The social and economic implications of an aging population are becoming increasingly apparent in many industrialized nations around the globe. With populations in places such as North America, Western Europe, and Japan aging more rapidly than ever before, policymakers are confronted with several interrelated issues, including a decline in the working-age population, increased health care costs, unsustainable pension commitments, and changing demand drivers within the economy. These issues could significantly undermine the high living standard enjoyed in many advanced economies.
Many industrialized nations are realizing the effects of an aging population, such as a decline in the working-age population and a surge in health care costs.
Over 20% of the population of 17 countries consists of persons 65 years or older.
The decline in the working-age population results in a supply shortage of qualified workers.
Nations with a large senior population depend on a smaller group of people to pay for higher health costs, pension benefits, and other publicly funded programs.
Advanced Industrialized Societies Are Growing Older
In 2020, there were 727 million people aged 65 or older. This number is expected to more than double by 2050.
The Decline in the Working-Age Population
A rapidly aging population means there are fewer working-age people in the economy. This leads to a supply shortage of qualified workers, making it more difficult for businesses to fill in-demand roles. An economy that cannot fill in-demand occupations faces adverse consequences, including declining productivity, higher labor costs, delayed business expansion, and reduced international competitiveness. In some instances, a supply shortage may push up wages, thereby causing wage inflation and creating a vicious cycle of price/wage spiral.
To compensate, many countries look to immigration to keep their labor forces well supplied. While countries such as Australia, Canada, and the United Kingdom are attracting more highly skilled immigrants, integrating them into the workforce can be a challenge because domestic employers may not recognize immigrant credentials and work experience, especially if they were obtained in countries outside of North America, Western Europe, and Australia.