Five ways demographics are transforming the global economy

Illustrative photo. Source: LookByMedia

In the English county of Shropshire, robots with elements of artificial intelligence are already working in the homes of elderly people. They remind residents to take medication, monitor their health, and help organize visits from social workers or relatives.

This is just one example of how the world is reacting to changes caused by declining birth rates, which have halved in developed countries over the past 60 years. Amid increasing life expectancy, the working-age population is steadily decreasing. This is forcing experts to predict a future where the labor force model will be based on the joint work of people and robots.

The transformation covers not only the labor market. The populations of countries such as Japan, China, Italy, and Central European states are in a phase of clear decline. In Belarus, in 2024, the mortality rate almost doubled the birth rate.

1. People will work significantly longer

Specialists note that people will have to work longer. Many will do so voluntarily, as work provides social connections, networking, and a sense of self-worth. In Japan, a quarter of the population over 65 years old remains employed. This indicator is also growing in many other countries due to legislative changes and financial needs. This is a sharp turnaround compared to the end of the 20th century, when the retirement age was steadily decreasing.

Data analysis shows that over the past two decades, the number of jobs among people over 50 has grown twice as fast as among young people. At the same time, more and more people maintain good health until at least 70 years of age.

Павялічыць

Experts call for abandoning stereotypes according to which people over 65 are considered a burden on the economy. Instead, they propose investing more in "human capital of the second half of life" — the education, health, and skills of older people, as well as making workplaces more adapted to their needs.

2. The population is simultaneously aging and shrinking

Many regions of the world, especially in Europe and East Asia, are facing depopulation, which researchers call "slow euthanasia". The closure of shops and the lack of basic services in Italian villages, where children have not been born for years and the population is rapidly aging, shows how demographic decline undermines both local production and the demand for goods and services.

In South Korea, these changes have taken grotesque forms: kindergartens are being converted into nursing homes.

According to forecasts by international organizations, by 2060, demographic factors will significantly slow down the growth of living standards in many wealthy countries. In Japan — by 70%, in the UK and South Korea — by 40%, and in Germany — by 80%. In Italy and Greece, not just a slowdown, but an absolute fall in living standards is possible. Meanwhile, in the USA, the effect will be almost unnoticeable.

Economists emphasize: with fewer people, it becomes harder to cover the state's fixed costs and ensure scientific progress. Although migration temporarily mitigates these processes in countries like Spain or the UK, stricter entry rules and an insufficient inflow of personnel in other states prevent this from being considered a definitive solution.

Павялічыць

Photo: pixabay.com

3. Artificial intelligence could be key to productivity

Among experts, there are different views on the role of technology. Some researchers believe that labor shortages will accelerate the adoption of artificial intelligence, leading to a new wave of growth. They argue that declining birth rates have historically fostered the formation of higher-quality human capital and increased prosperity.

However, another group of specialists is skeptical. They note that labor productivity in developed countries has been steadily slowing since the 1970s, and there are currently no signs that AI has fundamentally changed this situation.

The European Bank for Reconstruction and Development estimates that, under a high-impact AI scenario, AI could provide on average about half of the productivity growth needed to offset demographic consequences in individual EU countries.

Some economists argue that aging economies are shifting towards consuming more labor-intensive services (massage, recreation, care), where increasing productivity is very difficult.

Experts also warn: the elderly population is less risk-averse, which could lead to a concentration of investments only in countries with better demographic prospects.

Павялічыць

South Korean pensioners with "robot grandchildren". Photo: hyodol.lover / Facebook

4. Social systems will come under strong pressure

Experts point out that today's demographic and economic reality no longer aligns with old welfare state models. When the retirement age in Germany was set at 65 in the 1910s, life expectancy was below 50. Now it has risen to over 81 years, while the retirement age is planned to increase only to 67.

Despite the increase in the retirement age in many countries, pressure on healthcare budgets and pension funds is growing.

Economists warn: support for the elderly will have to be cut, while the tax burden on workers will remain high or even increase.

This could deepen inequality: wealthy citizens will switch to private medicine and pension provision, while others will depend on state systems whose capabilities will gradually diminish.

The problem is also complicated by political factors. Specialists introduce the concept of "gerontonomy" — an economy in which population aging leads to stagnation and an increase in the political weight of the older generation. In such societies, government policy is increasingly focused on pensions and healthcare, rather than investments in education, science, and future growth.

The example of Japan shows how radically the demographic balance can change. In the 1960s, for every person over 65, there were 8-9 people of working age. Today, it's just over one. In such a situation, a simple increase in the retirement age by a few years does not solve the problem.

The hope that merely working a little longer and implementing more technologies will suffice seems too optimistic. Demographic decline requires much deeper transformations.

5. Rethinking economic incentives

Demography specialists argue that society needs a large-scale shift towards older workers, similar to how conditions were created for the active involvement of women in the labor market in past decades. The main obstacle here remains employer prejudice when hiring older people.

Regarding birth rates, experts believe that radical social changes are necessary for their recovery. The main task is to make raising children a process that does not harm one's career.

Павялічыць

Illustrative photo. Source: LookByMedia

Experts warn that merely improving material well-being may not lead to an increase in birth rates. Modern women have gained autonomy and now see the possibility of combining education, career, and family only if the father dedicates significantly more time to childcare.

As a result, specialists conclude that solving the economic problems caused by demographics requires reforms in all areas: from education and migration to gender policy and technology. There is no single and simple way out of this situation.

• 2
• 1
• 0
• 0
• 2
• 0
• 0
• 0