Happy Monday everyone! Here in NZ we are recovering from a “weather bomb”. For Auckland, that means that the last couple of days have been some of the best of the summer – and all we needed to do was wait for the autumn. Today I want to return to a drum that has been well beaten on this blog over the last few months. That drum is the phenomenon that is making itself felt in (particularly Western) societies throughout the world – an ageing population and a shrinking workforce.
This small article in the Economist shows the changes that will occur to various countries’ working age populations between 2010 and 2035. Some countries, the Philippines, Egypt and Malaysia will see the number of their citizens aged 15-64 years old increase by about 40%. There will be a much larger pool of workers to expand those countries’ economies. Conversely, Germany and Japan will see their pool of working age citizens decrease by around 20% by 2035. Other countries that will see large decreases include: Russia, South Korea, Poland, Portugal and Italy. New Zealand is looking at around 10% growth, with the United States not too far behind. I suggest you go over to the Economist to have a look at the nifty graph that they have illustrating the different changes forecast for different countries.
Now, I am assuming that the changes are absolute – that is, they are not changes relative to the country’s population as a whole. This means that a country could see its workforce grow or decrease at the same rate as the general population in the next 25 years – if that is the case, then that country’s relative burden of dependants (elderly and the very young) will not change. Furthermore, a rapidly growing workforce pool does not mean that everyone in that pool will find work. However, if a country has fewer workers then, as the Economist notes, productivity has to be the sole driver of economic growth and even then it is likely to be slow. This is particularly problematic for countries seeking to grow their way out of debt:
“These figures are quite remarkable – not since the Black Death can there have been such a fall in workers – and the implications must surely be very profound. One reason it will be so hard for Europe to grow its way out of the debt crisis is the impact of demography.”
Greece is facing a workforce decline of around 5% over the next 25 years…