Developed economies face decades of reduced consumption due to population aging
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  • Spain is one of the countries in which the dependency ratio, i.e. the number of people of working age per retired person, will be below 1.5 in 40 years (versus 3 today).
  • The demographic transition will place additional pressure on public accounts in relation to maintaining adequate healthcare coverage.
  • These are among the conclusions of the Population Aging report from MAPFRE ECONOMIC RESEARCH, which examines the demographic outlook and its impact on the world economy.

Population aging will entail a demographic transition in the medium and long term that will affect the global economy. The latest report published by MAPFRE Economic Research in relation to this transition offers an analysis of the macroeconomic effects of a regressive pyramid and its impact on areas of society intrinsically linked to demographic patterns, such as pensions and public health. It also offers various considerations relating to public policy with a view to meeting these challenges.

The exponential growth of the retired population could be behind three current major trends: growing financial interdependency, secular stagnation, and increased economic inequality. Currently, more than 25 percent of the world’s population is over 60 years of age, while the average age is around 40, and this explains why the adult dependency ratio is above 50 percent.

The demographic dividend and its effect on growth

Population aging is the result of a continuing fall in fertility rates combined with an increase in life expectancy. The main consequence of this demographic change is an increase in the adult dependency ratio, which results in a significant decrease in the workforce.

Against this backdrop, the phenomenon we are currently seeing should be understood as a form of exhaustion of the demographic dividend that temporarily brought a boost to economic growth.

population aging

Dependency rates

Another of the most visible consequences of the increase in life expectancy can be seen in the dependency ratio (a demographic index that expresses the proportion between the dependent population and the active population on which it depends), which will be directly affected by the dramatic increase in the aged population. According to the report, in Europe, Australia and North America, the current (2019) ratio shows values below four people of working age per person reaching retirement age. In the 40-year forecasts (to 2059), in Southern and Western Europe, this ratio is below 1.5 people of working age per retiree.

population aging

 

This study aims to complement the work that MAPFRE has been carrying out on ageingnomics in coordination with the Deusto Business School. Taking the inevitable challenge raised by the demographic transition as its starting point, one of the aims of the ageingnomics project is to identify opportunities for the longer-living population to be able to continue to contribute to economic and social development, opening up new opportunities in the fields of work and creativity, as well as in terms of their contribution to saving and consumption.

 

You can read the study here.