There are a couple of interesting charts to see in this article over at Business Insider about the decline in the number of those in the “working age” bracket throughout the world. For the last 50-odd years, there was a sharp increase in the global workforce numbers and this lead to “a pretty easy and natural source of [economic] growth for decades”.
But this demographic tailwind has come to an end and the growth in working-aged people has peaked. In 2005 there were over 70 million people entering into the working aged cohort. But now (as you can see in a great chart – go check it out) that number is less than 50 million and by the 2030s the growth in the number of workers will be less than half what it was in 2005 and the same as it was in the 1960s. As Business Insider notes:
“Workforces in developed markets and China will shrink, and African growth will provide the lion’s share of the world total.
But in proportional terms it will be far, far weaker. The world is projected to have a population of over 8 billion by 2030, as opposed to more like 3 million in 1960.”
Furthermore, this prediction is not likely to be far off the mark. Fertility rates don’t change wildly and you can see what the numbers of working aged people will be two decades out as they will have been already born. Therefore, it seems as if this particular economic tailwind is definitely getting weaker.
At the same time, a demographic headwind will grow: the world’s population will continue to get older. This will continue to push down the global ratio of workers to elderly non-workers. (Another colourful chart, go to link above to see.) This is a headwind because elderly non-workers cost money through (institutional and familial) healthcare and social security pensions. So at the same time as one section of countries’ budgets is increasing, the growth in the number of new workers and taxpayers will be slowing down. Although some countries may be able to turn to migration to bolster their working-aged population, this is not a solution for everyone when the entire world is getting older and there are fewer workers as a proportion of the population than we have been used to.
A few years ago I said this on this blog and I think it is still relevant:
“I’m not saying that gearing our economy along the lines of a Ponzi scheme that relies on roping in more and more future rate and taxpayers is necessarily a good idea; just that if we want to continue to follow the current economic path we’re going to have to realise that it depends on us increasing our taxpayer base in the future OR subjecting that base to a much higher rate of taxation. OR we get used to the idea of a lower standard of living.”
The day of that realisation is edging slightly closer…