chain is China, with a surprising rate of 1.3which, however, has led them to elevate their two-child policy now.
Implications for the global economy
Now, when we need to delve deeper into this issue, the awareness of a shift in the demographics of the labor market is inevitable. After all, the change seems pretty likely, right? Consider how working from home became the new normal sooner than we thought, with companies changing their entire work culture with the movement of time. A similar shift in the way business and economies operate is what economists are predicting with advancing information on population aging. To clarify, consider how redistribution of labor would be the corollary. As a result, countries with sufficient resources to welcome and attract would be kinder with their immigration policies towards those with children in their families, a signal to the increase in skilled and unskilled labor. .
This, if considered probable, would have a much greater impact on global integration that what jumps out at the eyes. Let me plot it for you.
The distinction between the availability of cheaper labor between countries and comparative advantage is the main factor in the price division of industries with high labor demand. If labor mobility becomes the norm due to greater patronage in policies, the global economy is likely to experience a fairly similar pricing system in labor-dependent industries, including some include agriculture, hospitality, construction, etc.
However, if you think about the growing role of technology in the provision of labor-intensive services, the aforementioned argument is particularly related to labor-intensive industries, as some jobs no matter what point we become advanced, would not be supported by technology. . Example: the sectors mentioned above.
There is another story for areas that can be automated, the pace having to accelerate even further with the changing dimensions of the population. New perspectives of industries and opportunities are expected to emerge, with automation advancing into areas never before contemplated. Economists are calling for a reduced dispersion of the workforce and greater inclusion of female workers, especially with the move to work from home and remote opportunities. Small and medium-sized enterprises appear to be the flagship of agility and growth, of which the emerging trend is the corroborating factor.
Changes in workplace demographics are also what follows us, according to the experts, because the widening of the age bracket both in terms of early employment of the workforce and later retirement of the elderly population awaits the expected standards. A change in pensions and retirement benefits would be the driving force behind the cause of change, as a significant change in what we are going through today would only lead to the achievement of the desired results.
A follow-up of the innovation and capitalization agenda is also on the list. If current trends are to be mentioned, land structures in a number of countries are being rebuilt, from places for children to retirement homes and senility centers. This transformation is an insinuation on what the future would look like in terms of allocative and distributive perspectives, in line with demographic changes.
While the pandemic has brought us closer to the advancement and inculcation of the digital economy, it has also led to the revelation of a number of parameters that we often tend to overlook in the past. Global economies have suffered from overpopulation for most of evolution and it is time for a smaller humanity to hunt for what is needed.
Edited by Tanish Sachdev