Double, Double, Toil And Trouble …

During the twentieth century, the world’s population doubled not once, but twice. While it is not expected to double again in this century, according to The Economist, the number of older people is expected to double. By 2035, 13 percent of the world’s population – about 1.1 billion people – will be age 65 or older. Assuming no major diseases, disasters, or world wars, demographers at the United Nations predict the global population will reach nine billion by 2045. That’s a lot of people! 

Demographic changes are likely to have a powerful effect on global economies. In the United Kingdom, the leading edge of the Baby Boom generation is entering retirement. According to National Geographic

“The end of a baby boom can have two big economic effects on a country. The first is the “demographic dividend” – a blissful few decades when the boomers swell the labour force and the number of young and old dependents is relatively small and there is thus a lot of money for other things. Then the second effect kicks in: The boomers start to retire. What had been considered the enduring demographic order is revealed to be a party that has to end. The sharpening American debate over Social Security and last year’s strikes in France over increasing the retirement age are responses to a problem that exists throughout the developed world: how to support an aging population.”

The old-age dependency ratio, which compares the number of older people (above age 64) in a country to the working population (people aged 15 to 64), was approximately, according to the Office for National Statistics, 31:100 in the United Kingdom during 2012. By 2035, the ONS predicts the ratio will be approximately 46:100. How will our aging population affect economic growth? Some economists believe economic growth will slow in countries with high ratios; others say that older, well-educated people will work longer and retire later so aging will have little effect. A third group anticipates persistent economic stagnation. So, what can we expect? It all depends on “changes in the size of the workforce; changes in the rate of productivity growth; and changes in the pattern of savings.” Stay tuned!

 
 
 

Lexington Wealth Management