The world is facing a significant demographic shift as fertility rates decline in many countries, leading to rapidly aging workforces and, in some regions, shrinking populations. Nobel laureate Daron Acemoglu argues that this global trend, while presenting considerable challenges, also offers opportunities if societies adapt through technological investment and institutional reform.
The old-age dependency ratio—the number of working-age people relative to those 65 and older—is on the rise globally. By 2035, Italy's ratio is projected to reach 50%, with similar increases expected in Greece, Portugal, and Spain. Latin American countries like Cuba, Puerto Rico, Costa Rica, and Colombia are also experiencing this demographic transition. Asia is set for even faster aging, with China's ratio expected to climb to nearly 34% by 2035, and Hong Kong's potentially exceeding 55%. North America, bolstered by immigration, anticipates a more moderate aging trend, with the U.S. ratio forecast to reach about 34% by 2035.
These demographic shifts carry significant implications. The International Monetary Fund warns that fewer workers and lower labor force participation could lead to reduced economic output. Concerns also extend to pressures on living standards, fiscal stability, and broader social challenges. Politically, aging populations can shift electoral power toward older generations, complicating pension policies and potentially hindering consensus on long-term investments, such as those needed for a green transition. The age divide observed in the Brexit vote, where older voters favored leaving the European Union while younger voters overwhelmingly supported remaining, illustrates this potential for political divergence. Furthermore, declining populations in some regions and growing youth populations in others, particularly Africa, may intensify migration pressures and associated political tensions.
However, Acemoglu suggests that alarmism is not warranted. He draws a parallel to the post-World War II era, when rapidly growing, younger populations in developing countries, fueled by declining mortality rates, sometimes led to increased domestic conflict and civil war due to competition for resources. Conversely, countries with declining birth rates over the past 70 years, primarily industrialized nations, did not suffer economically; instead, their per capita incomes grew more rapidly.
Technological investment appears to be a key factor in mitigating the economic impact of aging. Research indicates that countries experiencing faster aging have increased investment in technologies like automated machinery, which helps offset worker shortages and boost productivity. Industries such as automotive and chemical manufacturing have been at the forefront of adopting robotics and new technologies, particularly in aging economies like Germany, Japan, and South Korea. This technological adaptation has allowed these economies to increase exports in formerly labor-intensive sectors. Studies suggest that falling birth rates over the last 70 years, when coupled with technological investment and economic restructuring, have not led to slower economic growth but rather to significantly higher income per capita.
Acemoglu emphasizes that these positive outcomes are not guaranteed. Continued investment in technology and robust institutional frameworks are crucial. Advanced economies face challenges such as rising industrial concentration, which can hinder the adoption of new technologies, including artificial intelligence. Without AI's potential productivity gains, the burden of aging could become more severe.
Institutional adaptation is also vital for managing the strain on political and economic systems. High public debt levels in many industrialized nations, combined with increased spending on pensions and healthcare, may necessitate new political coalitions. These could involve younger generations supporting public services while older generations accept pension reforms. Despite these hurdles, available evidence does not support widespread alarm regarding the political or economic consequences of aging.
The broader social effects are more complex. A shrinking population might alter societal perspectives on the future, potentially leading to indifference toward long-term challenges. Strong, adaptable institutions are seen as essential for navigating these potential social risks and enabling democracies to articulate and act on future aspirations. The choices made today will shape the inheritance for future generations, underscoring the need for immediate action.