Demographic forces will weaken over the coming decades as a driver of global economic growth, leading to a 20 percent dip in the world’s economic potential, according to a study from researchers at the University of California, Berkeley.
[Photo: Dr. William Dow]
The study, by the Berkeley Forum on Aging and the Global Economy (BerkeleyAGE), predicts high-income European and Asian nations with populations aging the fastest will face more severe economic impacts, while the United States, benefiting from somewhat higher birth rates and immigration, will fare somewhat better. Middle- and low-income nations will continue to benefit from strong growth among their younger populations, but the change will be somewhat less potent as population growth slows.
“Population aging is projected to be one of the most transformative trends in the 21st century,” said Dr. William Dow, BerkeleyAGE Director and a UC Berkeley School of Public Health professor of health economics. “Our focus at BerkeleyAGE is understanding and predicting the economic risks and opportunities created by this unprecedented phenomenon.”
Demographic forces drove 48 percent of global economic growth from 1990 to 2015, according to BerkeleyAGE research, which predicts these forces will weaken by 69 percent, reducing future global economic potential by 20 percent.
This is the first study that has used the National Transfer Accounts (NTA) database to model and project national economic growth for so many countries, and to aggregate the results into a regional and global analysis. The study is based on estimates of labor income, consumption, asset income, and private savings by age found in the NTA data.
High-income nations were the first to experience falling birth rates, and therefore are the first to see the economic benefits of population tailwinds dissipate. In high-income nations overall, the researchers report that falling birth rates and aging are projected to reduce the working-age populations by four percent from 2015-2040 while the number over 65 is projected to grow by 61 percent.
Middle- and low-income nations (excluding China) will see their working age populations increase 42 percent over the next 25 years, but this is still a slowdown compared to past growth rates.
While forecasting economic risks, the study cites economic, social, and government policy responses that can mitigate the imminent impacts of emerging population trends.
“Slowing demographic tailwinds could be mitigated by policies that raise employment rates, investing in education in order to maximize future productivity, and preparing for pension, health care, and long term care challenges,” according to Dr. Dow. “Business and industry leaders can prepare by developing new workforce, capital risk and market strategies, as well as new products and services for an aging marketplace.Berkeley, Global Health, Health Policy and Management, Minority Health and Health Disparities