How declining birth rates affect our economies

The effects of an ageing populationg
By Student Blog

6 August 2018

Around the developed world, people are living longer, and birth rates are falling. What does this mean for our society, our economy, and our families?

Experts differ on the peak carrying capacity for human life on the planet Earth. Some argue that we have already surpassed it, pointing to severe droughts, the increased movement of migrant and refugee populations, and issues with crop yield as evidence that the planet is already struggling with its human population.

Most experts agree that we are currently living through the 'anthropocene' era, defined as "the period during which human activity has been the dominant influence on climate and the environment".

Human population numbers undoubtedly affect the environment, and overpopulation promises to bring about even more violent change - however, economically speaking, the picture is not so simple.

The Grey Pound, and the Intern Trap

An article earlier this year reported on Japan's declining marriage and birth rates, which were at their lowest level since the post-WWII era. Furthermore, the falling number of births contrasts with Japan's ageing population - the country has the highest percentage of over-65s of any developed nation, making up over 27% of citizens.

People living longer means they also stay in work longer and in Japan, as in other countries with an ageing population, this can lead to a 'skills gap' where older workers are slow to retire, and sufficient skills and knowledge are not transferred to younger workers.

This phenomenon also explains, to a certain degree, the 'intern trap' in which many young people find themselves. As Neil Howe wrote in Forbes, a lack of 'room at the top' in the workplace can lead to the proliferation of low-paid work, zero-hours contracts and unpaid internships in a great many industries.

ECI Partners estimated that around £320bn of the UK's annual household spending is part of 'the grey pound' - money spent by those in retirement, after years of graft and gradual advancement through the ranks. Such life-long jobs and upward trajectories are much rarer for young people these days.

Unlike the CA qualification, where you study and work at the same time with a guaranteed route for progression, internships for young graduates can lead to people drifting from one internship to the next, never finding permanent employment. The long-term effects of this might lead to a generation whose retirement will be spent in poverty.

There are big social and fiscal challenges involved in managing low birth rates and ageing populations too. Older people may require more medical care, and funding for a huge 'Healthy Ageing' project was announced by the UK government earlier this year, dedicating £300m to healthcare innovations for an older population.

More retired people out of work, and more young people in low paid jobs, could have a drastic effect on our economy, and this has led to moves such as extending the retirement age, or initiatives such as matching funds invested in workplace pensions for younger workers.

Planning for the future

The key effect of these demographic changes is an increased need for planning. Governments around the world are scrambling to put schemes in place to address the predicted economic fallout, and these changes will continue to have repercussions for those in work, in training, or enjoying retirement.

Other global issues are driving policy change, from climate instability to mass migration, but overpopulation and the effects of an ageing population living and working longer are increasingly being identified as the key economic motivators.

How to balance these two opposing forces? Opinions vary widely. While some experts warn of the dangers of overpopulation for the global economy, others are engaged in finding creative ways to balance things out, with programmes designed to encourage young people to have children, and to make it more economically viable for them to do so.

While an ageing population presents certain challenges, from skills shortages to increased pressure on services, many experts are optimistic about the changes an ageing workforce might bring to our economies.

While the 'gig economy' in which so many young people find themselves has been criticised because it can lead to low pay and more exploitation of workers, it can also provide a greater freedom than previous generations enjoyed.

The only way to be certain that you will be provided for is to stay abreast of the latest developments; keep informed about your options for careers, pensions and healthcare. Together, we can build a brighter future.


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